11. The essential concept of currency
Zhu Weisha February 2023
96. Currency has no precise definition, but it has a definition. From different perspectives, there are more than 20 indicators.
97. From the perspective of exchange, the most classic definitions of currency are value scale, transaction medium, and stored value.
98. The improvement of human productivity has led to a surplus, and barter has emerged. At this time, a principle was established: items must have value. Otherwise, no one will exchange them with you. Air has value, but no one will exchange it. The value of items is divided into use value and exchange value. The exchange value is determined by scarcity. The scarcity of the use value determines the size of the exchange value in relation to the use value.
99. Barter is inconvenient, so a universal transaction medium is needed. The rarer something is the greater its value as a universal exchange medium.
100. When the value of gold is too high, there is a division.
101. Gold has become a standard of value due to its unique characteristics.
102. At that time, the production of gold just corresponded to the low economic growth, and the two achieved a balance. This balance was constrained by gold.
103. We need a metric to measure the overall development of the economy, as well as the development of individual economies.
104. Legal tender is the standard for measuring individuals. The measurement of total volume is based on the principle of regulation to anchor inflation and maintain the balance of total volume, as inflation is a reflection of total volume.
105. Due to the unpredictability of economic volume, just as human death is unpredictable, legal tender is often found to have overshot.
106. Bitcoin is based on the US dollar standard. Bitcoin measures total volume; the US dollar is the traditional yardstick, and Bitcoin and a new yardstick have successfully fulfilled the three functions of a currency after decades.
107. The total economic volume must be regulated by the market, not by the Federal Reserve. The interest rate hike cycle and the interest rate cut cycle are due to measurement uncertainty and need to be constantly tested.
Market regulation is the countless adjustments that replace the regulation of the Federal Reserve.
108. The value of credit is also valued, but when the credit is destroyed, the value is reduced. The emergence of Bitcoin is a distrust of trust in traditional currencies.
109. Money is simple, but economists make it complicated. A skilled economist can explain complex economic concepts in a way that ordinary people can understand.
