The Properties of Money: Apples, Pots, and Bitcoin

Book: The 7th Property Part 1:

Barter systems are forms of direct trade while monetary systems are forms of indirect trade. Goods used in indirect trade are naturally converged upon (i.e., chosen freely through iterations of trade) because they have properties that most people want most often. Goods that maintain these properties are desired because they are most likely to present a coincidence of interest with other parties. In this sense, Money enables a system of indirect exchange.

Carl Menger, in the The Origins of Money, defined the relative ability for a good to be sold in a given market at the time and price desired as a good’s salability.1 Market participants converge upon the most salable commodity over time, through many transactions. Consider a producer of apples and a producer of decorative pots.

A producer of apples is more likely to have buyers than a producer of decorative pots, but both producers still need to exchange their goods consistently for goods they need. The apple merchant will exchange as many apples as possible for the goods he currently desires. Then, knowing his remaining apples will soon rot, he might attempt to exchange them at a discount with the pots merchant. He does so with the knowledge that he can exchange these pots at a later date as they are more valuable across time.

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