The Rise and Fall of Good Money: A Tale of the Market and the State
theory. Despite being written in the early twentieth century, its arguments and conclusions are still valid and interesting today. Mises describes five characteristics that are vital to the function of money: marketability, durability, fungibility, trustworthiness, and convenience.
The history of money is straightforward. Markets developed and expanded as long as the private sector controlled the money supply. A decline followed once the state took hold of the monetary system. This arc can be illustrated by looking at a few broad examples of historical money.
Barter produces serious bottlenecks. The double coincidence of wants is a high barrier to trade. Primitive societies gravitated toward the use of various commodities as media of exchange. Iron hoes, salt, sugar, animal hides, and even animals themselves were given monetary applications in places around the world; bits of shell were even strung together for this purpose.
However, while each of these goods satisfied some of the requirements for good money, they also had significant shortcomings: living creatures require expertise to assess their quality and can die; salt and sugar can be eaten by animals or washed away by floods; animal hides rot; base metals corrode; and bits of shell can be broken into smaller pieces, either erasing their value completely or turning them into more, equally valued pieces. The existence of multiple types of money in different countries effectively reduced international trade to barter. Clearly, a more universal solution was needed.
Coinage of noble metals, most notably silver and gold, was the solution the market arrived at. Noble metals have several advantages. First, they are far less susceptible to damage from the elements. As such, they do not need to be individually examined for rust or other blemishes during trade, improving their fungibility. Further improv
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