What is Money? An Overview - Part 1
My goal with this posting is to get a discussion going about money, what it is, and how it's used. Why? so that we can better understand the economy, our place in it, and how to use it to create the life we want. If we can understand it, it makes us that much more prepared when we face an opportunity or financial situation.
This will be part a History, Math, and Political Science lesson. All of these make up Economics.
We're starting off with a wide group of people and backgrounds. Here's what I don't want to happen: I don't want the detailed, complicated discussion to get in the way of the basics and stifle the beginners or less knowledgeable folks from understanding. If this turns out ok, and the moderators are comfortable with it, I'll follow a 101, 202, 303 strategy in multiple posts. This will be the Intro, then we can hopefully move on to the more advanced stuff. So, the more fact-filled and knowledgeable folks, please bear with it and post the more advanced items in the succeeding threads... If you don't mind. I don't own the thread, but it would help me to make things clearer for the folks just starting to research this.
Here's how this will work: I will use this beginning post as the main repository of info. We will add to it together as questions are asked and facts or illustrations are uncovered. Check back here as we move along in the discussion, becaus I'm going to add info and ask more questions as things progress.
Disclaimer: I felt I needed to get permission from the forum moderators before I posted because this is a touchy subject. There are many videos on youtube, and books and blogs, that have many of the facts but lack context. The moment we start talking about debt and economics and the Fed, people seem to go crazy and either A) lable you as a conspiracy theorist and want to burn you at the stake, or B) try to convince you that aliens have taken control of the government and are out to get you... Please... Just keep an open mind. I will try to include as many references and sources as I can. I hate seeing some of the crap slapped on videos and blogs that have no basis or fact.
Please chime in as your experience and knowledge allows. Also, don't be afraid to go out and find sources that we can discuss or verify. Collaboration to piece this puzzle together is welcome. However:
Conspiracy theories (the alien ones are my favorite) without solid evidence, accusations, gruff statements with no facts to support them, or closed-minded denials are not welcome.
I need your help if I am going to provide this service to the forum. I'm putting myself out on a limb and am sharing my research and time with you, and I'm not being paid, so please respect that.
I don't have all the answers. But I think I can ask good enough questions, and together we can find the answers.
All that being said, let's start off with the basics....
Here are some questions. I'd like to hear some candid answers BEFORE we get into the research.
Also, Let's keep this as simple as possible, think back to cave-man days here.
The Earth as a platform
What I believe is a principle factor in understanding how money came to be is a law of physics:
The law of conservation of energy states that energy never disappears, it only changes form.
This can also be applied to matter. Matter doesn't disappear, it just changes form. Carbon atoms and nutrients transformed into trees, and the wood was transformed into your house. You can trace every particle in your house back through a long history.
In the same way, it is possible to reach a limit in growing all the grapes or other item that can possibly be grown from the earth, and then no more. Unless a moon or asteroid crashes into us with more material, you will only be able to grow a certain number of grapes, before you exhaust all the ingredients contained on the planet.
Boggles the mind, doesn't it?
That is the world we have lived in. Everything we have and are comes from it. All the potential we as humans have is contained in it. Unless you believe in a higher power... or aliens.
How did people survive before money?
You have to drink, right? You've spent all day hunting and finally caught something, and worked up a big thirst, and there's no river near you. But there happens to be a man who has some water stored away. You grunt and motion that he can have some meat if he gives you some water... Perhaps because you're a nice guy. Or perhaps you were too dehydrated to fight him for it. That's how people survived back then. They exchanged something. But it wasn't the actual meat or water... It's something else.
Even with our complicated banking systems today, we still exchange the same thing which people did back then.
What did people really trade and barter?
Value. I know that seems a little too simple, but that's what it is. In it's simplest form, economics is based on value.
If you're in the wilderness and you're starving, and you come across a dead animal carcass like Bear Grills... it has value to you. But value isn't just about tangible things.... If you're trying to cross a river, and you meet a local who knows a place to pass... He has valuable knowledge.
Side Note: We hear it all the time, especially places like this forum: Want to be rich? Find and add value. Well there it is. People get so caught up on dollar bills that they fail to see that favors being exchanged are just as relevant. An engineer exchanges his unique knowledge and abilities for..... VALUE. NOT money. Money is simply ONE way to facilitate that exchange.
We'll get into intrinsic vs perceived a little later. Let's stay in the lowest rung of the hierarchy of needs for now, before people were able to store up enough value to survive and could actually pursue enjoyment and other things.
Trade
People have bartered with each other for thousands of years. But, as a group of huts became villages, which turned into towns, which turned into cities... Trade between communities became the all important factor of life in the world. Goods harvested or made in one part of the world slowly began making their way across continents and seas. Trade routes formed, and people began to discover more about the world around them.
Side Note: It goes back to psychology. People like stuff. And need essentials. I remember a post here about storage facilities, and the discussion started about why people keep all this junk and crap they've collected. Well, that's a whole other topic, but the fact remains that people like stuff. Especially rare or exotic stuff.
As trade grew and evolved, so did a system to measure and control that trade. Political leaders of the day realized that they could do quite well for themselves and their nations if they fostered and controlled trade. Let's look at some of the factors that led to the widespread use of money:
-Government monitoring and control of trade.
-Government revenue through taxes on trade.
-The need to store value for long periods of time (both individual and governmental).
-The need of a facilitator for exchanging value.
Any more factors you can think of?
What is "Money"?
Economics isn't about money. It's about trade! We wouldn't need money if we didn't trade.
Money, in a formal sense, began as a way to measure the exchange of value, or trade. People traded and used things as money long before nations emerged. But it wasn't until nations became the dominant powerhouses they are today, that money became formalized - First between nations, then between individuals and communities, as a way to facilitate the exchange of goods and services (which are different forms of value).
Here's wikipedia on the subject:
Money - Wikipedia, the free encyclopedia
So, as we see here, money is used to help people exchange value between one another. Some goods are perishable, and you would not want to exchange and store the perishable item, since its value would deteriorate over time. That is why money is needed, as a store of value.
Gold and silver became the mainstays of trade at the higher levels of economy and government because of thier natural characteristics. They weren't industrial materials like iron or bronze, and they were fungible. There were many forms of money, but gold and silver became the standard over time because they were simply easier to account for across the known world. An ounce of gold was the same in Moscow or Geneva.
NOTE: This doesn't mean that other forms of money became extinct. Even though governments began to adopt gold as a monetary standard (we'll get to that), that doesn't mean that the average person was limited only to that. Units of tobacco were used as a form of money in the American colonies. It wasn't until the 20th century that nearly every person on the planet began to use a single monetary system. It's hard to imagine today.
Think about this for a second... You're a farmer. Picture yourself standing at the edge of your farm, facing the rode into town. It's the end of the harvest, and you just helped load your lots of wheat into a merchant's cart for several gold pieces. Hold them in your hand. What do you see?
If you were looking at it from an economic perspective, you would see all the effort, time, ingredients, tools and planning you put into growing those crops. The crops you worked so hard to produce are gone, but you still hold the value of them in your hand.
And you can store them for as long as you need to. They won't spoil. They hold their value.
What other things could you have exchanged your crops for? a bushel for some new tools? Some services to help you prepare for the next season? a letter of credit from another person (a corporation is considered a person)?
What makes money valuable?
RealOG has a good point:
And so does Fannocks:
Let's tackle this next.
But first, let's discuss the last update. Have we lost anyone yet? Beginners?
More to follow...
My goal with this posting is to get a discussion going about money, what it is, and how it's used. Why? so that we can better understand the economy, our place in it, and how to use it to create the life we want. If we can understand it, it makes us that much more prepared when we face an opportunity or financial situation.
This will be part a History, Math, and Political Science lesson. All of these make up Economics.
We're starting off with a wide group of people and backgrounds. Here's what I don't want to happen: I don't want the detailed, complicated discussion to get in the way of the basics and stifle the beginners or less knowledgeable folks from understanding. If this turns out ok, and the moderators are comfortable with it, I'll follow a 101, 202, 303 strategy in multiple posts. This will be the Intro, then we can hopefully move on to the more advanced stuff. So, the more fact-filled and knowledgeable folks, please bear with it and post the more advanced items in the succeeding threads... If you don't mind. I don't own the thread, but it would help me to make things clearer for the folks just starting to research this.
Here's how this will work: I will use this beginning post as the main repository of info. We will add to it together as questions are asked and facts or illustrations are uncovered. Check back here as we move along in the discussion, becaus I'm going to add info and ask more questions as things progress.
Disclaimer: I felt I needed to get permission from the forum moderators before I posted because this is a touchy subject. There are many videos on youtube, and books and blogs, that have many of the facts but lack context. The moment we start talking about debt and economics and the Fed, people seem to go crazy and either A) lable you as a conspiracy theorist and want to burn you at the stake, or B) try to convince you that aliens have taken control of the government and are out to get you... Please... Just keep an open mind. I will try to include as many references and sources as I can. I hate seeing some of the crap slapped on videos and blogs that have no basis or fact.
Please chime in as your experience and knowledge allows. Also, don't be afraid to go out and find sources that we can discuss or verify. Collaboration to piece this puzzle together is welcome. However:
Conspiracy theories (the alien ones are my favorite) without solid evidence, accusations, gruff statements with no facts to support them, or closed-minded denials are not welcome.
I need your help if I am going to provide this service to the forum. I'm putting myself out on a limb and am sharing my research and time with you, and I'm not being paid, so please respect that.
I don't have all the answers. But I think I can ask good enough questions, and together we can find the answers.
All that being said, let's start off with the basics....
Here are some questions. I'd like to hear some candid answers BEFORE we get into the research.
Also, Let's keep this as simple as possible, think back to cave-man days here.
The Earth as a platform
What I believe is a principle factor in understanding how money came to be is a law of physics:
The law of conservation of energy states that energy never disappears, it only changes form.
This can also be applied to matter. Matter doesn't disappear, it just changes form. Carbon atoms and nutrients transformed into trees, and the wood was transformed into your house. You can trace every particle in your house back through a long history.
In the same way, it is possible to reach a limit in growing all the grapes or other item that can possibly be grown from the earth, and then no more. Unless a moon or asteroid crashes into us with more material, you will only be able to grow a certain number of grapes, before you exhaust all the ingredients contained on the planet.
Boggles the mind, doesn't it?
That is the world we have lived in. Everything we have and are comes from it. All the potential we as humans have is contained in it. Unless you believe in a higher power... or aliens.
How did people survive before money?
You have to drink, right? You've spent all day hunting and finally caught something, and worked up a big thirst, and there's no river near you. But there happens to be a man who has some water stored away. You grunt and motion that he can have some meat if he gives you some water... Perhaps because you're a nice guy. Or perhaps you were too dehydrated to fight him for it. That's how people survived back then. They exchanged something. But it wasn't the actual meat or water... It's something else.
Even with our complicated banking systems today, we still exchange the same thing which people did back then.
What did people really trade and barter?
Value. I know that seems a little too simple, but that's what it is. In it's simplest form, economics is based on value.
If you're in the wilderness and you're starving, and you come across a dead animal carcass like Bear Grills... it has value to you. But value isn't just about tangible things.... If you're trying to cross a river, and you meet a local who knows a place to pass... He has valuable knowledge.
Side Note: We hear it all the time, especially places like this forum: Want to be rich? Find and add value. Well there it is. People get so caught up on dollar bills that they fail to see that favors being exchanged are just as relevant. An engineer exchanges his unique knowledge and abilities for..... VALUE. NOT money. Money is simply ONE way to facilitate that exchange.
We'll get into intrinsic vs perceived a little later. Let's stay in the lowest rung of the hierarchy of needs for now, before people were able to store up enough value to survive and could actually pursue enjoyment and other things.
Trade
People have bartered with each other for thousands of years. But, as a group of huts became villages, which turned into towns, which turned into cities... Trade between communities became the all important factor of life in the world. Goods harvested or made in one part of the world slowly began making their way across continents and seas. Trade routes formed, and people began to discover more about the world around them.
Side Note: It goes back to psychology. People like stuff. And need essentials. I remember a post here about storage facilities, and the discussion started about why people keep all this junk and crap they've collected. Well, that's a whole other topic, but the fact remains that people like stuff. Especially rare or exotic stuff.
As trade grew and evolved, so did a system to measure and control that trade. Political leaders of the day realized that they could do quite well for themselves and their nations if they fostered and controlled trade. Let's look at some of the factors that led to the widespread use of money:
-Government monitoring and control of trade.
-Government revenue through taxes on trade.
-The need to store value for long periods of time (both individual and governmental).
-The need of a facilitator for exchanging value.
Any more factors you can think of?
What is "Money"?
Economics isn't about money. It's about trade! We wouldn't need money if we didn't trade.
Money, in a formal sense, began as a way to measure the exchange of value, or trade. People traded and used things as money long before nations emerged. But it wasn't until nations became the dominant powerhouses they are today, that money became formalized - First between nations, then between individuals and communities, as a way to facilitate the exchange of goods and services (which are different forms of value).
Here's wikipedia on the subject:
Money - Wikipedia, the free encyclopedia
So, as we see here, money is used to help people exchange value between one another. Some goods are perishable, and you would not want to exchange and store the perishable item, since its value would deteriorate over time. That is why money is needed, as a store of value.
Gold and silver became the mainstays of trade at the higher levels of economy and government because of thier natural characteristics. They weren't industrial materials like iron or bronze, and they were fungible. There were many forms of money, but gold and silver became the standard over time because they were simply easier to account for across the known world. An ounce of gold was the same in Moscow or Geneva.
NOTE: This doesn't mean that other forms of money became extinct. Even though governments began to adopt gold as a monetary standard (we'll get to that), that doesn't mean that the average person was limited only to that. Units of tobacco were used as a form of money in the American colonies. It wasn't until the 20th century that nearly every person on the planet began to use a single monetary system. It's hard to imagine today.
Think about this for a second... You're a farmer. Picture yourself standing at the edge of your farm, facing the rode into town. It's the end of the harvest, and you just helped load your lots of wheat into a merchant's cart for several gold pieces. Hold them in your hand. What do you see?
If you were looking at it from an economic perspective, you would see all the effort, time, ingredients, tools and planning you put into growing those crops. The crops you worked so hard to produce are gone, but you still hold the value of them in your hand.
And you can store them for as long as you need to. They won't spoil. They hold their value.
What other things could you have exchanged your crops for? a bushel for some new tools? Some services to help you prepare for the next season? a letter of credit from another person (a corporation is considered a person)?
What makes money valuable?
RealOG has a good point:
And so does Fannocks:
Let's tackle this next.
But first, let's discuss the last update. Have we lost anyone yet? Beginners?
More to follow...
Dislike ads? Become a Fastlane member:
Subscribe today and surround yourself with winners and millionaire mentors, not those broke friends who only want to drink beer and play video games. :-)
Last edited:
Membership Required: Upgrade to Expose Nearly 1,000,000 Posts
Ready to Unleash the Millionaire Entrepreneur in You?
Become a member of the Fastlane Forum, the private community founded by best-selling author and multi-millionaire entrepreneur MJ DeMarco. Since 2007, MJ DeMarco has poured his heart and soul into the Fastlane Forum, helping entrepreneurs reclaim their time, win their financial freedom, and live their best life.
With more than 39,000 posts packed with insights, strategies, and advice, you’re not just a member—you’re stepping into MJ’s inner-circle, a place where you’ll never be left alone.
Become a member and gain immediate access to...
- Active Community: Ever join a community only to find it DEAD? Not at Fastlane! As you can see from our home page, life-changing content is posted dozens of times daily.
- Exclusive Insights: Direct access to MJ DeMarco’s daily contributions and wisdom.
- Powerful Networking Opportunities: Connect with a diverse group of successful entrepreneurs who can offer mentorship, collaboration, and opportunities.
- Proven Strategies: Learn from the best in the business, with actionable advice and strategies that can accelerate your success.
"You are the average of the five people you surround yourself with the most..."
Who are you surrounding yourself with? Surround yourself with millionaire success. Join Fastlane today!
Join Today
