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Last updated: May 6th, 2011


What is it?

Money is a highly abstract concept, and it is tied up in complex social systems such as the bank system, the tax system, and the legal system, in addition to being defined by the marketplaces in which it is used. In short, money is a number of different things at once:

These roles are not necessarily all in line with each other. For example, if a type of currency is losing value more quickly over time, it will function less well as a store of value, but better as an exchange medium. Conversely, currency that gains in value over time functions better as a store of value and less well as an exchange medium. This phenomenon is related to Gresham's Law, the phenomenon by which people in their daily lives tend to use whatever currency is losing value fastest.

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