What Is Money?

Copyright 2006 David Brown
What is money?
In today’s article you will learn what money is
In today’s world we all use money on a day to day basis Have you ever stopped to think what money in fact is?
• Money is a source of exchange
• It has a unit of account
Money is a source of exchange
All throughout history there has been an exchange system in place One example is Rome back in 550 BCE, salt was exchanged for goods
Originally a conch shell, which is a marine mollusc with a large brightly coloured spiral, was used in exchange for goods
Here is the point
Any object can be used in exchange for goods When this object is used to trade goods, it is a medium of exchange When trust is built up in this object it leads it to become important and valued It then becomes a “money system”
What about the object we use today?
As we have just said, salt was exchanged for goods; today we use coins and notes
These coins and notes are recognised “objects” which are accepted in society and trusted
This leads on to the second point
Money is a unit of account
What does this mean?
It is how the “object” is measured or valued- It is what it is worth
For example, a car sales person wants to sell a second hand car He puts a value on the car for £2000 A customer walks into the car show room and asks “how much” £2000 answers the sales man This price has become the unit of account; it is valued or measured at that price
In other cultures the unit of measurement may be a different object For example if goats is the trusted “object” for the exchange, then instead of that motor car having a market value of £2000 it could be worth 100 goats!
• It is a store of value
• Money is not real
The third point is money must be a store of value
The “object” must have a market value that can be stored for future use
For example, a man who sells lap tops has in his possession one hundred lap tops which he can sell for future trade This is beneficial for him because he has a store of market value, when he sells the lap tops he will add value to his business and himself
Maybe you keep a cash box at home The currency in the box holds market value and can be used in a future date The currency is a store of value
Is money real?
Here’s the thing, money is not real Why is this fact?
We have already discussed that money systems are only “objects” which are trusted and accepted
If you lived in a culture where goats were the “object of exchange” would you view them as real money?
Money is the body of value This value is decided within ourselves For example, take two people
One man loves the old silent movies the other man does not They are both offered an original silent movie film The film buff is so excited at the thought of owning this film he offers £1000 to buy it The other man offers £10 because he does not hold any value to the item See the difference; it comes down to internal value on an item
If money was real they would have the same value
Also read back to the first three questions, it mentions about the personal value on an object

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