Money
This chapter deals with the economic functions and the historical development of money from ancient coins to modern banknotes and bankmoney on account, also discussing questions of the validity and value of money, and the role of money in a financialised
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The Four Functions of Money: Currency, Payment, Income and Capital
The need for something like money arises with a complex division of labor and corresponding chains of provision, accompanied by administration and the documentation of supplies. Some three to five thousand years ago, what was later to become money first developed as a unit of account for the documentation and clearing of claims and duties. Such units were quantities of barley, salt, silver, work days, for example. That was not yet money, but an early form of currency, a unit of value accounting which made different things commensurable. For archaic and early ancient economies to evolve into monetarized and financialized economies, two developments had to take place. Money as a means of payment had to be introduced, and some of the money, rather than being immediately spent on everyday living expenses, had to be put aside and used to fund undertakings that could over time create a particular benefit such as an increase in production, land, hands, riches and power, also including a financial return as we understand it today. Money put to uses in this way constitutes an investment, and potentially the formation of a stock of capital. Money and monetarized finance began to develop in antiquity. Coins were introduced in Lydia in Asia Minor in the seventh century bc. Basic banking structures, too, played a role in classical Greece and Rome. In Christian Europe, banking and finance emerged in the high and late middle ages and became fully fledged in early modernity with deposit taking, letters of credit
© The Author(s) 2017 J. Huber, Sovereign Money, DOI 10.1007/978-3-319-42174-2_2
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Sovereign Money
(important in long-distance trade), double-entry bookkeeping and current accounts for the clearing of claims and liabilities. The habitually stated three functions of money have thus already been identified, traditionally referred to as the functions of serving as a unit of account, a medium of exchange and a store of value. In order to better reflect relevant realities, these functions might be restated as follows: 1. The currency function of money: the existence of a monetary unit of account which enables pricing (attributing monetary value to items) and accountancy. Today, such units of account exist primarily in the form of the official currency of a nation-state (such as the dollar, pound, yen, yuan) or a community of nation-states (such as the euro) 2. The payment function of money: the use of tokens as a means of payment, or to put it another way, using money denominated in a currency for the settlement of any kind of claims and liabilities 3. The income function: money used as a vehicle for transferring income (in the broadest sense), which in turn allows real and financial expenditure 4. The capital function: money used as a vehicle of capital formation. The latter function has a meaning that is different from the traditional notion of money as a store of value or stock of wealth. While silver coins and gold bullion were undoubtedly real valuables, not
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