One of the biggest challenges of people today is wealth and how to make wealth. Money is one of the main building blocks of wealth, because with it a person can acquire lands, houses, livestock, agricultural produce, financial savings and other natural resources. And now, how to get more money has become increasingly difficult for many people all over the world today. To give a broad understanding on this subject in a manner in which people can apply it and succeed, the following topics will be summarized and lecture videos will be linked for further study.
- What is Real Money?
- Why is There Inflation and Imbalance of Wealth
- The Hidden Truth About Money
- How You Can Make Yours
- Fight Inflation Through Multiplication
As the title header indicates item number 1 is the focus of this post. In subsequent posts, I shall simplify the other points listed above. Let’s go straight into defining money.
Money is simply an item of value used as a medium of exchange for goods and services. Real money has to fulfil 5 criteria, in that it must be:
- Fungible (it is interchangeable) – an amount in one person’s hand can be equated to a similar amount in another person’s hand.
- Store of value
From the beginning of man’s life on earth, different items have been used as a means of payment for goods and services. They are:
- Trade by barter – some goods one person has which is of value to exchange for what another person has which is of value. Lands, houses, agricultural products etc.
- Commodity currency – cowries, sea shells, copper etc.
- Precious metals – gold, and silver etc.
- Government issued fiat currency – Paper money
Over the years in history, people were able to discover that the items they used as money did not meet the 5 criteria for real money. So they changed from ‘trade by barter’ to ‘commodity currency’ to ‘precious metals’ to ‘paper money’.
Only gold, silver and some precious metals are real money. Why, because we can actually reshape and turn precious metals into jewelry, use them for beautification, for building amongst other uses of value. However paper money as a material cannot be used for anything other than to be thrown away as paper.
There was a point in history where the rulers over people no longer wanted people to carry coins about. Thus, they invented what we call money today; currency notes were created. These currency notes are like a letter of agreement and a promise that one person will pay another in gold with the value on that currency note. Let’s say for example when the dollar note was first created, that $1 note was equal to 1 centigram of gold. In that period, this gold was kept in a bank and was available for retrieval whenever a person wanted it. Currency notes are simply a note saying ‘I Owe You’ (IOU). So when it is time for a person to pick up his gold, he can simple go with the currency note to the bank and in return he gets his gold back.
Currency notes are believed to be money because everyone has agreed that it is a legal tender. If for example we all agree that the Sun is not helpful to us as humans, does that invalidate the true value of the Sun? The problem with present day currency notes is that there is no gold in the bank backing it up. As an illustration, if the Central Bank in your country says they have 5 Trillion dollars in circulation in the country, then there must be 500 million kilograms of gold in a Government approved vault in the country’s gold reserves. Several African countries do not have gold reserves, all we have is a belief in paper notes as money.
I have provided a video link for your further understanding of what real money is. The video is quite involved so it is best for a person to view it multiple times and understand the whole idea about money.