ECON104: Principles of Austrian Economics II

Mises' theory of money and credit argues that money began as a solution to the problem of exchange. People needed a better means of exchange than directly exchanging one commodity for another. For Mises, money is basically anything that is used as a medium of exchange. Watch this lecture to examine the topology of money, the issuance of fiduciary media by banks, and the consequences thereof. The second half of the course explores how digitization is leading us to rethink the fundamental phenomenology of money.

Topics covered include:

• Types of money
• Fiduciary media
• The Golden Rule in banking
• The Solvency and Liquidity of banks
• Commodity credit vs. circulation credit

Key points:

• Fiduciary media is money substitutes not backed by money holdings
• The lending of fiduciary media increases the supply of the medium of exchange
• The lending of fiduciary media does not require anyone to forgo a present good
• Money is, in essence, a medium of exchange. Its other functions are derivative from this