And truthfully, I didn't really want to do a post on this.
Cos it's a long complex story, it's irrational, and it's pointless to ponder over.
I'll explain each of these points statements later.
But then I thought, "Heck, I need to do this topic", cos I can't do topics that I like all the time and it IS a worthy topic to write about. Just that I don't particularly like writing about it.
...have you ever wondered what is ‘money’? How do you understand it? Recently I came across some thoughts by Daniel Suelo and I enjoyed probing into it. If you have time and find this interesting hope you can explore it and write a post about it sometime. I think it’s so important that people understand what really is ‘money’ but to me... seems 99% of people never even contemplated it!
--Kuriko
Ok, so "What is Money?"
Here's the long story short...
Based on investopedia... What is money...
Going back in history... people bartered for their stuff, but it's not so easy to barter cos there's no medium of exchange, the person selling meat might not need eggs, the person giving eggs might not need beef, etc etc...
So essentially, people found a medium of exchange which is usually a rare and precious item.
Things made sense when it was gold. Cos it's still a commodity.
When you watch old Chinese shows, they use pieces of paper signed by a bank. These are IOUs.
The person deposited real physical gold and silver into the bank and the bank issued these pieces of IOU so that people didn't need to carry loads of physical gold around.
Before the Great Depression, money in the USA, had these words printed on them... "Backed by gold".
Cos it was really backed by gold. Theoretically, a dollar could be converted to 1.5gm of gold on demand.
But what happened was that, the amount of gold that a country had was limited. So in the case of USA, the amount of money they could issue out is basically whatever gold they owned, divide by 1.5gms.
This limited the money supply in the economy.
There are many theories and reasons to why the Great Depression occurred and money supply is one of them.
Since money is a rare commodity, cos it's backed by the rare commodity of gold, there is a limited supply.
When people earned money, they hoarded it. It's always just kept in the bank.
That's what most of us do with our money. BUT, current money loses value across time.
Gold on the other hand, increases in value across time, cos the supply is limited, so as the rich people hoarded more money, the money supply in the economy decreases.
Highly related to my previous post on Bitcoin.
The more people don't spend gold backed money, the more value it has. Cos no one else has it.
So maybe $1 could buy a whole cow.
But one year later, maybe $0.50 could buy a whole cow.
What happened was that people didn't want to spend money or invest, cos just by hoarding gold money, they could get more value as time passed.
And due to this, and other factors, the economy ground to a halt, resulting in the Great Depression.
(It's probably an oversimplification, but it's something like that.)
So governments decided to do away with the Gold Standard and create fiat money.
They needed a medium of exchange that slowly loses value over time.
So that people would be incentivized to spend the money, invest the money, consume, keep the economy moving.
And this money is now... just based on TRUST.
It's irrational...
I TRUST that the Singapore government, will keep the money supply fairly constant for the next few years but I expect the money supply to grow across time. Since I know it will lose value, I will tend to spend it or invest it to utilize the value before it depreciates.
So I TRUST that I WILL lose value in my money due to increasing money supply across time, which is why the Government needs to grow the economy so that it can sustain a larger money supply.
I TRUST that for 1 month of work, with the money I get, I can get an equivalent value. Or I can hire someone with that money to do some other skill that I do not have.
It's pointless to ponder over...
As long as we have trade, in goods or services, we will always need money or a means of exchange.
Gold or Bitcoin is just as worthless as fiat money.
Any billionaire stuck in the middle of a desert with only his clothes also knows that.
Fiat money will probably never go away. It will be needed to churn the economy.
(Unless there is a major overhaul of the whole economic system).
Gold, Bitcoin has a limited supply and will probably not make a stable money supply.
It cannot be used to spur the economy in times of downturn, cos Governments does not control unlimited supplies of it.
BUT, it can still exist as a store of value as an asset for the future.
Fiat money will always depreciate, Gold or Bitcoin or probably any other non-perishable asset has the potential to appreciate over time.
Which is why I don't particularly like writing about it.
You see, money is irrational...
It is a medium of exchange and a potential store of VALUE.
It allows people to buy utility, meaning you can exchange the money for some form of value.
BUT value is relative/subjective.
I will charge a billionaire $1 million for a glass of water in the desert, cos the VALUE of the water is worth more.
Now value, is a function of multiple things, location, rarity, how much it is needed, how much it is wanted, etc.
Money is worthless. Value is more important.
But it's pointless to talk about it. Cos the world uses money. I'm part of this world and society.
I don't make the rules, I just play around it.
So I don't question, what is money, I know it is worthless except for the trust that someone else will give me some value on it when I need it, I know it loses value, so I work around it.
Which is why we are supposed to invest... BUT, when we invest, we sell the item also for money. So there's no getting around this "money".
Daniel Suelo, as mentioned by Kuriko, is a guy who gave up money. Most freegans know about him.
I got the idea of the pet dog from him. (Previous post)
A pet dog is part of the family, he provides no real value to the household except just to exist, the owner is happy to take care of the puppy and pay medical bills and feed the puppy... why do we have so much expectations on other human beings?
Daniel Suelo's view on money is that, everything has already been paid for. Nature is free. The lion doesn't ask how much is a deer before eating. It just eats. Humans could have lived like this. Getting free food from the land. Humans could just build homes using mud or wood. We could live simply, just to exist and enjoy life. But if we didn't have laws, then there's be stuff like over-hunting and over-fishing, and deforestation and all that nonsense.
I agree with Daniel Suelo's view.
BUT, humans are complicated and selfish. IF everyone just takes what they need and maybe a little extra, the Earth could sustain humans easily.
BUT, humans are greedy, people want more and they hoard the resources and put a price on it. Resources that they will never use, but also never share.
And I live in Singapore, there's little options to life a different life.
Maybe if I grew up in the USA, I'd have bought a mini-bus and lived out of a mini-bus already.
So you see... to me, talking about it, writing about it, knowing about it... it's meaningless.
Money, or any form of exchange will be here to stay.
I'm not like Daniel Suelo who will give up money and live without money.
Even if I reject it, it still exists, for me, I believe I will still live with it for the rest of my life.
It's pretty similar to environmental destruction.
We know about it, some people try to do something about it.
But the little that the handful of people do, is entirely overshadowed by large corporations and governments.
It's like... the Titanic is sinking, and flooding with water, and a few people are just using wine glasses to try to remove the water to prevent it from sinking.
For me, it all boils down to, what can I do about it?
For the environment, I feel, there's little I can do, so I just live my life. I don't really think about the environment, if my freegan activities help it, that's good, but I know whenever I take a biz trip with my wife, it negates everything that I've done.
For money, I can't change the monetary system, even if I know that fiat money is just a game of trust, the only way is to play the game. Buy assets, things that provide value (stocks/companies), things that store value (gold/paintings).
It is an interesting topic, I agree, and probably others would be interested in it as well.
So I do thank Kuriko for "motivating" me to write about it.
Although I don't really bother much about it as a subject cos... there's nothing I can do about it.
There's no action item. So I tend to just leave it where I found it.
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