Perry Mehrling has written an excellent blog-entry entitled “Why is money difficult?” He points out 4 essential obstacles to understanding monetary economies he has encountered again and again in teaching his money and banking course over the years: (1) the alchemy of banking, (2) the essential hybridity of the monetary system, (3) the inherent hierarchy of credit and money, and (4) the inherent instability of credit.
In his comment, Wolfgang suggests adding a point (5) to the list: the paradox of thrift, which essentially is based upon accounting identities (my obligation is your claim and vice versa) and the mechanics of balances (W. Stützel) resulting from them. The “beggar thy neighbor” attempts of the major industrial nations to improve their balances of trade during the 1930s, which led to a deflationary spiral by way of a “race to the bottom”, provide a historical example which is paralleled by germany’s “surplus / competitiveness imperialism” in today’s eurozone.
View Perry Mehrlings blog-entry “Why is money difficult?” here. To view Wolfgang’s comment, scroll down to “moneymind”.