A Brief Introduction to Money

At this stage in the course we need to tackle a few big items in macroeconomics: monetary policy, fiscal policy and the nature of money itself. I briefly introduced fiscal policy - mostly just defining it - just prior to our second exam. However, to really do it justice we need to introduce money in a more systematic way.

Most principles courses will deal with these issues separately, but as we shall see going forward, these items are interrelated. So much so, that it is difficult to talk about each without defining the others. And both fiscal and monetary policy will depend upon our understanding of money; i.e. What is it? How can we understand it? How has it changed over time? We need to know at the outset what type of monetary arrangement we have, so that we can start to consider its relationship with the state and the rest of the economy.

Below is probably the best introduction to the US monetary system by one of the leading scholars in the field. He also happens to be a member of the faculty here at UMKC.

Note: You'll most likely come across some ideas in this video that challenges your current understanding of money. Keep an open mind and be sure to write down any question you have, so we can take them up in class.




Caveat: The concepts covered in this video are not presented in the text. I am not aware of a textbook in existence that does cover this. Use the text as a guide, but just be aware that these are divergent views.