<p>First, there are many misconceptions and mistakes in your question.</p>
<ol>
<li>You state:</li>
</ol>
<blockquote>
<p>Instead, I have just caused inflation, since theres more stuff in relation to money.</p>
</blockquote>
<p>No, inflation is inversely related to output. If the amount of money is fixed and you create more valuable products that (ceteris paribus) creates deflation not inflation (see Blanchard et al. Macroeconomics: An European Perspective).</p>
<ol start="2">
<li>You state:</li>
</ol>
<blockquote>
<p>Whats weird about this is, that even though I did all the work, tom became 10\$ poorer yet both me and the bank became \$10 richer.</p>
</blockquote>
<p>No this does not make any sense from economic perspective. Tom purchased those seashells from you for \$10 which clearly shows that Tom values seashells more than \$10 and you sold those seashells for \$10 which clearly shows that you value the money more than seashells. Hence after trade you both have higher value than before and you are both richer.</p>
<p>In addition, if Fed <strong>loans</strong> bank \$10 the bank did not became richer by \$10. Now bank has \$10 liability so their net wealth is zero (since \$10 in cash assets - \$10 in liability =0). So asserting that banks becomes richer just by borrowing from Fed is absurd. Banks earn money on later lending out the funds on intermediation margins and those intermediation margins are their payment for providing financial intermediation services (e.g. screening clients, having accessible branches, etc.).</p>
<ol start="3">
<li>You state</li>
</ol>
<blockquote>
<p>money can only be used to exchange a fixed supply of things back and forth and can't actually account for creation of new wealth without &quot;hacks&quot; like the federal reserve</p>
</blockquote>
<p>No this again makes little sense. Money existed long before Fed. If you have fixed supply of money and amount of products and services in economy increases then prices across economy adjust (decrease via deflation).  That means that even with fixed money supply output can increase indefinitely. As a matter of fact even when Fed prints money to keep prices constant, in real terms value of output is still allowed to increase as in economics what matters is the value of goods and services (e.g. real output) what matters not how price change.</p>
<p>Now to your question:</p>
<blockquote>
<p>Is there a system of exchange that would be similarly easy to money, but that accounts for the creation of wealth in a natural and , if possible, fair way?</p>
</blockquote>
<p>No, alternative to exchange with money is barter, but barter is much less convenient and inefficient due to the problem of double coincidence of wants. With barter you always have to search for a person that both sells what you want and want what you sell.</p>
<p>At the fundamental level the only difference between barter and exchange with money is that the problem of double coincidence of wants is eliminated. Instead of searching for someone who sells what you want as well you just sell your seashells and then buy what you want from some another person. In the end you are still exchanging just goods and services for other goods and services just with extra step that makes everything more convenient (but clearly less obvious to people without economic training).</p>
<p>In addition I can't see how money is less 'natural' (whatever that is supposed to mean) than barter. Going with <a href="https://www.google.com/search?sxsrf=ALeKk03tMc4k7r6mNWSwEcxQM5HZiwPnPw%3A1609334793964&amp;ei=CYDsX4-_OtH0kwX4o7nQBg&amp;q=natural&amp;oq=natural&amp;gs_lcp=CgZwc3ktYWIQAzIHCCMQyQMQJzINCC4QxwEQrwEQFBCHAjIECAAQQzIECAAQQzICCAAyAggAMgIIADICCAAyAggAMgIIADoECCMQJzoHCAAQyQMQQzoKCC4QxwEQrwEQQzoICC4QxwEQrwE6CAguEMcBEKMCOgIILlDbEFiqFmDjGWgAcAF4AIABlwGIAa0EkgEDNi4xmAEAoAEBqgEHZ3dzLXdpesABAQ&amp;sclient=psy-ab&amp;ved=0ahUKEwjP59-l5_XtAhVR-qQKHfhRDmoQ4dUDCA0&amp;uact=5" rel="nofollow noreferrer">dictionary definition</a> of natural as something not man made neither barter or money is natural.</p>
<p>Lastly, what is fair or not fair is not for economists to say (although I have hard time seeing any unfairness with concept of money per se) and requires moral judgements - for that you need to visit philosophy stack.</p>

CC BY-SA 4.0
2020-12-30T13:32:43.437Z
2020-12-30T13:32:43.437Z
1muflon1
<p>Say I have collected a bunch of seashells. Tom wants to have my seashells. Therefore the seashells have value and I have just created wealth. And so Tom buys my seashells for \$10. But even though I have just created value, the amount of money hasn't increased. Instead, I have just caused inflation, since theres more stuff in relation to money. To compensate, the fed prints \$10 (or less) so the inflation rate remains stable and loans it to a bank.<br />
Whats weird about this is, that even though I did all the work, tom became 10$ poorer yet both me and the bank became \$10 richer.<br />
It almost seams money can only be used to exchange a fixed supply of things back and forth and can't actually account for creation of new wealth without &quot;hacks&quot; like the federal reserve.
So heres the question: Is there a system of exchange that would be similarly easy to money, but that accounts for the creation of wealth in a natural and , if possible, fair way?</p>

<inflation><federal-reserve><exchange>
Is there an alternative to currency to facilitate exchange of goods and services?
user2741831
# Is there an alternative to currency to facilitate exchange of goods and services?

(Asked by: username_0 on 2020-12-30)

Say I have collected a bunch of seashells. Tom wants to have my seashells. Therefore the seashells have value and I have just created wealth. And so Tom buys my seashells for \$10. But even though I have just created value, the amount of money hasn't increased. Instead, I have just caused inflation, since theres more stuff in relation to money. To compensate, the fed prints \$10 (or less) so the inflation rate remains stable and loans it to a bank.  
Whats weird about this is, that even though I did all the work, tom became 10$ poorer yet both me and the bank became \$10 richer.  
It almost seams money can only be used to exchange a fixed supply of things back and forth and can't actually account for creation of new wealth without "hacks" like the federal reserve.
So heres the question: Is there a system of exchange that would be similarly easy to money, but that accounts for the creation of wealth in a natural and , if possible, fair way?

**Tags:** inflation, federal-reserve, exchange

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## 1 answers

### Answer by username_1 on 2020-12-30. Score: 2 | Accepted answer

First, there are many misconceptions and mistakes in your question.

1. You state:

> Instead, I have just caused inflation, since theres more stuff in relation to money.

No, inflation is inversely related to output. If the amount of money is fixed and you create more valuable products that (ceteris paribus) creates deflation not inflation (see Blanchard et al. Macroeconomics: An European Perspective).

2. You state:

> Whats weird about this is, that even though I did all the work, tom became 10\$ poorer yet both me and the bank became \$10 richer.

No this does not make any sense from economic perspective. Tom purchased those seashells from you for \$10 which clearly shows that Tom values seashells more than \$10 and you sold those seashells for \$10 which clearly shows that you value the money more than seashells. Hence after trade you both have higher value than before and you are both richer.

In addition, if Fed **loans** bank \$10 the bank did not became richer by \$10. Now bank has \$10 liability so their net wealth is zero (since \$10 in cash assets - \$10 in liability =0). So asserting that banks becomes richer just by borrowing from Fed is absurd. Banks earn money on later lending out the funds on intermediation margins and those intermediation margins are their payment for providing financial intermediation services (e.g. screening clients, having accessible branches, etc.).

3. You state

> money can only be used to exchange a fixed supply of things back and forth and can't actually account for creation of new wealth without "hacks" like the federal reserve

No this again makes little sense. Money existed long before Fed. If you have fixed supply of money and amount of products and services in economy increases then prices across economy adjust (decrease via deflation). That means that even with fixed money supply output can increase indefinitely. As a matter of fact even when Fed prints money to keep prices constant, in real terms value of output is still allowed to increase as in economics what matters is the value of goods and services (e.g. real output) what matters not how price change.

Now to your question:

> Is there a system of exchange that would be similarly easy to money, but that accounts for the creation of wealth in a natural and , if possible, fair way?

No, alternative to exchange with money is barter, but barter is much less convenient and inefficient due to the problem of double coincidence of wants. With barter you always have to search for a person that both sells what you want and want what you sell.

At the fundamental level the only difference between barter and exchange with money is that the problem of double coincidence of wants is eliminated. Instead of searching for someone who sells what you want as well you just sell your seashells and then buy what you want from some another person. In the end you are still exchanging just goods and services for other goods and services just with extra step that makes everything more convenient (but clearly less obvious to people without economic training).

In addition I can't see how money is less 'natural' (whatever that is supposed to mean) than barter. Going with [dictionary definition](https://www.google.com/search?sxsrf=ALeKk03tMc4k7r6mNWSwEcxQM5HZiwPnPw%3A1609334793964&ei=CYDsX4-_OtH0kwX4o7nQBg&q=natural&oq=natural&gs_lcp=CgZwc3ktYWIQAzIHCCMQyQMQJzINCC4QxwEQrwEQFBCHAjIECAAQQzIECAAQQzICCAAyAggAMgIIADICCAAyAggAMgIIADoECCMQJzoHCAAQyQMQQzoKCC4QxwEQrwEQQzoICC4QxwEQrwE6CAguEMcBEKMCOgIILlDbEFiqFmDjGWgAcAF4AIABlwGIAa0EkgEDNi4xmAEAoAEBqgEHZ3dzLXdpesABAQ&sclient=psy-ab&ved=0ahUKEwjP59-l5_XtAhVR-qQKHfhRDmoQ4dUDCA0&uact=5) of natural as something not man made neither barter or money is natural.

Lastly, what is fair or not fair is not for economists to say (although I have hard time seeing any unfairness with concept of money per se) and requires moral judgements - for that you need to visit philosophy stack.


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