What is money anyways?

What on earth is money anyways? To most reading this the base unit of money is a greenback or a loonie. We take it and we use it. If we go to a casino we exchange it for “cheques” which we again accept because we know we can exchange them back to one of the former, or in the case of some places either or. In the case of US Dollars, we can go on vacation and use them in places with their own currencies. In the Bahamas, I had to ask for a Bahamian Dollar in change to bring home. In North Korea, having a greenback could get you arrested. In the USSR, there were stores that took only western currencies, that’s right, they only took currency of their worst foes.

But why do we take dollars? Years ago (pre-1971) people claimed it was “backed by gold.” Even though it mostly was not, why would you want the gold? Neither the paper nor the gold has much practical use. The paper can kindle a fire or you can write on it. The gold can be used as jewelry or a few industrial uses. Neither can be eaten or worn for comfort. What gives?
I used to equate money to “food units.” On a podcast I heard it better called “energy units.” Money is merely a measuring stick for energy one of us owes to another. Man is a social creature. Man is the only mammal who if left completely alone will simply not survive. Imagine even a primitive day. You would need water, food, and probably fire to survive. Unless you lived near the tropics you would need clothing of some sort. Finally, you would need minimal shelter. To get the food you would need some kind of tools. You would need to store water unless you never strayed far from a source. To provide yourself with it all would be impossible. Man saw this and socialized.

Most social creatures specialize. My bees have specialties, some nurse, some forage, one queen lays, and some males just wait to mate and otherwise are the insect version of Andy Capp. Man is the same. In a social setting young kids cannot hunt, but they could gather water. Those not fast enough to hunt might be better at making spears. Baddabeppadaboppadaboop, specialization happens.

Specialization eventually started. The spear maker might trade a spear to a hunter for meat. The hunter may have traded the meat for water. The spear maker needs water, so what does he do? He could demand more meat because a spear is harder to make than water, then offer meat to the person gathering water. But then they all need clothing and what does the clothing maker need with a spear?

Eventually, units of measure happened. Instead of the spear maker telling the clothing maker “I’ll owe you a pound of meat when the hunter gets it” so the clothing maker can tell the water gatherer he will give her half a pound, measure would have to have happened.

Fast forward to today. Dollars are just measures of energy one person owes another. I research property records for gas well drillers. I want a steak dinner. The gas driller is not going to pay me in steak, but they will give me dollars so I can trade my time for the time for someone to prepare than dinner.

We often hear about a “fair wage” or a “living wage.” We hear that “people work hard!” We hear that some guy gets paid millions for throwing a football but our teachers get paid just so much!” What is fair?

Fair is how the “energy units” stack up. To use my own example, when I deal craps I get paid about $20/hr more than any other game dealer gets paid. Am I working ‘harder?” A little, but I am really getting paid because my energy units are harder to come by than a BJ dealer. We all get paid more energy units per hour than the waitress at the place because we are willing to be “on call” for just a few hours. To use the athlete example, there is a need for 32 QBs that can competently throw on an NFL level. Worldwide there are rarely more than 15-20 available. OTOH, every May there are thousands of new teachers produced nationwide to stand in front of the classroom.

The means of exchange of course can gain or lose confidence, which can be a future discussion.

You will never even come close to explaining
what modern money is in a thread like this.
It's far far too complicated. Explaining where
money came from is easy by comparison.

My dad was born on a farm in W VA in 1914.
No electric, the farm supported their every
need. They had no monetary income, except
for a few things sold in town to buy things
like sugar and cloth and things like that.
They raised their own food, and canned it,
or dried it, or kept it in a root cellar. They
raised and slaughtered their own meat. Money
was almost unneeded. Later they made a small
amount a month from an oil well on the property.

Nobody lives this way anymore. Money has
morphed into a complicated monster that
takes a college semester to understand.

Quote: Evenbob

You will never even come close to explaining
what modern money is in a thread like this.
It's far far too complicated. Explaining where
money came from is easy by comparison.

Actually it can be broken down pretty simple, as I just did. Money is merely a tool to hold value. Your goods for mine. Your service for mine.

Quote:

Money has
morphed into a complicated monster that
takes a college semester to understand.

Because nobody teaches just how it all works. You learn a little here and a little there. The Fed, OTOH, is intentionally designed to be totally confusing. I am convinced that those in power want it to be that way. It need not be so confusing because so much of the population is so stupid about money management on their own level.

Quote: AZDuffman

Actually it can be broken down pretty simple, as I just did. Money is merely a tool to hold value. Your goods for mine. Your service for mine.
.

That's the most basic explanation. But to
explain how the monetary system works
on a worldwide basis, that takes lot more
explaining. You have to go back to the
Federal Reserve, which is private company,
not a federal one, to understand just what
all those super rich robber barons cooked
up for us 100 years ago.

I like in the Middle Ages when the peasants
lined up at tax time, making their payments
in chickens or bags of grain. That was money
you could understand.

I saw one explanation that gave that money came about a way of tracking debts, not as a medium of exchange.

Monetization is an important topic.

Quote: Wikipedia

https://en.wikipedia.org/wiki/Monetization#Monetizing_debt

Even intrinsically relatively worthless items or commodities can be made into money, so long as they are difficult to make or acquire.

The money project: http://money.visualcapitalist.com/

I understand the original poster's points but would not be in universal agreement.
There are places in the tropics where money is still unknown, visitors receive feasts and the attentions of amiable women, often of an age barely legal in the visitor's society.

I like to dwell on names for specific jobs. Think of a Cooper as a barrel maker, but a wainwright was the man who made the metal rings around the wood, a much more specialized task. Its an important task to remember for it was the most well respected trade during the Tulip Mania and remains a store of value and sensibility.

We exchange coinage but in Scandinavia an occupation is paid roughly what all other occupations are paid and there is no incentive to change occupations unless one really interests you.

We have communes, we have collectives, Woofers, Slackers. Middle eastern countries graduate zillions of unneeded engineers that can't get jobs as engineers or janitors. Europe supports symphony orchestras with taxes. Europeans take lots of vacations. Americans often do not. Yet we have WORLD currencies with ever fluctuating exchange rates.

Quote: TheCesspit

I saw one explanation that gave that money came about a way of tracking debts, not as a medium of exchange.

It is that. Lets go back to the explanation of energy units. Last weekend I dealt craps for three hours. I gave my energy units at the time. For simplicity lets say I want to spend it all on food. For further simplicity lets say I want it all in bananas for my morning smoothies and we have the benefit that bananas are the most common SKU purchased at a grocery store.

The energy units required to get a banana to the store differ from what it takes me to deal. My labor is more skilled but at the same time I cannot grow my own in my climate. My 3 hours of energy buys about 75lbs of bananas. I have no need for 75lbs at a time, I need at most 2lbs at a time. The money in my pocket is my "credit" I created. The "debt" came about because on one night I produced more value than I could at the time use. The money itself lets me collect the debt from anyone willing to trade in the figurative town square.

"I need some bananas"
"I have some, what will you offer?"
"I will deal craps for you!"
"I don't want to play craps"
"Hey, who said they deal craps, I need a guy to do that!"
"I said it"
"OK, come deal it for 3 hours and you can get your bananas, I'll give the banana guy what he wants in trade."

But instead of this clunky system where that guy would owe the banana guy a debt and the banana guy owed someone else we just have one way to "collect" the energy debt.

Quote: Fleastiff

There are places in the tropics where money is still unknown, visitors receive feasts and the attentions of amiable women, often of an age barely legal in the visitor's society.

In the 18th century, certainly, but probably not today.

Since the native women in Hawaii would sleep with the sailors for a metal nail (they had never seen metal before), Captain Cook tried to keep his men confined to protect the natives from STDs that the crew carried. A century later a European captain had to lock up his crew to prevent the crew from getting an STD from the natives.