Economic Fundamentals-Money

currency has value. It is difficult to disassociate money with trade just as it is difficult to regulate a barter system.  Barter on a personal level– is a straight-forward agreement between two parties– and is easy enough to negotiate, but between several parties, barter becomes difficult because the value of goods and labor have too many variables, and establishing a multilateral trade system through barter would require far too much regulations for it to be fair.  What one determines as use-value will likely be very different from what another determines to be labor-value, and these “primitive” trade relationships may work well in closed trade systems, however, they can easily derail in multilateral systems, as Marshall Sahlins suggests in Stone Age Economics, (“Exchange Value and Primitive Trade,” Aldine Publisher p.307, 1972). Money on the other hand, abstracts the value of goods and services, standardizing trade, while allowing for more transparency in the system. I should qualify the difference in money, as M1 and M2, to avoid further confusion as we begin talking about trade. Specifically, M1 is a term used by the Federal Reserve that narrowly restricts money to its most liquid form. It consists of currency in the hands of the public, travelers checks, demand deposits, and other deposits against which checks can be written.  The term M2, is an aggregate definition of money, which may not be immediately accessible to the public on demand. M2 includes M1, plus savings accounts, time deposits, and balances in retail money market mutual funds. M2, the aggregate definition of money is generally what we talk about when discussing trade and the economy. Trade and currency valuation will be discussed in a later post on GDP.  Gross Domestic Product, loosely defined, is the aggregate measurements of goods and services and has been a standard model used since 1956 in measuring currency valuation and determining international trade. What does money buy, really?  As we begin to expand the frame of our conversation on money, ideally, it should provide for food and resource security, as it should also provide for benefits to the general welfare of our population.  The casual meaning of money that is often referred to doesn’t do this.  That money is all about consumption, personal wealth, the “freedom” of financial gain, military defense for the protection of our assets from have-nots, etc, and while this approach towards money signifies the currency of power, there is another approach that is more in line with traditional communities and indigeneity.  This perspective of money is highly regulated and advocates fair-trade and general welfare.]]>

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