inside money

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Money which is an asset to the person or firm holding it, but is also a liability for somebody else in the economy. Inside money is contrasted with outside money, where the asset of the holder is not balanced by a liability for some other party. Bank balances, for example, are clearly inside money, while gold coinage is outside money. A rise in the real value of inside money does not increase the aggregate wealth of the economy, but redistributes it between the issuers and the holders of money. It is a matter of definition whether money which is a liability of the government counts as inside or outside money.

Subjects: Economics.

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