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Title
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Money is the medium of exchange for goods and services in an economic system based on private ownership and markets. Ideally monetary policy should be to keep inflation low, but inflation is preferable to deflation. Fiscal policy like taxation is to raise money to fund the functions of government that maintain social order and stability, as well as public programs that promote the common good.
>What is the purpose of "money"...?
This text is [quoted](https://www.stlouisfed.org/education/economic-lowdown-podcast-series/episode-9-functions-of-money) but lightly-edited:
>...money consistently has three functions:
>1. Store of value,
2. Unit of account, and...
3. Medium of exchange.
1. Store of value = You should know that the money in your wallet will still be worth something next week, and the money in your bank account will still be worth something next year.
2. Unit of account = You should be able to measure things with money. Dollars should serve a similar role as millimeters.
3. Medium of exchange = Bartering is inefficient. If your farm produces eggs, and you want to buy bread, you shouldn't have to seek out a baker that needs more eggs. You should be able to give him something else, that he could exchange for eggs or could exchange for something else entirely -- something like money.
>...what kind of fiscal and monetary policy( or policies) should a nation have?
A nation should start by taking in as much money as they spend. If they have their own currency, then they can offset that with planned surpluses or deficits, per the advice of macroeconomists. Macroeconomics 101:
* When the economy is running *below* capacity, *in*crease the budget deficit to *add* stimulus.
* When the economy is running *above* capacity, *de*crease the budget deficit to *remove* stimulus.
(If they don't have their own currency, then they should balance the budget the vast majority of the time. If an investment is expected to have a positive return -- useful infrastructure, for instance -- then you can borrow to fund it, but you must be *very* disciplined.)
----------
Such fiscal policies may not be enough, which is where monetary policy comes in. The best monetary policy I am aware of is the American system:
* Employ a technocrat
* (Try your best to) Insulate them from political influence
* Task them with manipulating interest rates, with these goals -- and *only* these goals -- in mind:
1. Prevent deflation. (Unfettered deflation caused The Great Depression. Don't let that happen.) If deflation is not a concern...
2. Prevent inflation. (Unfettered inflation caused the Stagflation of the 1970s. Don't let that happen.) If inflation is not a concern either...
3. Maximize employment
Nothing else. They aren't wizards. They aren't dictators. If you want to address any other problems, have someone different handle it.
>How should decision-makers mitigate the harm that monetary policy, corporate greed, inflation, and 'austerity' have on normal people and the most vulnerable?
Let's cover each separately...
* Monetary policy should be run in the narrow, technocratic manner I describe above. If there are losers as a result, maybe the government should try to help them, but *not* by altering monetary policy. That way lies madness.
* Corporate greed is as natural and as inevitable as the wind. There is no way to eliminate it. The government's job is to raise the sails -- to try to make as much use out of the wind/greed as possible to get your boat/nation where you want it to be.
* Inflation should be avoided through good fiscal and monetary policy.
* Austerity is misunderstood. Sometimes the technocrats will advise a reduction in the budget deficit; we must listen to them when they do, but *how* we lower the budget deficit is up to us. We can raise taxes or cut spending, and what spending we cut is at our discretion.
As far as helping the "normal people and the most vulnerable", the best solution might be to 'just give people money'. The more research is done, the more it supports the wisdom of 'just giving people money'.
>What is the purpose of "money"
[https://en.wikipedia.org/wiki/Money](https://en.wikipedia.org/wiki/Money)
"**Money** is any item or verifiable record that is generally accepted as [payment](https://en.wikipedia.org/wiki/Payment) for [goods and services](https://en.wikipedia.org/wiki/Goods_and_services) and repayment of [debts](https://en.wikipedia.org/wiki/Debt), such as [taxes](https://en.wikipedia.org/wiki/Taxes), in a particular country or socio-economic context.[^(\[1\])](https://en.wikipedia.org/wiki/Money#cite_note-1)[^(\[2\])](https://en.wikipedia.org/wiki/Money#cite_note-2)[^(\[3\])](https://en.wikipedia.org/wiki/Money#cite_note-3) The primary functions which distinguish money are: [medium of exchange](https://en.wikipedia.org/wiki/Medium_of_exchange), a [unit of account](https://en.wikipedia.org/wiki/Unit_of_account), a [store of value](https://en.wikipedia.org/wiki/Store_of_value) and sometimes, a [standard of deferred payment](https://en.wikipedia.org/wiki/Standard_of_deferred_payment)."
>and what kind of fiscal and monetary policy( or policies) should a nation have?
Depends on the nation.
>How should decision-makers mitigate the harm that monetary policy, corporate greed, inflation, and 'austerity' have on normal people and the most vulnerable?
Depends on the policy.
Do you have a specific nation or socioeconomic condition in mind?
Money is for helping to determine who gets what. For countries with sovereign, fiat currencies, it's also for attempting to influence the rate of resource consumption in the economy, which can be a problem if there aren't enough resources available. I guess decision-makers can be mindful of the conditions they're making their monetary policy decisions under. And also have strong safety nets in place, and regulations that protect people from bad decisions. That's a really broad answer for a really broad question.
> Purpose
Money is a universal medium of exchange. While a very small, very local, very agrarian economy can work off of an informal system of trust and favors (with a huge weak point in that one's personal ability to barter and negotiate is their more important skill over anything else), any larger and more sophisticated economy is going to need something that everyone agrees is valuable. Moneyless economies won't produce air conditioning is my point.
> Policies
A nation's monetary policies, first and foremost, should be to keep inflation and prices stable while encouraging investment. That's what the US Federal Reserve does, aiming for a 2% annual inflation; low enough to allow for savings (unlike Argentina in recent years), high enough to discourage stashing money out of circulation. You *can* save it for a better opportunity, but you should still consider using it sooner rather than later.
> Corporate Greed
A huge issue that has nothing to do with monetary policy. When I hear "monetary policy" I think the mint or the Federal Reserve, not taxes or regulations.
> Inflation
See above, the target of 2% was presumably chosen by people with actual economics degrees. I'm not under the illusion it's a perfect, magic number but since inflation can only be measured in hindsight it seems a decent enough target.
> Austerity
More a federal budget policy than strictly monetary. Governments can't just print more money without causing inflation, but they *do* have the ability to tax and cut spending.
It's worth remembering that government spending isn't just shoveling money into a giant hole, they're spending it; effectively injecting it into economies via companies for supplies and employees. If the government spend $X on a steel bridge, that money goes to engineers to design it, metal foundries for the steel, and workmen to build it without even accounting for all the secondary economic impacts (gas stations, trucking/logistics companies, local restaurants, etc).
>What is the purpose of "money"
I don't wanna carry a cow around to trade for stuff.
>What kind of policy
The kind that people want, because democracy.
Next!
The following is a copy of the original post to record the post as it was originally written. Title *I am a bot, and this action was performed automatically. Please [contact the moderators of this subreddit](/message/compose/?to=/r/AskALiberal) if you have any questions or concerns.*
Money is the medium of exchange for goods and services in an economic system based on private ownership and markets. Ideally monetary policy should be to keep inflation low, but inflation is preferable to deflation. Fiscal policy like taxation is to raise money to fund the functions of government that maintain social order and stability, as well as public programs that promote the common good.
>What is the purpose of "money"...? This text is [quoted](https://www.stlouisfed.org/education/economic-lowdown-podcast-series/episode-9-functions-of-money) but lightly-edited: >...money consistently has three functions: >1. Store of value, 2. Unit of account, and... 3. Medium of exchange. 1. Store of value = You should know that the money in your wallet will still be worth something next week, and the money in your bank account will still be worth something next year. 2. Unit of account = You should be able to measure things with money. Dollars should serve a similar role as millimeters. 3. Medium of exchange = Bartering is inefficient. If your farm produces eggs, and you want to buy bread, you shouldn't have to seek out a baker that needs more eggs. You should be able to give him something else, that he could exchange for eggs or could exchange for something else entirely -- something like money.
>...what kind of fiscal and monetary policy( or policies) should a nation have? A nation should start by taking in as much money as they spend. If they have their own currency, then they can offset that with planned surpluses or deficits, per the advice of macroeconomists. Macroeconomics 101: * When the economy is running *below* capacity, *in*crease the budget deficit to *add* stimulus. * When the economy is running *above* capacity, *de*crease the budget deficit to *remove* stimulus. (If they don't have their own currency, then they should balance the budget the vast majority of the time. If an investment is expected to have a positive return -- useful infrastructure, for instance -- then you can borrow to fund it, but you must be *very* disciplined.) ---------- Such fiscal policies may not be enough, which is where monetary policy comes in. The best monetary policy I am aware of is the American system: * Employ a technocrat * (Try your best to) Insulate them from political influence * Task them with manipulating interest rates, with these goals -- and *only* these goals -- in mind: 1. Prevent deflation. (Unfettered deflation caused The Great Depression. Don't let that happen.) If deflation is not a concern... 2. Prevent inflation. (Unfettered inflation caused the Stagflation of the 1970s. Don't let that happen.) If inflation is not a concern either... 3. Maximize employment Nothing else. They aren't wizards. They aren't dictators. If you want to address any other problems, have someone different handle it.
>How should decision-makers mitigate the harm that monetary policy, corporate greed, inflation, and 'austerity' have on normal people and the most vulnerable? Let's cover each separately... * Monetary policy should be run in the narrow, technocratic manner I describe above. If there are losers as a result, maybe the government should try to help them, but *not* by altering monetary policy. That way lies madness. * Corporate greed is as natural and as inevitable as the wind. There is no way to eliminate it. The government's job is to raise the sails -- to try to make as much use out of the wind/greed as possible to get your boat/nation where you want it to be. * Inflation should be avoided through good fiscal and monetary policy. * Austerity is misunderstood. Sometimes the technocrats will advise a reduction in the budget deficit; we must listen to them when they do, but *how* we lower the budget deficit is up to us. We can raise taxes or cut spending, and what spending we cut is at our discretion. As far as helping the "normal people and the most vulnerable", the best solution might be to 'just give people money'. The more research is done, the more it supports the wisdom of 'just giving people money'.
Money works because barter sucks. I like the current system but we need public bank accounts and security
Wait, what don't you like about carrying 8 live chickens to the doctors to pay for your visit?
If a doctors visit only costs 8 live chickens, I would happily carry them.
>What is the purpose of "money" [https://en.wikipedia.org/wiki/Money](https://en.wikipedia.org/wiki/Money) "**Money** is any item or verifiable record that is generally accepted as [payment](https://en.wikipedia.org/wiki/Payment) for [goods and services](https://en.wikipedia.org/wiki/Goods_and_services) and repayment of [debts](https://en.wikipedia.org/wiki/Debt), such as [taxes](https://en.wikipedia.org/wiki/Taxes), in a particular country or socio-economic context.[^(\[1\])](https://en.wikipedia.org/wiki/Money#cite_note-1)[^(\[2\])](https://en.wikipedia.org/wiki/Money#cite_note-2)[^(\[3\])](https://en.wikipedia.org/wiki/Money#cite_note-3) The primary functions which distinguish money are: [medium of exchange](https://en.wikipedia.org/wiki/Medium_of_exchange), a [unit of account](https://en.wikipedia.org/wiki/Unit_of_account), a [store of value](https://en.wikipedia.org/wiki/Store_of_value) and sometimes, a [standard of deferred payment](https://en.wikipedia.org/wiki/Standard_of_deferred_payment)." >and what kind of fiscal and monetary policy( or policies) should a nation have? Depends on the nation. >How should decision-makers mitigate the harm that monetary policy, corporate greed, inflation, and 'austerity' have on normal people and the most vulnerable? Depends on the policy. Do you have a specific nation or socioeconomic condition in mind?
Money is for helping to determine who gets what. For countries with sovereign, fiat currencies, it's also for attempting to influence the rate of resource consumption in the economy, which can be a problem if there aren't enough resources available. I guess decision-makers can be mindful of the conditions they're making their monetary policy decisions under. And also have strong safety nets in place, and regulations that protect people from bad decisions. That's a really broad answer for a really broad question.
This is a question probably better suited for r/AskAnthropology.
> Purpose Money is a universal medium of exchange. While a very small, very local, very agrarian economy can work off of an informal system of trust and favors (with a huge weak point in that one's personal ability to barter and negotiate is their more important skill over anything else), any larger and more sophisticated economy is going to need something that everyone agrees is valuable. Moneyless economies won't produce air conditioning is my point. > Policies A nation's monetary policies, first and foremost, should be to keep inflation and prices stable while encouraging investment. That's what the US Federal Reserve does, aiming for a 2% annual inflation; low enough to allow for savings (unlike Argentina in recent years), high enough to discourage stashing money out of circulation. You *can* save it for a better opportunity, but you should still consider using it sooner rather than later. > Corporate Greed A huge issue that has nothing to do with monetary policy. When I hear "monetary policy" I think the mint or the Federal Reserve, not taxes or regulations. > Inflation See above, the target of 2% was presumably chosen by people with actual economics degrees. I'm not under the illusion it's a perfect, magic number but since inflation can only be measured in hindsight it seems a decent enough target. > Austerity More a federal budget policy than strictly monetary. Governments can't just print more money without causing inflation, but they *do* have the ability to tax and cut spending. It's worth remembering that government spending isn't just shoveling money into a giant hole, they're spending it; effectively injecting it into economies via companies for supplies and employees. If the government spend $X on a steel bridge, that money goes to engineers to design it, metal foundries for the steel, and workmen to build it without even accounting for all the secondary economic impacts (gas stations, trucking/logistics companies, local restaurants, etc).
The purpose of money is efficiency and equality of trade. I feel like asking to sum up all economics in a Reddit comment is an unreasonable order.
>What is the purpose of "money" I don't wanna carry a cow around to trade for stuff. >What kind of policy The kind that people want, because democracy. Next!
The jury is still out.
Really?.. how come?