Money by itself is not wealth. It is simply a means by which people can exchange goods or services that have value.
While a pile of banknotes is being kept in an attic by a scrooge and never exchanged for anything, it is worth less than a heap of old rags. The reason is that money is a promise of trust which is passed from hand to hand and can easily be stored without perishing. It has value only if the trust lasts.
To be trusted, money, it seems, must be of limited supply. If there is too much, people trust it less. They then want more and more of it in return for goods. It can become practically worthless, as in times of chronic inflation. If there is too little, then people cannot expand their activities because they cannot find the ‘credit’ in the form of loans to keep them going while they develop new ventures.
This can lead to economic depression , or recession, which means not enough things going on, not enough money in people’s pockets to cause ‘demand’ for goods and not enough jobs.
Hendrik
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