Real Money Is Not Real Goods and Services

by Don Boudreaux on January 14, 2018

in Myths and Fallacies, Trade

Here’s another letter to my frequent “Trump Man” e-mail correspondent, Nolan McKinney:

Mr. McKinney:

Agitated by this letter of mine, you write that you “don’t see why Mexico has to export more to pay for [Trump’s border] wall. They’ll pay for it with just their money.”

Money has value only because it can be exchanged for real goods and service.  And so people, non-Americans no less than Americans, earn money only if and to the extent that they themselves supply to – export to – the market real goods and services.  The reason is that no one will voluntarily part with money that can be used to acquire real goods and services in exchange for nothing or (what is the same thing) in exchange for pieces of paper called “money,” such as Monopoly “money,” that cannot be exchanged for real goods and services.

If the economic proposition implicit in your claim is correct, then you can make an excellent living by quitting your current job in order to spend a few minutes each day using your office printer to print out “McKinney dollars” – little pieces of paper that you call “money.”  Your economic ‘theory’ implies that grocers, restaurateurs, department-store owners, physicians – indeed, anyone with whom you currently engage in market exchanges – will be content for you to pay for what you buy from them with ‘just your money.’

Try this manner of paying for things and let me know how it works out for you.

Sincerely,
Donald J. Boudreaux
Professor of Economics
and
Martha and Nelson Getchell Chair for the Study of Free Market Capitalism at the Mercatus Center
George Mason University
Fairfax, VA  22030

P.S. Suppose you order a meal in a Mexican restaurant and are served a plate piled high with nothing but pesos?  Would you eat that meal?

…..

Note to my fellow economists: especially – but not only – because I’m a great admirer of the work of the late W.H. Hutt, I am well aware that money performs real and genuinely valuable functions in a market economy.

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