Law and Democracy in the New Russia

By Bruce L. R. Smith; Gennady M. Danilenko | Go to book overview

Fertile Money

GORDON P. GETTY

It was Aristotle who said that money is sterile, meaning unproductive or without yield. This isn't always strictly so. But it has been near enough the truth throughout history to deserve explanation. The apparent reason is that the qualities we want in money seldom appear in high-yield assets, but they have paid for themselves by saving us the transaction costs of barter.

Money evolved as a measure of value and a medium of exchange. It should be something actually wanted, and steadily so over time. It should also be something "liquid," meaning fungible, plentiful, divisible, storable, and transportable. Fungible here means homogeneous or interchangeable, like peas in a pod.

Merchants found long ago that gold and silver can have those qualities. Precious metals are desired, if for elusive reasons, and so much so that small weights carry high purchasing power. This makes them easy to store and transport. If they are of even purity, they are fungible and divisible. They are also "noble," or chemically difficult to synthesize or degrade. This quality guards against counterfeiting and lowers maintenance costs. Gold and silver, however, are classically sterile apart from their output of "psychic rewards" to owners. Many today prefer other psychic rewards and more fruitful assets. The value of those metals, moreover, depends on supply, which may change unexpectedly with new discoveries or with the policies of foreign governments that control them.


AN ANALYSIS OF MONEY IN THE MODERN WORLD

Precious metals and other commodities will have a place in my scenario for the future evolution of money. Meanwhile I will first consider money in the modern world.

-73-

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Law and Democracy in the New Russia
Table of contents

Table of contents

  • Brookings Dialogues on Public Policy ii
  • Title Page iii
  • THE BROOKINGS INSTITUTION v
  • To the memory of Ed A. Hewett vi
  • Editors' Preface vii
  • Contents ix
  • Contributors x
  • Constitutionalism in the New Russia 1
  • Vasily A. Vlasihin Toward a Rule of Law and A Bill of Rights for Russia 43
  • Note 52
  • Fertile Money 73
  • Fertile Money and Banks in Russia: A Comment 89
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