| The meaning of currency
In order to review financial / economic theory, we have to consider money.
What is money?
Money is called [currency] in this book. Both coin and paper money are called [currency].
Important role of currency is exchange function of value. It is paid when
objects and services are bought. Paid currency becomes currency of receiver.
Thus currency is paid just as much as the value of objects / services from
buyer to supplier. Therefore currency has function to indicate both magnitude
and direction of exchanged value. Direction is indicated by possession
of currency, and magnitude is indicated by amount.
Then, what does currency become after the exchange? Value of currency
is fixed for the first time when it is exchanged with objects / services.
Value of currency is not fixed before economic transaction. Therefore,
value of money after exchange will not be fixed till next economic transaction
In short,
[Currency that is not used in transaction can’t have amount.]
When economic transaction is done, currency has just as much value as value of transaction.
For these reasons, it is necessary to generate following rule in order
to satisfy both exchange function and save function of value.
[Value of currency occurs only at the moment of making a deal]
Value of currency doesn’t occur without transaction.
In traditional economic theory, currency has as much value as amount of the currency. Owner of currency has value corresponding to the amount. But, if social unrest etc. happen after receive of currency and economic transactions don’t go through at all, how about the value of currency. As there is nothing that can be exchanged with currency, currency has no value.
If society stabilizes and something can be bought with money, currency
can have the same value as bought objects at the moment of realizing the
buy.
For these reasons, it is understood that traditional economic theory that
protests [Currency itself has value] is imperfect. Value of currency does
not continue. Currency has the same value as exchanged objects at the moment
of going through economic transaction. When economic transaction is finished,
value of currency is extinguished. When this currency is used in next economic
transaction, the currency repossess value. This is essential meaning of
currency. Therefore, possession of currency functions as record of
[economic transaction was done previously, and value corresponding to
amount of money was supplied.]
There may be someone who reacts against the explanation described above
by stating
[For what purpose do we work? It is unrealistic that salary clears at
the moment of receiving it.].
The explanations described above are only essential meanings of currency.
Salary consistently remains. Value is just not realized. Value is realized
at the moment of buying something with the salary. It is not until the
salary is exchanged with something that value of salary is realized. Is
it OK with you?
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