Money

Money is a medium of indirect exchange: people accept it because they expect to be able to use it in later exchanges. Its usefulness depends on liquidity, acceptability and the terms on which it can be held and transferred.

Money and claims on money

Holding an asset and holding a claim against its issuer are different arrangements. A banknote redeemable in gold is a promise to deliver gold; it is not the gold itself. A bank deposit is a claim against the bank. The quality of such claims depends on the bank’s ability to honour its obligations.

Bitcoin complicates the conventional opposition between commodity money and fiat money. George Selgin calls it a potential “synthetic commodity” money: it combines the absence of ordinary nonmonetary uses with a supply constrained by its protocol. This classification does not establish general acceptance or stable purchasing power.

Supply, demand and purchasing power

The quantity of money is only one side of its valuation. Demand to hold money also changes. An increase in supply need not raise every price by the same proportion or at the same time: changes in spending, cash holdings and relative prices affect different people differently.

Mises, Rallo and the regression theorem

Mises’s regression theorem traces the emergence of monetary demand back to a previous exchange value derived from nonmonetary uses. He presents this as a necessary condition. Juan Ramón Rallo disputes that necessity: expected future liquidity can itself support present demand. Prior nonmonetary usefulness may explain a historical route to money without being the only possible route.

Monetary freedom and banking

The libertarian question includes freedom to choose currencies and contracts. A contract for safekeeping and a contract permitting the bank to lend carry different obligations. Knowingly accepting a debt claim does not make it a warehouse receipt. Selgin and White defend the freedom to choose fractional-reserve accounts as well as full-reserve custody; Rallo emphasizes the distinction between free banking and banking protected by privileges.

Gold’s industrial uses and demand as a store of value

Gold held above ground and annual gold demand, by use. Sources: World Gold Council, Metals Focus and Refinitiv GFMS.

Gold’s industrial uses are real, but they account for a small part of its annual demand. In 2025, technology represented 6.5% of total gold demand by weight, compared with 43.5% for private investment and 17.3% for net purchases by central banks and other official institutions. Jewellery fabrication represented 32.7%. Investment and official purchases together accounted for 60.7%; in 2024, the corresponding share was 45.9%.

The stock of gold already held gives a different view. At the end of June 2026, the World Gold Council estimated that 44.8% of above-ground gold was jewellery and 45.3% was physical investment gold, comprising bars and coins, gold-backed funds, OTC investment holdings and official reserves. Central banks held 17.5% of the total. The remaining 9.9% was a broader category that includes technological uses and cannot be treated as an industrial-use total.

Jewellery itself can combine adornment with savings and collateral. It cannot all be assigned to either monetary or nonmonetary motives. Gold’s physical usefulness therefore does not establish that its market value is mainly derived from industrial consumption. The percentages describe quantities demanded or held, rather than a precise division of the causes of its price.

Lectures and debates

• Juan Ramón Rallo, Algunos errores graves en la teoría monetaria de Mises (Spanish).
• Juan Ramón Rallo and Philipp Bagus, Reserva fraccionaria o 100% (Spanish).

See also

• Juan Ramón Rallo
• Czechoslovak monetary reform of 1953
• Free banking (French)
• Full-reserve money proposals (French)