Why Governments Hate Currency Competition

by Thorsten Polleit

In this article, I would like to accomplish two goals: First, I want to explain what money is (and what it is not). I will argue that money is the medium of exchange, and that this is the only function of money. Second, I will point out why the size of the money supply does not matter and that the money supply does not have to grow to make an economy any richer. These two insights can be considered timeless truths about money, and I believe they are also of the utmost importance if we want to understand better (1) the role “sound money” plays for our society’s economic progress and (2) what the desirable properties of “sound money” are—past, present, future.

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