105. Basics Of Money And The Problem Of Government Spending

We just passed the largest stimulus bill in American history by a long shot. And while people may celebrate their $1,200 check or complain about the pending bailouts, I think it’s important to get to the basics of money and why government spending is an issue.

“The Keynesian prescription for unemployment rests on the persistence of a ‘money illusion’ among workers, i.e., on the belief that while, through unions and government, they will keep money wage rates from falling, they will also accept a fall in real wage rates via higher prices.”

Murray Rothbard

Here are the topics we’ll cover today:

  • What is money?
  • Federal Reserve
    • Fractional reserve banking
    • Interest rate control
  • Government influence on money
    • Inflation
    • Mis-signaling the market

What is money?
Money is a commodity like any other. The difference is that the purpose of money is to be a means of exchange. It is a good that is highly exchangeable and fractionable to make buying and selling easy.

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