I threw around some terms in that last post, as if we all know what they mean: money, currency, medium of exchange. Is it really that clear? It wasn’t clear to me when I first started looking into all this. It’s makes just a little more sense to me now, but that’s possibly only because I’ve started to form my own opinions, and have started to fit everything else I see into my own little prism. But anyway here’s my quick gloss:
“Medium of exchange” is perhaps the easiest term to understand, it’s sort of self-explanatory. Investopedia says a medium of exchange is just an intermediary item used to make economic trade easier. The modern medium of exchange is currency.
But wait, what’s “currency”? Er, Investopedia says currency is money, generally accepted as a medium of exchange. And what’s “money”? You guessed it, Investopedia says money is currency, an official medium of exchange!
Ah, I’m overemphasizing the circular nature of these definitions. I think the key concept with currency is that it’s generally accepted among a certain group, whether that group is described by geography or tribe or contract. And I’d say the key concept for money is that it’s officially redeemable from the issuer. But at this point, I have to admit that I really am just making up my own shorthand, which I formed after reading (or trying to read) many lengthy and confusing, boring articles on these topics.
So what’s the point? I need two more concepts to make my point, these are easier. The first is the concept of “fiat” – as in fiat currency or fiat money. This time it doesn’t matter that those terms might mean the same thing, because it’s “fiat” that makes them the same. The modifier fiat means that the currency or money is issued by the government, backed by whatever government authority or promise of redemption that the government chooses to provide. You might think then that fiat currency is the most stable, reliable kind of currency available.
But I’d guess your belief in that would depend on your belief in the particular government that issued the currency, and perhaps also on your belief in any government at all. The concept of private currency is applied to a generally accepted medium of exchange that is not issued by the government.
And this is where it gets really interesting. What if Linden Dollars are private currency? This is such an interesting what if? that I’d like to think about it even before I try to answer the question, Are Linden Dollars private currency? Because the latter is kind of a hard question, probably beyond my ability to answer. Not that that ever really stops me from offering an answer . . . but for now I’ll just say that if Linden Dollars are private currency, that could be a very interesting future.