Our Money System

This chapter focuses on money system. With the help of an example, it highlights the three characteristics of money: store of value, medium of exchange, and unit of account. It offers a simple definition of money as a claim on wealth. A nation's money supply should be well-managed (particularly if it's fiat money), because if it's not carefully administered, the monetary unit can be rapidly destroyed by inflation. Further, it presents an example to explain money creation. Next, it describes how Federal Reserve creates money. In the end, the chapter discusses the two kinds of money. First, the money created by bank credit by loaning in existence. Second, the base money supply of a nation, that is, printing money. The debt-based money system is always continually growing by some percentage; it is an exponential system by its very design implying the amount of debt in the system will always exceed the amount of money.