Money is a medium of exchange that can also be used as a storehold of wealth.
By medium of exchange, I mean that it can be given to someone to buy things. Basically people produce things in order to exchange them with people who have other things that they want. Because carrying around non-money objects in the hope of exchanging them for what one wants (i.e., barter) is inefficient, virtually every society that has ever existed has invented money (also known as currency) to be something portable that everyone agrees is of value so it can be exchanged for what we want.
By a storehold of wealth, I mean a vehicle for storing buying power between acquiring it and spending it. While people can store their wealth in assets that they expect will retain their value or appreciate (such as gold, gems, paintings, real estate, stocks, and bonds), one of the most logical things to store it in has been the money that one will use later. But they actually don’t hold the currency because they believe that they can hold something a bit better and always exchange the thing they’re holding to get the currency to buy the things they want to buy. That is where credit and debt come into the picture.
When lenders lend, they assume that the money they will receive back will buy more goods and services than if they just held onto the money. If done well, the borrowers used the money productively and earned a profit so that they can pay the lenders back and keep some extra money. When the loan is outstanding it is an asset for the lender (e.g., a bond) and a liability (debt) for the borrower. When the money is paid back, the assets and liabilities disappear, and the exchange is good for both the borrowers and lenders. They essentially split the profits that come from doing this productive lending. It is also good for the whole society, which benefits from the productivity gains that result from this.
So, it’s important to realize that 1) most money and credit (especially the fiat money that now exists) has no intrinsic value, 2) it is just journal entries in an accounting system that can easily be changed, 3) the purpose of that system is to help to allocate resources efficiently so that productivity can grow, rewarding both lenders and borrowers, and 4) that system periodically breaks down. As a result, since the beginning of time, all currencies have either been destroyed or devalued. When currencies are destroyed or devalued that shifts wealth in a big way that sends big reverberations through the economy and markets.
In order to gain and to hold the esteem of men it is not sufficient merely to possess wealth or power. The wealth or power must be put in evidence, for esteem is awarded only on evidence. And not only does the evidence of wealth serve to impress one's importance on others and to keep their sense of importance alive and alert but it is scarcely less use in building up and preserving one's self-complacency.… Abstention from labor is the conventional evidence of wealth and is therefore the conventional mark of social standing; and this insistence on the meritoriousness of wealth leads to a more strenuous insistence on leisure.[...] According to well-established laws of human nature, prescription presently seizes upon this conventional evidence of wealth and fixes it in men's habits of thoughts as something that is itself substantially meritorious and ennobling.
It is not from the benevolence of the butcher, the brewer, or the baker that we expect our dinner, but from their regard to their own self-interest. We address ourselves not to their humanity but to their self-love, and never talk to them of our own necessities, but of their advantages.
Coronavirus is a planetary event of a magnitude we have trouble wrapping our minds around, not only because of its ...
I've been thinking a lot lately about a piece I read in Stuart Brand's, CoEvolution Quarterly back in 1975. It's ...