23 The Ability Of Money To Account Units

23 The Ability Of Money To Account Units

The term ‘unit of account’ refers to the ability of money to measure the fault of things in specific agreed upon and understood units. Like meters is a unit to measure length, grams a unit to measure weight, here we evaluate the ability of each type of money to evaluate the value of an item.
Money Type Score (5) Why
Debt 1 Debts are a very port measure of ‘units of account’, and it was the use case commodities and items to fulfil this role. This is because debts are subjective unless they are measured and recorded in units of other forms of money. So if I said to you “You owe me a days work” thats ambiguous, but if I said “You own me $40”, then thats better, but only as good as the dollar is at the job.
Commodities /Items 3 Commodities and items are better at keeping a ‘unit of account’ as they have some uniformity that is more consistent than something as subjective as ‘how much a days worth of work is’, but because most commodities and items are susceptible, to damage, decay and occasionally hard to subdivide, they can have some difficulties in performing this task. Not to mention that each commodity holds different value to different people due to demand.
Gold /Silver 5 Gold, historically, has been a very good measure of value due to its scarcity and malleability, having the ability to take an infinite shapes and forms while holding the same weight, over time it has been a good measure of universal value across time and space. Silver, hasn’t done as good a job due to its increased relative volatility compared to gold. The price of a sheep at the time of the Messenger of Allaah صلى الله عليه و سلم was between 0.5 and 1 Deenaar, which is 4.25g of gold, which is, as of 11 Feb 2021 is £88.20 - £176.40. Thats pretty much the price of a sheep today if purchased for Qurbani. 
Fiat 4 Fiat is relatively stable on a day to day, month to month in countries that have relatively good economies. So the price of goods and services can be adequately measured in it. The main failing of fiat is that over longer periods of time, the value tends downwards, as they all eventually lose value.
Bitcoin 3 Bitcoin would be the superior measure of value as a unit of measure if it were fully adopted. Due to it being so young, the measure of its value grows along with its adoption. The more its adopted, the more the value grows. But once completely adopted (if hyperbitcoinisation is achieved) then its price should stabilise. But until that happens, its volatility prevents it from being effective as a unit of account. If I said I wanted to sell my car for 1BTC, tomorrow the price could be drastically different compared to any local fiat price.

Footnotes

No Footnote provided.

Further Reading

No Further reading available.

Leave a Reply

Your email address will not be published. Required fields are marked *

three × three =