9. Money and Prices

In the history of money, bartering was awkward because wants were not divisible. Direct exchange depended upon a double coincidence of wants. Demand for a medium of exchange grew until a general medium of exchange emerged, like gold and silver. A medium of exchange should display these characteristics: must be generally acceptable, widely demanded for non-monetary uses, easily portable, homogeneous, highly divisible and highly durable. Although it is beneficial to have more of any other commodity, it is not true of money. A greater supply of money merely dilutes the purchasing power of each money unit. The consequences of inflation include a rise in prices, a fall in purchasing power, and a stealth tax on citizens. The ninth in a series of ten lectures, from Fundamentals of Economic Analysis: A Causal-Realist Approach. Download the MP4 video.