It Is the Difference in Marketability of Various Goods That Gives Rise to Media of Exchange

Some goods are more marketable (or "liquid") than others. This means that a seller of such goods would not have to search very long to find a buyer willing to pay the highest likely price that anyone would offer for the good. In contrast, if the seller of an unmarketable (or illiquid) good has to dispose of it quickly, he will have to accept a much lower price than what he would be able to obtain if he had more time to find a suitable buyer.

It is the difference in marketability of various goods that gives rise to media of exchange. For example, if a farmer wishes to trade away a pig in exchange for sweaters, but cannot find someone who wants to trade away sweaters for a pig, then the farmer can still improve his situation by trading away the pig for something that is more marketable, such as tobacco. Not only is he more likely to find someone who wants to trade away sweaters for tobacco, but it is much easier to store and transport the tobacco than the live pig.

Money provides its unique services when it resides in someone's cash balance. There is no such thing as money "in circulation"; at any moment, every unit of money belongs to someone's cash balance. For this reason, there is nothing to distinguish the "hoarder's" cash balance from that of a "normal" person, except for their relative size.

--Robert P. Murphy and Amadeus Gabriel, Human Action Study Guide: A Guided Tutorial of Ludwig von Mises's Classic Work (Auburn, AL: Ludwig von Mises Institute, 2008), 152-153.