Money

Sure we all want it and we spend most of our life working for it but how many of us really understand it? Where does it come from? What did people do before it? Why was it invented?

Now if you say “money is to pay for things” you missed the point.

Money is an invention, those bits of paper in your wallet weren’t found by a caveman lying under a rock and we humans invent things to solve a problem. So what was the problem?

Take the example of a boat. What was the problem solved by the invention of the boat? A boat is way to travel on and across water without getting wet.

The problem was not that we couldn’t go sailing and boats were not invented to go sailing, the concept of sailing did not exist before the boat, it came after. The same goes for money, it was not invented so we could pay for stuff. The concept of paying did not exist before money.

everybody in Zimbabwe was a trillionaire

So what was the reason then?

Look at all the things around you now. The electronic device your reading this on, the chair your sat on the clothes you’re wearing. Do you know how to make any of that stuff? Probably you don’t but somebody in this world does and thank god for that.

What do you know how to do? The answer is your job, weather it may be flipping burgers or running a nuclear reactor you know how to do it and somebody out there has a need for what you do.

Now we are getting to the crux of the matter. It’s not possible for you to have the knowledge or experience to create all the things in your life that you need or want. Even the basic necessities take at lot of knowledge and understanding to create.

Could you forage for and grow your own food, build your house, purify the water, weave your clothes. Even the basics take a lot of experience and knowledge. However, you could practice one of these skills and specialize in it, maybe even master it.

Much better than being "a jack of all trades and a master of none", and so goes for all the workers in an economy.

But there is a problem, if we only make one product or service, then we only have one product or service to trade for the things we don’t know how to create.

This is the reason money was invented, as way to exchange the things of value that we create for other things of value created by others.

“Money is a medium to exchange value”

Maybe an easy sound bite to say but not too easy to understand.

Notice that money is a medium to exchange value; it’s not the thing of value itself. Although it could have its own intrinsic value. It’s not really the money that you want, it’s the things you can buy with it, a very important distinction.

compressed blocks of tea used as money

How did people trade before money?

Most people will think of barter. Let’s say we have those burgers that we flip to trade and we want some of that sweet electricity from the nuclear power plant down the road. Well we would have to say to the owner...

"anytime you want a burger come on in, just as long as you keep the power flowing"

...and hope that they would be happy to make the trade. Now this is certainly possible to do but very problematic.

Instead lets imagine a community of people, say a large tribe. It’s not too big and everybody more or less knows each other. Rather than try to find to find somebody to exactly match your trade, you could trade your excess production with anybody who wants it. First you could check out the stuff that they have to trade and see in anything takes your fancy. If not then you could say to the person now you owe me one, your in debt to me and at some point in the future you have to repay the debt with something of equal value.

Now let’s say instead of just remembering the debt, we exchange some kind of token that represents the debt. A precious shell or feather, a cup of rice or wheat, a weight of metal, a notch on a stick , digital space of on a public ledger (bitcoin, steem) to recorded the transaction et voila! we’ve done it, we invented money. It wasn’t that hard and now transactions can get a lot easier.

1000 year old gold coins

Now if everybody uses the same tokens in a given community, individual debts don’t have to be settled between the original seller and buyer. The token could be traded with anybody in the community as long as people have faith that other people will accept the token as payment, and so it goes.

"Money is a medium to exchange value"

You work in order to create things of value, which you exchange for money in order to buy the things of value that you can’t (and now don’t have to) make yourself.

Cacophony