by Stephan Smith on November 20, 2010

Have you ever given any thought as to what money is? Depending on where you live, you’re idea of money could be very different from someone else’s idea of money. Regardless of that fact, one thing that is clear is that everyone wants it and those who have it want more of it.

Those who provide no goods or services have little of it and seem to have difficulty holding on to it, while those who provide goods and services acquire more of it. Some have committed terrible acts for the sake of it and others have used it to accomplish amazingly wonderful things. Some horde it and others donate it to help those who are less fortunate. A great majority of people all around the world submit to employment and spend anywhere from one third to half of their day working in order to earn it so that they can get access to life’s basic necessities. What is ‘it’? It is called money and whatever money is, it appears to be very important. Let’s look deeper.

What is Money?

Money is a society-wide accepted medium that helps facilitate the trading of valuable goods and services. If you produce valuable goods and services, people in a society would go to you and offer money in exchange for your valuable goods and services. Money aids in exchanging goods and services between parties. In the past and possibly in few societies today, if a there was no established medium of exchange in a society, consumers had to offer goods or services to producers in order to get the goods or services the consumer wanted. This is known as the barter system. The problem with the barter system is that the producer had to want what the consumer was offering in order for the transaction to take place. In many instances, the producer didn’t want what was being offered by the consumer.

Money essentially saves us from the barter system. But here’s the kicker. If we were to stop using money as a society, we most likely would revert back to the barter system or at least some variation of it. What does that tell you? It tells me that true value isn’t money but rather goods and services. By default we (people) trade value for value. We don’t trade value for no value. In this world the only way to obtain value to give value in return. Money is just the tool we use to trade value. Money is not valuable in of itself. However, money does have a degree of value because it aids in the trade of real value, which is goods and services. Money provides a service for a society. If money wasn’t used to trade valuables, then money would have no purpose and no absolutely no value.

Take this example.

You have no money. What do you do? You offer your value, whether it be your skills, knowledge or products. Two days later you’re given an employment offer to utilize your skills (employment, yuck). You take it. Two weeks later you’ve made ‘x’ amount of money. You then use that ‘x’ amount of money to buy food, clothes, a massage treatment, a haircut, a ticket go to the movies and a new cell phone.

Do you see what happened? In my example, you brought value with value. You brought food, clothes, etc., with your skills. You just used your money as a tool to postpone buying value. The money you were paid was merely a tool to get that value.

Currencies and Gold

Currencies and gold are very popular forms of money.

Three very popular forms for money we use today are currencies, gold and silver. Currencies come from central banks and gold and silver comes from, well, earth. Currencies, gold and silver have no value in of themselves. They are only tools. Money is only a tool to aid in the trading of goods and services. Nothing more.

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