ABSTRACT
In a way such a description covers fairly well the discussions by Hume, Say and Ricardo, all these saw the money for use at the internal market basically without any intrinsic value but trading with foreign countries required a currency which was internationally accepted, gold and silver, and consequently it is necessary with a link between internal and international trade. Henry Thornton thought a bit differently since he introduced paper money as assets/liabilities in commercial trade where the trade and other commercial relations induced trust per se in the paper currency. Thus money as a medium of exchange is not difficult to understand. The next step is to realize that the acceptance of money as a medium of exchange also gives money a value which is independent of any intrinsic value namely the value of the most liquid asset. Jean Baptist Say was advocating a currency where the basic money had an intrinsic value, mainly silver, but still he claims that even if we are prepared to pay with jewels the latter is not liquid since it lacks the official status as a medium of exchange. Consequently when we discuss chartalism or metallism we must remember that it is not the eventual intrinsic value which creates the liquidity but it has more to do with the general trustworthiness and such matters and this was also the view of Aristotle. Subsequently the market use as such is the key issue and that implies that it is easier to trust a big currency issued by a rich country since it is part of a larger amount of transactions, compared with a currency of a small country; the quantity and size of the market transactions in a big country makes the currency more trustworthy. In the same line the use of money coins or papers attached to gold is easier to trust than the use of iron and/or copper as a norm, since people use gold for more for valuation then for practical purposes. Consequently when we go back to our quotes in the beginning of Chapter 2 from von Mises and Iwai we are apt to lean towards Iwai’s opinion: money is to the largest extent depending upon social acceptance.
