What Is Money?
Seed page. Is money mainly a store of value or a medium of exchange? Chris leans toward store of value: if it were only a medium of exchange, we could all share the same dollar. That puts him against Mises on the definition, and on the free-banking side of an internal Austrian split on supply. Not resolved; parked on purpose.
Links: Inflation, Measuring Inflation, The Equation of Exchange, Evo-Cap: Optimal Money Supply, Yarvin x McCormack — Fake Science of Economics (Menger → Mises regression theorem; Sven’s store-of-value problem), Business Cycles, Vault gap audit §3.9
Chris’s thoughts (2026-09-24, first pass)
1. Closer to a store of value.
“I am still going through my head to classify what money really is: is it more a store of value, or is it just a medium of exchange. I think closer to the former, as if it was just a medium of exchange we could all share the same dollar. What matters is how much liquidity do you have.”
2. But the amount of value to store isn’t fixed.
“This goes against the Austrians, as the total amount of value people have to store is not fixed.”
3. The fence he’s sitting on.
“I am not a huge fan of fiat currency, but I do believe in FRB [fractional-reserve banking], so my fence sitting is real.”
Also on the fence, from the inflation discussion the same day: “A floating currency is attractive, but it is also abusive.”
Scaffolding (Claude, to test when the discussion resumes)
- The shared-dollar argument has a formal version. In the Cambridge cash-balance equation (Marshall, Pigou), M = k·P·Y, where k is the share of income people choose to hold, and k = 1/V. A pure medium of exchange would need only a tiny money stock circulating at very high velocity. Holding balances is the store-of-value function, and it is the V term. So “velocity is unstable” (Equation of Exchange) and “the desire to store value changes” are the same fact.
- Orthodox Austrians disagree with thought 1. Menger and Mises treat medium of exchange as money’s defining function: money emerges from whatever good is easiest to sell, and storing value follows from that. This is a real disagreement, not a strawman.
- Thought 2 is inside the Austrian school, not against it. It is the free-banking position (Selgin, White, Horwitz): the money supply should expand and contract with the demand to hold money (“monetary equilibrium”). Rothbardians (100% reserves, a fixed commodity base) are on the other side.
- Thought 3 may not be fence-sitting. Skeptical of fiat + accepts fractional reserves is close to the free-banking package exactly: a commodity base with competitive fractional-reserve issue on top. Chris’s two “fences” may be one coherent, named position. To test: does he accept its other commitments (no central bank, competitive note issue)?
All attributions above are from memory; verify before any page leans on them.
Open Questions
- Store of value vs medium of exchange: which is primary, or is the question malformed (one function per timescale: exchange at a moment, storage across time)?
- The fixed-currency test (Chris): does a hard currency with supply shocks and changing technology show a stable “general” level while relative prices move? Candidate lab: the classical gold standard, where prices fell from the 1870s to the 1890s with real growth (Selgin’s “productivity norm”), but gold discoveries (1849, the 1850s, 1886 onward) were money-supply shocks inside the “fixed” system. Needs grounding.
- Is fractional reserve compatible with anti-fiat? And is the free-banking position the resolution of Chris’s fence, or a third fence?
- “Floating is attractive but abusive”: is the abuse inherent in floating money, or in a monopoly issuer? (Compare Failure as Mandate: the discipline missing may be competition in issue, not the float itself.)
economics, free-markets