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Let’s not talk a long story here, let’s simply put up the central tenet of money:

Its a concept


Money is a concept. At its core, that is what money IS. Coins and banknotes are not money, they are currency.

Concepts are tricky things. They are purely abstract. They exist only in our head. And they have to be learned. Most parents will have observed how their children learned about money. And the strangeness that a mere number on a piece of metal (or paper) would determine its worth. Not the number of pieces, nor their size or weight. The number was important. Most of us took some time before we understood (i.e. formed the concept).

Concepts have to be useful. Otherwise we would not go to the trouble of forming or remembering them. A concept is only useful if there is a connection with reality. For money that connection exists by way of currency. A currency translates the concept of money into something that is usable in real life. Different currencies have different values, but all are expressions of the concept of money.

Some people say that money is trust. And there is a good reason for that: when we receive money in payment for goods or services we trust that we will be able to exchange that for items that have utility to us. However trust is not the same as a concept. When we have different currencies we can have different levels of trust in each currency. However that has no impact on the idea that each of these currencies is money. Hence money and trust are not the same.

Some people say that money is debt. And they too have a good reason for that: In the current economic system, all currency in circulation is created because somebody took out a loan. Hence all currency is associated with debt. However the concept of money is not necessarily associated with debt. We could use a non-debt based currency like gold, sugar, tabaco etc. All of these have been used in the past as currency.

The money concept itself is relatively simple: it is possible to trade one item (or service) for another item (or service) through an intermediary.

Originally posted at: 2016-11-22
Last modified on: 2016-11-22