[jmherbener]

The regression theorem is a necessary but not sufficient condition for something to become money. It rules out any item that has not been traded on the market and therefore, lacks exchange value against other goods (i.e., there are no prices of other goods in terms of the item). In particular, no government can merely declare a non-traded item as money and have people accept it as money. If Obama criminalized the use of the dollar and declared that a new currency, say the Obama, is now money in the USA, it would not be used by people as money. Instead, people would trade their goods and services for something that has known exchange value. So, any good that is traded in the market passes the regression theorem test and is a viable candidate to become money. But of all the traded goods, some are superior as a medium of exchange to others. Those that are already widely traded are superior to those that trade more narrowly. Durable goods are superior to perishable goods. Divisible goods are superior to indivisible goods. Portable goods are superior to stationary goods, and so on. Of all the traded goods, the most suitable good to be a medium of exchange is widely-traded, durable, divisible, portable, and so on. That is the good people choose as money.