2. Carl Menger, Principles of Economics, 1871 http://mises.org/etexts/menger/principles.asp Chapter VIII: Theory of Money Direct exchange (barter) has limitations Coincidence of wants Indivisibility Suppose that Farmer C has a horse that he would like to exchange for a number of agricultural implements and clothes. How unlikely it is that he will find another person who needs his horse and is, at the same time, both willing and in a position to give him all the implements and clothes he desires to have in exchange!

3. Final end of action: goods with use value Immediate and direct attainment OR Intermediate and indirect attainment Example of the smith: He does not have time to wait for the goods he wants directly to appear on the market where he sells his armor. It is in his economic interest to accept in exchange goods that have greater marketability than his own commodity.

4. In nomadic and early agricultural times: sheep, cows, horses. Very general use as final goods No artificial roads: transported themselves Saleable over a wider area than other commodities Considerable durability Cost of maintenance very low abundant pastures, open sky Rare cases of excessive quantities brought to market (low risk of price loss) Cattle was the most saleable of all available commodities in ancient times Other types of early money in different areas of the world: Earthenware, Shells, Weapons, Cocoa, Cotton, Quills, Furs, Slaves, Wax, Salt, Cod, Tobacco, Sugar, Ivory, Dates, Tea, Glass Two apparently different reasons for marketability: local usage and export demand.

5. Civilization, Division of labor, Cities, Industrial development Cattles lost previous advantages and, in consequence, saleability It ceased to be a medium of exchange and economic calculation Adoption of metallic standards Copper Brass Iron Silver Gold Advantages of metallic standards Very general use: vessels and ornaments Great divisibility, especially in raw form Transportability Density: reduced space consumption Durabilty Transition to more scarce and dense metals as the economy developed: transportability is the key to understand this development. Coinage gave even more divisibility and also a certification of authenticity, wheight and purity Direct usage of the money commodity develops less than usage for exchange intermediaton However, money that loses commodity character (direct usage), immediately ceases to be money

6. Generalized medium of (indirect) exchange Measure of value: the only commodity in which all others can be evaluated without roundabout procedures and on a daily, or, in any case, very frequent, basis. Store of value: the function of transferring value from present to the future. Proof against uncertainty: money stocks can best be used to make decisions in case of unanticipated events. As in the case of all other goods, money has to be produced in a private property regime, and exchanged on free markets, if it is to perform its function.

8. Ludwig von Mises, Theory of Money and Credit, 1912 http://mises.org/books/Theory_Money_Credit/Contents.aspx Murray N. Rothbard, What Has Government Done To Our Money?, 1973 http://mises.org/money.asp Dinamycs of interventionism: Monopoly of coinage Debasement (Greshams law) Legal tender and Bimetalism Banking Fractional reserves: confusion of money and credit Banking holidays Central banking Monopoly of banknote issue Deposit insurance Gold-exchange standard Gold standard abandoned Paper money and a socialist banking sector

10. Jesús Huerta de Soto, Money, Bank Credit, and Economic Cycles http://mises.org/document/2745/Money-Bank-Credit-and-Economic-Cycles Chapter 9: A Proposal For Banking Reform Demand deposits to be separated from credit intermediation 100% reserve regime for deposits Gold (and other banking assets) privatized: to be returned to the original owners and/or distributed to the citizenry (not a simple solution) Free banking Free money production Monetary competition (free choice in currency)

11. The State Asking the State to give up a core function and thus to weaken radically his own position: a quite impossible task. Reform from outside: another state imposing sound money and banking on a defeated or integrated state. The Market Black market: free market with relatively more uncertainty The situation given when the state is loosing the ideological battle and the natural society is affirming itself against the (open) aggression of the state. Consequence for economy: shorter capital structure Higher risk premium Scarcity: the material dimension of goods: weight and size

12. Going to essence Alcohol under prohibition Drugs under the war on drugs Vitamines under medical socialism Black market money: denser; more divisible; easier to hide and transport; easier to transform; Black market banking: Secret networks Informal certification