WHAT IS MONEY?

Ellesmere Guardian, Volume LVI, Issue 89, 26 November 1935, Page 8

WHAT IS MONEY?

COMMON MISUNDERSTANDINGS

DEFINITIONS DISCUSSED

The term money is probably one of the most misunderstood words in the world. "A fertile cause of confusion arises from the different meanings given to the word money," writes Eric M. Carter in an article on "rv-

British Monetary System," in "The Accountant" (London). "For instance, one often hears it said of a man that he has plenty of money when he may at the moment have hardly a shilling in his pocket

and no balance at his bank. What is

here meant is that he has plenty of possessions of various sorts which can be exchanged into bank notes and coins if he wishes. But to speak of such things as houses, land, or investments as if they were money, is a confusion of terms which, though intelligible enough in ordinary conversation, is quite misleading when it comes to serious discussion of monetary problems.

"Again, writers in our financial papers speak of loans as money. They say, for instance, that money is cheap or dear when they mean that loans can be secured at lower or higher rates of interest. It is incorrect, however, to call a loan money, for loans and money are different things.

"If this misuse of the word money were confined to ordinary conversation it would not matter much, but unfortunately professional economists themselves are not in agreement as to the meaning of the word.

"The late Professor Carman, in his j book 'Modern Currency,' when discussing the so-called quantity theory j of money, assumes that money must be taken to mean our national currency (i.e., bank notes and metal coins) and nothing else. On the other hand, Mr G. H. D. Cole, in his 'Intelligent Man's Guide Through J World Chaos,' employs the word | 'money' in a sense that includes not only bank notes and coins but also depositors' balances in joint-stock banks. | "There is a school of economists, I

am told, who declare that there is no such thing as money; they say it simply doesn't exist, though they permit us to speak of 'monetary systems.' These different ideas about the word 'money' show that great care is needed in employing it if we are to avoid confusion of thought, but the word must be a useful one, otherwise it would not be there.

"The underlying idea conveyed by the word money, whenever it is used, is 'purchasing power,' and if I were to attempt a definition I should state it to be 'any form of purchasing power that is in general circulation as a medium pf exchange.' This definition, however, is incomplete unless we have clearly in our minds the nature and functions of a medium of exchange."