What is money? And why do you need to know?
Because understanding this truth is the key to preserving wealth and achieving financial freedom.
It will change your perceptive and the way handle your finances to create generational wealth that can last for generations.
So what is money really?
What is Money?
Money, defined by Merriam Webster dictionary as a medium of exchange for goods or services within an economy.” Simple put, money is what you use to sell and buy goods and services.
Three primary ways money is used within an economy are:
- As a medium of exchange — people can use is it to buy and sell from one another.
- To store — people can save it, use it, and transfer it later without losing purchases power over time.
- As unit of account or measure — it provides a common base for prices.
That might sound a lot like currency for some. So is currency and money the same thing? No.
How Money and Currency differs
So how is money different from currency?
Money and currency are two of the most misunderstood words in finance. Most people use money and currency interchangeable, but they are not the same.
For example, real money has intrinsic value. It’s value is in itself. It is finite (limited amount) and government can’t just make more because they want to like they print fiat currency.
Real money is based on production and backed by something tangible in value usually gold or silver and other precious metals.
Currency on the other hand, is a physical representation of value.
Unlike money, currency drives value from the government that established it and citizens who agree to the value.
This value is relative and it can change from country to country. One currency in one society or nation might not possess the same buying power in another.
For example, the yen might have a certain purchasing power in China, and totally totally different value in US. Vice versus, the United States dollar could be worth a certain value in US and could completely worth more or less in another nation.
Ultimately, without the people agreeing or trusting in the value of the currency set by government, it is worthless. It has no value.
From Bartering to Commodity: Money through History
Money has taken a lot of forms through out history. In the past, salt, cocoa beans, tea and even cheese were used as a medium for trading in parts of the world.
Thought these systems was a step up from bartering, it was still flawed by the fact that the value placed on these commodities can change based on how much is produced.
This makes it hard for these commodities to maintain consistent value, which affects its storability (save) value over time. And it makes it hard to use as a base of measurement for goods and services.
This force people to look for other forms of commodities that are more stable, hold value better, and behaves more identical to money.
Gold and Silver
Gold has been a means of exchange for goods and services for thousands of years, and it is still relevant today. Gold posses all the characteristic of true money to make it the perfect commodity.
Gold and silver have intrinsic value and are limited in quantity (finite). You can mine it but it’s limited but it’s still limited You can’t just make more if you want to like we do with fiat currency. And there lies it’s true value. In addition, it’s tangible and it’s value is in itself.
Gold and silver for the most part maintain value and appreciate, making it the perfect money because you can store it as liquid asset, transfer it as wealth, and it can serve as a measure of unit.
Gold Standard to Fiat Currency
Before the current financial system, the US economy was build on the gold standard.
What is the gold standard?
A gold standard is a monetary system that directly links a nations currency to gold. That means every currency circulating in an economy was backed by gold and could be traded for gold equal to its representative value.
For instance, if you have $20 dollar currency, you can take it to the bank and traded it for $20 worth of gold. The United States was under gold standard but in the 1930s, things began to shift.
During the Great Depression, the US government found themselves unable to influence the economy a certain. Since the government couldn’t manipulate the economy or create artificial activity to get people spending again, the county affectively abandoned gold in 1934 under President Roosevelt.
And in 1971, President Nickson completely striped Gold from the dollar, turning the dollar from real money to fiat currency —from being backed by a precious medal of value to fake money. The dollar has been rapidly drop in value (buying power) since. Today, it’s loosing the little left value it has at a rate of 3.5 percent ever year.
Why does it matter?
So why should you care?
Because what you have in your wallet is not money. You are spending your entire life storing Monopoly money -A child’s play.
“Most modern currencies, such as the Euro or the United States dollar, are fiat money, or money whose value is based on government guarantees but has no inherent value.”
And yet, you are storing it like it is. Everything from your savings account to your 401k, not realizing that it’s loosing value faster than you can make it.
Logically thinking, if every dollar you possess lose value at 3.7% yearly, how long do you have to hold on to it to realize it’s worthless to hold on to it?
It’s time to drop your financial advisor and deprogrammed yourself from Wall Street’s narratives. 401k is not an investment vesicles. At best it’s a savings assets, but you can do better.
Educate yourself and stop wasting your whole life saving fake money and start creating wealth that you can pass down 3X Generations.
I’m coach Francis Schedule a call with me so we can set you the right path. You’re more than worth it.