Courtesy of Mish.
The “macroblog” by the Atlanta Fed is promoting the concept of Money as Communication. Let’s take a look.
A textbook description of money is usually just a recitation of its functions—it acts as a store of value, a medium of exchange, and a unit of account. This definition of money is a rather hollow one (as Minneapolis Fed President Narayana Kocherlakota noted back in his academic days) because it tells us only what money does but doesn’t speak to the core issue—what is the problem that money solves?
The “unit of account” function, in particular, gets little development in the textbooks and has generally not carried much weight in the academic literature on the theory of money. (There are a few exceptions, like this NBER working paper by Matthias Doepke and Martin Schneider.) [Mish note: The paper costs $5]. But if people are going to communicate with one another about value, those communications are going to be most effective if done using some standardized metric—and that’s where money comes in. As a “unit of account,” our money is how we communicate about value. It can be a physical thing, like a particular commodity, or it can be an abstract concept, like the broad purchasing power of a medium of exchange.
…
In other words, it’s essential that the unit of account conveys value so that the units expressed in trade, contracts, and financial accounts are both meaningful and durable. We recently produced a simple four-minute video on the subject. Give it a view and let us know what you think. We’re big on getting our communications right.
By Mike Bryan, vice president and senior economist in the Atlanta Fed’s research department.
4-Minute Video
link if video does not play: Fed Explains Good versus Bad Standards
Right at the one minute mark, the video proclaims “In the United States, the standard measurement for value is the dollar.“
At that point I broke out laughing. But it gets even worse. The massive propaganda campaign begins at the 2:15 mark: “Was the gold standard a good way to measure value? As it turns out, not really“.
At the 3:24 mark comes pure silliness regarding “price stability“.
…
