Thursday, August 29, 2019

An Evaluation of Money with No Intrinsic Value in Naked Economics

An Evaluation of Money with No Intrinsic Value in Naked Economics Money, at least in the modern sense, has no intrinsic value. Because it does not need to. It is for people to have an ease in transaction. Money needs to be easily stored, commonly accepted, and store some value dictated by its users. This seems perfect—the dollar can be stored in your wallet, or online, and everyone in the United States has to accept it. However, fiat money can be manipulated by governments both for malevolent—in the case of North Korea cutting the money supply to control black market businesses, all while making North Koreans poorer—and for benevolent purposes—the United States Federal Reserve creating more money out of scratch to help with the economic recovery following the 2008 Great Recession. Because the money is not backed by materials with intrinsic value, the government can manipulate the value of money. However, fiat money is worse than money with intrinsic value—the mackerel pouches in prisons, money backed by gold, or g old itself—because it can increase in supply as the economy grows. If money were limited to materials with intrinsic values, the economy would not be able to grow easily—it is a lot harder to find five percent more gold in the world than it is to create five percent more fiat money when the economy grows by five percent. Money without intrinsic value also only has to be commonly accepted, as in the case of the Somalian shilling, in order to function as money. People need money because people need a way to keep track of their wealth, easily store their wealth for future purposes, and to exchange their wealth easily for other goods and services. Fiat money fulfills those requirements—it is easy to assign a value to, it is easily stored in paper, bank accounts, or even bits and bytes among other methods, and can be exchanged as easily as a click of a button. And its supply can always be increased when the economy grows.

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