fisherman. I just caught a boat-load of fish, and I want to exchange all these fish for a new suit. Without an “exchange medium”, his is very difficult to do. But with an exchange medium, it s easy.
What will I accept as a medium to help me exchange my fish for a new suit? I ll accept anything for my fish--I don t care what it is--so long as I am sure the suit-seller will accept it in exchange for a suit. If there is any doubt about whether or not the suit-seller will accept it for a suit, then I will not accept it for my fish. If I think he might not accept it, then I will not accept it.
Now, let s be more realistic. A fisherman really doesn t want to exchange his boat-load of fish just for a suit. He wants groceries, electricity, water, housing and a few glasses of beer. So whatever he accepts in exchange for his fish can not be something acceptable only to the suit-seller. It must be something that is acceptable to all those other people, too. Why do all those other people accept it? Only because they are confident that everyone they do business with will accept it. See how it all ties together? When everyone is confident that everyone else will accept something as money, then that something becomes generally acceptable. Then, and only then, it is money.