The Value of Money

Carlos Tapang
May 4, 2019 · 6 min read

It all starts with barter or direct exchange. If we were thrown back in time, in a situation in which there were no money, we would engage in barter. Barter does not work every time, though, and we would find that most transactions require indirect exchange: imagine Alicia who has apples and wants bananas; Brad has bananas and wants cashews; and Caitlin has cashews and wants apples. Alicia can make a deal with Caitlin to exchange some of her (Alicia’s) apples for some of Caitlin’s cashews. Alicia does not want cashews, but she needs it to make another deal, this time with Brad who she can now barter with. What Alicia has…