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The 3 Functions of a Currency

The Importance of Money in the Modern Economy

Money plays a central role in our daily lives and in the economy as a whole. We spend a significant portion of our time earning and spending money, often without fully understanding how it is created or who controls it. Money is not just a simple medium of exchange but a fundamental component of a functioning economy.

The Three Main Functions of Money

Money has three central functions in the economy: It serves as a medium of exchange, a unit of account, and a store of value. As a medium of exchange, it facilitates the trade of goods and services without the need for direct barter. As a unit of account, it helps compare the value of different goods and services. Finally, it serves as a store of value, allowing money to be saved over time without losing its value.
In a functioning economy, these functions play crucial roles. Without money, people would need to barter directly, which is nearly impossible in a complex society. The function of a unit of account allows for price comparisons and informed economic decisions, while the store of value function underpins saving and investment.

Trust as the Foundation of Currency

The value of money is fundamentally based on the population’s trust in its stability. This trust is supported by government legislation and the economy’s ability to provide goods and services. As long as people are confident that their money will maintain a stable value in the future, the currency remains functional.
An example of the importance of trust can be seen in the former East Germany (DDR). There, state control and manipulation of the currency led to a loss of trust in money. The result was an inefficient economy where money no longer adequately fulfilled its functions.

The Dangers of Currency Manipulation

History shows that the manipulation of currencies can lead to severe economic crises in the long term. When governments increase the money supply to achieve short-term goals, people lose trust in the currency’s stability. A well-known example is the Roman Empire, whose decline was partly hastened by the gradual reduction of gold content in its coins.
Manipulative monetary policies may bring short-term benefits but lead to inflation, loss of value, and economic instability in the long run. This illustrates how crucial a stable and trustworthy currency is for the health of an economy.

 
 
 
Link to the YouTube video with English subtitles

Development Occurs in Waves

Why Social Development is Cyclical

Why can’t a society continuously progress from a lower state to a higher one, becoming wiser and stronger in the process? This question arises when we look at the history and development of nations. It seems to be a law of nature that societies grow, then eventually decline, while other societies rise. This phenomenon can be compared to the growth of a tree.

The Cycle of Growth and Decline

A tree begins as a young sapling, weak and easily influenced by external forces. Over time, the tree becomes stronger and more resilient. But the growth never stops. Eventually, the tree becomes a colossal structure, its branches become overgrown, and finally, the tree collapses under its own weight. This natural process is also reflected in human societies. Even those of us who often believe we possess all wisdom experience the reality that what once brought prosperity can eventually break down over time.

Changing Consciousness as a Driving Force

After World War II, Germany faced significant challenges. People were poor, many were homeless, and basic resources were scarce. However, through wise political decisions, such as those made by Ludwig Erhard, who freed the economy and did not control prices, an economic upswing was achieved. Over time, however, the consciousness of the people changed. In the past, people were hungry and eager to work hard to achieve prosperity. But as wealth increased, a certain complacency set in. Society began to take the status quo for granted and focused on merely managing what had been achieved.

The Role of Politics and Society in Cycles

It is important to recognize that politics is often a reflection of society. When the consciousness of the people changes, this is also reflected in political decisions. The idea that prosperity is guaranteed and only needs to be managed led to a form of decadence in society. Politics evolved accordingly and adopted concepts such as **Modern Monetary Theory** (MMT), which advocates for the uncontrolled printing of money. However, these developments have long-term harmful effects on society.

In summary, social developments occur in waves, similar to the fluctuations in stock markets that move in a zigzag pattern. These fluctuations are a natural consequence of changes in societal consciousness. Rather than placing all the blame on politics, we should recognize that the entire society contributes to these cycles.
 
 
 Article on Wikipedia: https://en.wikipedia.org/wiki/Modern_Monetary_Theory

 
Link to the YouTube video with English subtitles

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