Under capitalism, money is an asset (typically gold) used in a division of labor society as a medium for indirect exchange. These can be in the form of deeds, certificates, or notes which can be exchanged for the asset on demand.

In today’s world, money is created literally out of thin air by government-created and run central banks.

Legal tender laws give a monopoly to this fiat money forcing market participants to use this money (by making other money substitutes more costly to use.)

As the paper money is not tied to an asset, there is no limit to how much money central banks create. If the rate of money creation for an economy is greater then the increase in general production for that economy this leads to a general rise in prices. This process is known as monetary inflation (increasing the money supply).

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