This question divides economists even more than it divides voters. Voters do not think much about this question. Economists think about it throughout their careers. They do not agree with each other regarding the answer.
The problem is, about half of American economists who specialize in monetary theory and banking policy are either on the payroll of the Federal Reserve System or sell their services to the FED on a piece-rate basis.
Most of the others are trying to get in on the deal. Through the FED, economists set policy for American banking, and, through banking, just about everything else.
The economists are not agreed. Federal Reserve policy is therefore not consistent. It is mostly a system of trial and error – these days, very large errors. Through the influence of the FED among foreign central banks, and through the influence of the top dozen American graduate schools, the confusion over what money is has spread to the entire world.
In the area of monetary policy more than any other area of modern life, the self-certified, self-policed, and self-confident experts are making it up as they go along. Then the rest of us have to go along.
In my forthcoming series of articles, you will learn the following: The experts do not know horse apples from apple butter about monetary theory. Monetary theory should be an integrated part of a general economic theory of how the world works.
Counterfeiting produces bad results for almost everyone except the counterfeiters. Fractional reserve banking is legalized counterfeiting.Government fiat money is counterfeit.Those who trust government money will lose wealth more surely than those who do not trust it.
If you stick with me through this series of articles on monetary theory and policy, you will have a much better idea about where modern society has gone wrong. You will also have a better idea of how to protect yourself against the inevitable consequences, all of which are negative, of the government's violations of sound money principles.
It boils down to this question: If you don't know what money is, how will you obtain more of it? This is another way of saying that if you don't understand the modern violations of monetary theory, you will not understand the extent to which you are vulnerable to bad policies which are going to produce disastrous consequences, just as they have in the past.
THE DEBATE OVER MONEY
What is money? These three words introduce one of the most baffling areas of economic thought. I can think of no other area of economics in which there is greater confusion, leading to greater economic disruptions, than this one.