Veil of money

Veil of money describes a problem in economics, which centers on the question of whether money is a commodity like other commodities—such as oil or gold or food—or whether it has special properties.

This question arises in classical political economy, where John Stuart Mill argues that money is unimportant, and that while money might disguise the true values in an economy, it would only do so for a limited period of time. This was used to argue against government intervention in political economy as a waste of time. The problem expanded, however, as money swung back toward credit-based issuance of notes. What money meant, or was equivalent to, became important as governments attempted to adjust interest rates rather than maintain the Gold Standard.

In the 20th century the veil of money is used to describe questions of stability and the exchangeability of money for interest or commodity in a macro-economic model. In essence, as long as money can be treated like a commodity, there is no stickiness between money and goods, or money and interest.

See also

• Money illusion
• Neutrality of money
• Real versus nominal value