MONEY AND MONEY OF ACCOUNT

Money of account, namely that in which debts and prices and general purchasing power are expressed, is the primary concept of a theory of money.

A money of account comes into existence along with debts, which are contracts for deferred payment, and price lists, which are offers of contracts for sale or purchase. Such debts and price lists, whether they are recorded by word of mouth or by book entry on baked bricks or paper documents, can only be expressed in terms of a money of account.

Money itself, namely that by delivery of which debt contracts and price contracts are discharged, and in the shape of which a store of general purchasing power is held, derives its character from its relationship to the money of account, since the debts and prices must first have been expressed in terms of the latter. Something which is merely used as a convenient medium of exchange on the spot may approach to being money, inasmuch as it may represent a means of holding general purchasing power. But if this is all, we have scarcely emerged from the stage of barter. Money proper in the full sense of die term can only exist in relation to a money of account.

Perhaps we may elucidate the distinction between money and money of account by saying that the money of account is the description or title and the money is the thing which answers to the description. Now if the same thing always answered to the same description, the distinction would have no practical interest. But if the tiling can change, whilst the description remains the same, then the distinction can be highly significant.