PrevNext

What is Money?

Money is the agreed medium for the exchange of a person's work.

Money is Effort

Contrary to popular belief money is not a coin, a bank note, a bank balance, a cheque, or a credit card. It is the value placed on the exchange of work effort.

 

Before the time of currency, trade was conducted by barter, that is, the direct exchange of goods and services. As it became increasingly difficult for people to convert their chickens into firewood so that they could attain the fish that the stonemason wanted to then build their hut, at sometime it became easier to deal with the stonemason directly with one transaction using a commonly agreed medium of value. It is likely the earliest currency was rare earth elements such as gold, silver, gems and the like, as they we rare and attractive.

 

Work
Gold Bars

For thousands of years the main standard of trade became gold (the Gold Standard). But gold was very heavy so kingdoms issued lightweight rights to the gold that was stored in a secure location. This evolved into the currency we now know - paper and coin. These paper and coin 'tokens' could be redeemed for gold and over time community trust in this mechanism developed to the point that most did not bother gathering their gold.

 

Central banks of nations held the country's gold reserves and issued the currency 'tokens'. Most governments guaranteed this process and the people, for the most part, are satisfied with it.

Money has Real Value

The amount of money available in an economy is finite, as the number of people working in an economy is finite, as is the amount of work each person does. Circulating more currency than the current national effort underlying it and the previously stored effort leads to Inflation.

How Pay Rates are Determined

Work is rewarded in most societies on a Supply and Demand basis not from how hard you work. A computer programmer will earn a lot more than a store attendant because the programmer has a rarer skill set that not many can, or want to master, and the community greatly requires these skills. The store attendant is just as valued a member of society but their skills are more easily mastered and thus more people can do it and such the supply of person is more readily available.

 

Specialist / unique skills are paid a higher rate as not many people have them (short supply) and many businesses (high demand) must compete to hire / utilise these people. This means the pay rate is based on the rarity of the skillset and the demand for it, not how hard they work. This is why many complain 'they work long hours for little pay'. Education and experience over long periods creates a specialist.

 

A supply and demand model allows products and services to become cheaper over time.

Why We Must Specialise our Roles

Specialist

We all choose a specialty and earn money from it. A web designer that creates content such as this page, doesn't usually manufacture the computer, the networks and generate the power to run it all. Why? We have finite time, memory, energy and intelligence and can only learn and master so much.

 

Specialists must be good at what they do and thus must dedicate themselves to being as good or better than their peers for fear of being unproductive in an ever changing world and losing their jobs. There are a finite number of jobs in an economy and only the best candidates make the grade. While many more can do the job, only the top people will be employed and the rest will have to find another specialty, hence the term "making the cut".

 

All your current conveniences, food, shelter, materials like bricks, windows, your refridgerator, your oven, your car, and your TV could not be built only by your, you would need to own vast amounts of land to mine, grow, manufacture, generate power, and then build the specialist tools. It would take most of your life just to get a fraction of the way on your own. Unless your willing to live as a hunter gatherer on land given to you (and taxes paid for you), you will need money.

Exhausted