Money and the Banking System

Any commodity to be called "money" must be generally acceptable in exchange, and any commodity generally acceptable in exchange should be called money. -IRVING FISCHER

Everyone seems to want money, but there have been particular times in particular countries when no one wanted money, because they considered it worthless. In reality, it was the fact that no one would accept money that made it worthless. When you can't buy anything with money, it becomes just useless pieces of paper or useless metal disks. In France during the 1790s, a desperate government passed a law prescribing the death penalty for anyone who refused to sell in exchange for money. What all this suggests is that the mere fact that the government prints money does not mean that it will in fact function as money. We therefore need to understand how money functions, if only to avoid reaching the point where it malfunctions.

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