The Money Paradox

Abstract

Money has two key properties—accumulation (value) and liquidity (exchange), which results in what we define as “The Money Paradox”. In the language of Physics, money can be in either static (value, potential energy) or dynamic (exchange, kinetic energy) state, however the same money can’t be both static and dynamic at the same time because the states are mutually exclusive. In our paper we discuss the conditions under which money changes its state and how such transformations impact continuity (stability) of economics. Our goal is to identify the measures of continuity and thus sustainability of economic activity, as well as to help determine a point in time when new money must be infused into a financial system in order to maintain a continuous production and exchange of goods and services within an economic system without interruption, i.e., a financial crisis.