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How money works - Inverted Passion
Money is an abstraction of tangible resources or human effort. It is a promissory note for future goods or services. Unlike the time and effort that people spend on something, it is what money represents that gives it its value. And as an abstraction, it has no “real” value to our primitive brains, which judge the real value of food and shelter or
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From the preceding discussion, and from the understanding of monetary economics afforded to us by Austrian economics, the importance of sound money can be explained for three broad reasons: first, it protects value across time, which gives people a bigger incentive to think of their future, and lowers their time preference. The lowering of the time
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For example, why does water, which is essential for life, cost nothing, while diamonds, which are mere ornaments, are highly valued? The resolution to this problem turned out to be in the effects of scarcity: goods whose supply is low relative to demand will command a higher price than goods whose supply is abundant relative to demand.