International banking and money as a commodity

The Economist this week has an article about international banks and the problems of their retreating to their home markets.

The big problem here is that we treat money as a commodity when it really should be an intangible token which represents the goods and services produced by an economy.

Money represents purchasing power and gives its holder command over goods and the services of people.  International financial transactions should then represent and match exchanges of goods and services between different countries.

Historically we have mostly used gold, a commodity with limited usefulness, as the token.

By treating money as a commodity we have given it a value of its own and made transactions that do not match the exchange of goods and services.  This has made the financial system complicated, convoluted and chaotic.  It is no wonder there are lots of problems.

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