Record of a Claim

Money is a record of a claim to goods or services that other people recognise

We can now start to see the function of money. Money enables me to obtain goods and services. This is an important and basic principle. People accept money, because they know that other people will accept it in exchange for goods or services.

When I want goods or services, I can obtain them by working for someone else or by selling goods that I own. However, the people that I sell to will not generally have what I want. I will need to get what I want from someone else. This means that I cannot buy and sell simultaneously. Buying and selling will usually occur in different places, with different people, at different times. There will be a time gap between selling and buying. I will have to sell first and buy later, but once I have sold what I had, I need some other proof that I made the sale and am entitled to buy. Money is the solution.

Money is proof that I have given up goods and services to someone in my society and am entitled to complete the exchange by getting goods and services from someone else in society. Money is a record of a half-completed transaction. It is a record of a claim to goods and services that is recognised by the rest of society. The usefulness of money depends on it being accepted by other people.