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Money in time-space Universe

Money in time-space Universe

According to the established theory of money, based on the works of Eugen Böhm von Bawerk and especially Ludwig von Mises, money does not represent capital. According to this view, money does not produce added value like all other means of production but serves only as a medium of exchange for goods that appear on the market.

That such a conception of money holds is especially apparent after various sorts of commodity money were replaced by fiat money and various higher-order derivatives. But only if the marginal utility theory of how added value is constructed holds.

Marginal utility and time-space

Apart from many other insights into the economy developed through marginal utility theory, two are essential in this respect. The first is the dependence of the value of a particular good on a place and the one of time. Water in the Sahara has a much higher value than that same water by the lake in the Swiss Alps. Any good has a lower value if consumed sometime in the future than if it can be consumed now.

All goods are thus time-space dependent. It is fascinating that Mises wrote his Theory of Money and Credit in 1912, between Albert Einstein’s first theory of special relativity (1905) and his theory of general relativity (1915). Einstein’s theories distorted objects in the time-space of the Universe, and Mises’ theory distorted values of goods in the time-space of economy. The value of a particular good, whether it be production, consumption, transport, or any other good, is not an inherent property of such good but is always instant/partial subjective evaluation influenced by the specific time-space situation of such good.

It would thus be neither misleading nor pretentious to say that Mises is the Einstein of the economy.

Money as space-independent

What Mises did not take into account explicitly about the different role that money plays among all other goods is that money, in its purest fiat form with the highest emanation through cryptocurrency, gets affected only by time and not by space. Since money nowadays travels through space with the speed of light, it is space indifferent. On the other hand, a certain amount of disposable money still holds a higher value than the same amount of money somewhere in the future. Therefore, interests do not represent added value but only show a discount based on individual evaluation of distortion of nominal value in time.

Money is thus not only different from all other goods for its only purpose as a medium of exchange but for the reason of being affected by the influence of time only in a time-space paradigm of our Universe.

Why this last unique character of money is essential is going to be revealed in the next post.


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