What is money?

Thanks to manipulations by socialists and communists in the corporate media, many people are confused about what money is.

They have heard manipulative lies like, “Money is the root of all evil,” or, “Having large sums of money is greed.”
But few have taken the time to understand what money represents both in historical development and modern transaction.

By watching this video, I hope to help you understand what money is so that you are better able to communicate why money is something that should be celebrated as a wonderful advancement for human flourishing.

First, we must look at how money arose in the market.

Early humans were largely hunters and gatherers over 11,000 years ago. This meant that small groups of people worked to get what they needed through direct capture from nature, whether it was picking berries or taking down wild animals for meat.

This means of survival was brutal as people only had whatever resources they could gather and hunt, and that was often consumed within a matter of days.

It wasn’t until people started to work toward farming and agriculture that they had the means for people to think about activities for building wealth. Those living in and around the fertile crescent some 9,000 years ago began to realize that they could increase their supplies by intentionally penning animals and domesticating crops in fields.

When people saw this opportunity and applied controlled agriculture methods, they were able to produce more than they could individually or as a family consume.

This surplus in things like rice, wheat, sheep’s wool, and eggs, provided people with an excuse to trade with others for items that they wanted but could not otherwise readily attain with their attention focused on certain crops and animals.

As farmers gained surplus, people began to trade their surplus with each other. Eventually, certain items became favored to trade because they were easier to exchange for other things.

For example, eggs were a common item traded in early markets because many people desired eggs for either consumption or for future chickens, and the eggs were small enough and durable enough to be carried and traded for in aggregate.

Choosing to trade a few eggs or several eggs was a much easier task than say, trading several cows, goats, or large pieces of cut wood.

In this manner, people would often trade eggs not for their own immediate consumption, but for the opportunity to trade with others in the near future for something they really wanted.

Eggs, in early human history, became one of the first forms of proto-money in the world.

From this example, you can start to see that the essence of burgeoning money creation is when people trade for certain goods so that they can trade those goods again for something else.

Money is traded not for its consumption directly, but for its future use in trade.

While eggs were certainly an important stage in the development of money’s potential, there were still many pitfalls as eggs were still relatively delicate and could rot over time.

Because of this, many people eventually turned to other forms of trade with items that had a bit more durability.

The Yap Islanders of Micronesia used giant wheels of stone called “Rai” as money because of their durability and size.

Chinese natives used gold cubes as a kind of money as early as 2,100 B.C.

The Lydians in West Turkey developed gold and silver coins around 700 B.C.

As you can see, people around the world started to drift toward mediums that were physically scarce, easy to break apart into divisible denominations, and durable for carriage. Money naturally drifted toward physical items that had the ability to be fashioned into something else for convenient trade.

And, as noted in the historical development, it was able to arise because of surplus, that is, money came into play only after people had enough abundance to trade beyond meeting their basic consumption needs.

Money did not stop there, however.

Kings and other government heads sought to create their own version of money and impose its use on people. For example, coins made of gold and bronze were introduced by the Roman Republican government in 300 B.C.
United States Notes, that is, paper dollars, were issued by the U.S. treasury from 1862 until 1971.

Today, the U.S. money supply is controlled by the Federal Reserve using their paper notes, which act as monetized debt owed to the private Federal Reserve Bank.

Looking at these trends, the question arises, “What is money actually communicating?”

Money is communicating the expectation of future subjective value creation.

As money is not itself being traded because the person desires to consume or use it directly, money is actually traded on the basis that it could be exchanged with others to meet a subjective want or need in the future.

This makes a lot of sense if you seat yourself in the position of a seller.

Would you want to trade something you value for an item that you didn’t want and one you knew no one else wanted either?

Likely, not.

You don’t trade today’s fiat, the Federal Reserve notes, because you wish to have the pieces of paper. You trade them because you expect that others will provide you with future subjective value creation, whether that is exchanging the bills with you for a T.V., or providing you a service like mowing your lawn in exchange for the bills.

This inherently means that the value of a currency is directly tied to how accurately that currency reflects subjective value creation and the willingness of people to continue to provide value in anticipation of their own future exchanges.

This leads us to the question of what makes “good” or “strong” money.

If money is the expectation of future value creation, then strong money must reflect people’s desire and expectation to provide goods and services to others in the future.

If someone were able to duplicate money without their having to meet the subjective value of others, then they would be consuming without providing others value.

For a simple example, if someone had a money printing machine, they could print out bills at their leisure and then exchange those bills for groceries. If that person simply eats the groceries, but does not provide value to others later, then there is a net consumption.

For this reason, certain kinds of physically scarce materials were valued in the past, like gold and silver, because, while they may not necessarily be items any particular individual wants, they at least were not readily fabricated and, otherwise, had some subjective utility that could be leveraged as a metal.

The further one gets from limiting duplication, and the fewer potential utilities a money has, the more ripe it is for being used without there being any actual subjective value creation provided to others in the process.

This danger has been most readily seen with government heads who have ordered large quantities or denominations of money to be printed without the provision of subjective value to other people. When this happens on a large scale, it is called hyperinflation. In 2007, the Zimbabwe government kicked off this trend by attempting to print more money and enact price controls in the wake of the global economic downturn. This lead to an inflation increase of 89.7 sextillion percent by November 2008 with banknotes printed at the 100 trillion dollar mark.

This lesson is a reminder that government-forced money has a significant relationship to what those in the government provide in goods and services to people at large. As the government cannot ever truly meet market signals because taxation is based on force, not choice, how closely the government mimics what market demands would otherwise be supported closely defines the strength of state-imposed money.

Of course, market-based money derived from consumer choice will give the closest and most ethical means to identifying what people subjectively value and expect to receive in the future because that is the only mechanism that can account for all possible fluctuating wants and needs based on individual choices in time.

So next time someone tries to tell you that money is some evil or is something to be shunned, you can tell them that money is nothing more than people choosing to meet the wants and needs of others.

It is literally an act of service based on benefitting two parties who each seek to better their lives through voluntary exchange and provision of value.

Without it, we’d be stuck trying to figure out how to exchange cows for cars.