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Naked Capitalism is weighting in into the fundamental question:

The Standard Definition of Money is in Error

The standard definition of money is given in terms of its three functions:

    1: Money is a medium of exchange.
    2: Money is a measure of value.
    3: Money is a store of value.

Number 1 is at best misleading. Numbers 2 and 3 are simply wrong, and these things are easy to show. It is also easy to show that this is important.

First, the actual definition of money:

    1: Money is a token, or instrument, of demand, which is exchanged for goods or services. Or simply: Money is demand.
    2: Money is a measure of demand.
    3: Money is a store of demand.

[...] Money is not a store of value. Can it reliably be a measure of value? Economically worthless things may be in much demand, and therefore command a price beyond their value. Yachts, for instance. Economically valuable things may be in little demand, or supplied at prices below their value. Water, for instance. With money, you have demand for these things, at the prices they are offered. But their prices do not reflect their economic value, only the amount of demand, the amount of money, which must be exchanged for them [...]

So because money is demand, or more exactly a token or instrument of demand, it serves as a `medium' of exchange: Because money is not demand for any particular good or service, but is demand for any offered good or service, it may be exchanged for any offered good or service. Money is a medium not in the sense of being an environment for exchange, but in the sense of being a generalized instrument.

To my taste, this mixes up two answers to "Demand of what?". If the demand for anything in general is meant, I do not see that money as we know it is badly necessary.  If the demand for money itself is meant, then we have a self-perpetuating meme-instrument, right. But money is introduced for very tangible purposes - thus the definition should not be self-referential. Demand is just a story that advertisers or consumers themselves tell. The political power aspect is still not present in the new definition.
by das monde on Tue Jun 30th, 2015 at 11:01:22 AM EST

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