Back: Why Study Money? Top: Getting Money Right
So what is money? Complex textbook definitions invoke notions like medium of exchange, store of value, and unit of account. These definitions seem designed to obscure rather than illuminate. We say: Money is a claim on the resources of the society that issues it. More particularly, the salable resources, including all the goods and services available for sale in the society. That includes things like real estate, raw materials, manufactured products, and the many paid services that are provided by the efforts of the society's participants. When you have some money, you can exchange it for (hence, claim) some goods and services. Got more money? You command more resources! Kudos. Without money, you may still have some claims, but money gates access to everything salable in the whole society.
What I want to emphasize in this definition is the role of society. Money is social. Society defines it, creates it, uses it, and destroys it. What society offers (or demands) in exchange for money gives money its value. Society makes (and selectively enforces) the laws that govern money and its usage. That's policy. These are not natural laws like those which govern the weather or nuclear physics. We can change our policy for the better.
There is one genuine complication in understanding money that you must grasp firmly if you are to understand what follows. Money is social, but all participants of society are not equal before money. Money divides society into two distinct parts: sovereign and subject.
The sovereign is the issuer of the money. Typically that's a murky conglomeration of federal government and central bank in modern nations, with some notable exceptions like the EU. Everybody else in society is a user of the money. Those users I call subjects to emphasize the asymmetry of the money relation. Subjects don't get to issue money (unless they are banks, more on that later). Subjects can include persons, businesses, local governments, and even nations in case of the EU and other monetary unions. Even sovereigns are subject when they deal in the money of another sovereign. I emphasize the distinction between subject and sovereign because the sovereign has vast powers over the resources of the society, by virtue of that capability to issue money. Subjects, not so much.
In a democracy, sovereignty is said to rest with the people. But real sovereignty also (maybe even primarily) resides in the power to issue money. Who controls the money supply exercises huge influence, regardless of the theatrical appurtenances of government. Hence all the obfuscation and aura of mystery (artificial complications) around central bank, government treasury, and private banks, designed to limit democratic oversight.
Failing to distinguish sovereign from subject enables an especially pernicious lie which comes in various guises. Asserting or implying that the sovereign is just another subject serves as bulwark justification for all sorts of dereliction of duty by society's leaders, under the excuse that the money isn't available. For the sovereign, the money is always available; if the physical resources are also available, only the will to use it is what's lacking.
One useful criterion of a democracy is the degree to which the policies of money reflect the needs and values of the people of the society. When a tiny elite of bankers and their cronies monopolize the money sluice, furthering their own enrichment while refusing to fund legitimate social needs on the grounds of not being able to pay, that's no democracy: it's an oligarchy.