In other words, all exchange whatsoever only and always occurs because both parties to the transaction increase their respective subjective wealth from the exchange.

This simple realization completely topples most if not all of current modern economic theory residing under the label *”macro”-economics*, including Keynesianism, Chicago School “monetary” theory, the Austrian Business Cycle theory, etc., and at a minimum shows the superfluousness of the label “macroeconomics”. The most enormous error that may have ever been committed in economics from Menger’s time to now was defining money as a medium of exchange.

For it is *not* true that trading any good whatsoever for something called money is an exchange of equal subjective value, a medium “equalizer”, to the actors that actually do the exchange. As Menger showed, that type of exchange, tranferring something of equal value repeatedly back and forth, does not occur. Therefore, the true defnition of money is that it is the most commonly exchanged thing. Money is an evolutionary phenomenon which constantly replaces arbitraging facilitators of exchange middlemen in the establishment of price information. Price is the expanded information revelation of possible subjective wealth increasing exchange that allows for the mutual exploitation of all members of society of not directly seen indirect barter rather than only direct barter exchange. It was an error to hold a process of barter was replaced by a process of monetary exchange. Exchange is barter, barter is exchange, and it continues to this day.

Today, the most commonly exchanged thing is not gold. It is not government currency. It is credit. It is promises of future payment. Credit may always have been the most commonly exchanged thing soon after the evolutionary process beyond strict instantaneous barter given the degree of trade of tangible goods not conducted simultaneously but transferred at different distinct points of time. Payment received upon completion of services rendered or receipt of goods.

So it may be that credit is just as important as the capital stock in the process of investment and technological improvement. Acceptance of a promise implies trust, implies a degree of expected safety. The markets price risk in the form of interest, which is why there are different interest rates dependent upon the credit worthiness of the borrower for equal amounts borrowed.

It should be possible to construct a ceterus paribus diagram which shows at an instant in time whereby everyone has gotten all the mutual wealth increasing gains from trade that can be gotten at that point in time, and there will be those holding goods and those holding “money”, to various degrees, those holding the dreams of credit promises, to various degrees. It must never be forgotten that the dreams of credit promises are not “inherently” less valuable than tangible goods by some definition of mystical intrinsic worth. All that need be noted is that the subjective value of all goods, including money and credit, is constantly in flux, changing with the change in supply and demand. The degree of existing credit may be said to reflect the degree of how forward looking the society is, the degree to which it is attempting to price the future into the present.

*Note that declared “legal tender” status of fiat currency has nothing to do with exchange. It is not originally voluntarily accepted in exchange but forced exchange that necessarily makes one party better off, subjectively wealthier, while making the other party worse off, subjectively poorer.

Trade is instinctive. Doesn’t matter if it is for goods for goods, labor for goods, or labor for future delivery of labor or goods. The only thing money does is keep score in the game of life.

90% of the “money” in circulation is nothing but electronic notation in a computer file. This is why the ENRON mess is important: it are the accountants and the computer files we need to trust, not the govt.

First,each person needs food and shelter and secondly, each person needs a guarantee of tomorrow’s food and shelter. Third, . . . . People only trade when they have a surplus of basic needs or to obtain basic needs. If the money system should collapse, the people who have provided for basic needs and have some trading stock are, at least in the short run, no worse off then the day they were born. “In the long run, we are all dead.”

Before people can trade or learn about “truck and barter”, they are first social beings, immersed in social institutions. While we are different from animals, that is a small point. Primitive societies did not “truck and barter”. Even under feudalism, this was not the case, since people produced for consumption, and not exchange. So this idea that we naturally “truck and barter” doesn’t hold true. In each society it is the social property relations, indeed the social institutions that determine how people will act. People choose but only within the given context.