Yet today, many citizens don't even agree, as to whether monetary policy is "too tight" or "too loose". This most basic of disagreements, not only means problems for monetary theory, but also for public policy. Perhaps some confusion stems from the relatively recent adoption of fiat money, and how it has contributed to government economic roles. Let's take a look at how Wikipedia defines fiat money:
Fiat money is a currency without intrinsic value established as money by government regulation or law. The term derives from the Latin fiat ("let it be done") used in the sense of an order or decree. It was introduced as an alternative to commodity money and representative money. Commodity money is created from a good, often a precious metal such as gold or silver, which has uses other than as a medium of exchange (such a good is called a commodity). Representative money is similar to fiat money, but it represents a claim on a commodity (which can be redeemed to a greater or lesser extent).Investopedia also contributes to this definition:
The value of fiat money is derived from the relationship between supply and demand rather than the value of the material that the money is made of.The fact that fiat money lacks intrinsic value is problematic for some, while for others this monetary standard gives a green light to the flexibility of today's organizational patterns. Nevertheless: Might recent shifts in supply and demand, affect how different groups react towards monetary policy? The recent dominance of non tradable sector activity in relation to tradable sector activity, is still conceived as a linear relationship in terms of general equilibrium results. But how can these sectors exist in a linear relationship in terms of supply and demand potential, when one is mostly dependent on the revenue origination of the other?
As financial activity grew more complex in the twentieth century, it played an important role for the ultimate adoption of fiat money as well. In particular, during times of sustained economic growth, both financial and monetary tools can make it appear as though time based services function much the same as other points of wealth origination. Alas, this is not yet so. And while a fiat monetary standard is (generally) viewed favorably in prosperous regions and elite universities, there's less optimism in some circles, especially since many regions are no longer represented well in quantitative terms. These are the same regions, where the use of high skill knowledge tends to be limited to what is deemed "necessary".
Meanwhile, cost containment becomes ever more important at all levels of government, after the excesses of twentieth century promises. There was little agreed upon rationale on the part of various constituencies for the potential of fiat money when it was adopted, and many have grown uncomfortable with the level of economic activity which is funded through debt instead of more direct means. Real supply side limits for knowledge use are on the immediate horizon, despite the "open checkbook" rationale that fiat money made possible, not so long ago.
Even though knowledge can be applied as an indirect source of wealth (via debt) up to a point, it is becoming increasingly important to find more direct means for the continued spread and preservation of knowledge use. Should time value be given the chance to function as a local commodity standard, knowledge use would no longer be restricted to the present wealth origination points of general equilibrium capacity. Best, time value as an economic unit, would ultimately create more possibilities for general equilibrium potential, as well.
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