Wednesday, January 4, 2012

WW: Money

Welcome to Word Wednesday. This weeks word is Money

Most people look at a dollar bill in there pocket and think they have money. By many accounts they do. However, if you look at that dollar bill, it does not claim to be money, it claims to be a Federal Reserve Note, good for debts public and private. 

Money is a funny thing. Many who lack money like to mis-quote the 1 Timothy 6:10 in the Holy Bible by saying that money is the root of all evil. Many people will work 100,000 hours for a company during their lifetime to get it. People think of money as paper and coins, however most of the money in the United States exists as 1's and 0's on computers

Robert Kiyosaki, in his book Cash Flow Quadrant, states that money is just an idea. History seems to back this up. The United States was on the Gold Standard for quite a while, which means that you could exchange your Note (paper money) for a fixed amount of gold. It was an on again off again proposition until 1933 when the link was broken and it was even illegal for most Americans to even own gold for a while. 

The thinking behind a Gold Standard is that gold has an intrinsic value. It is rare and valuable, which makes to a fairly good store of wealth. This also means that the government cannot change the value of the currency, but the market value of the gold sets the value. Since going off the Gold Standard in 1933, the United States dollar has been considered fiat money, or in other words, it's money because the government says it is.

To even further back the concept of money as just an idea, most of our money is digital. How many times do you actually use the fiat paper money anymore. We use the internet to setup direct transfers, bill pay and use credit and debit cards to transfer most of our money around.

We generally consider money as a means of exchanging value. Instead of the artist trying to exchange a painting directly for eggs, he can exchange is painting for something that holds value, money, and then later exchange that money for eggs. Money becomes a third-party to the transaction. As long as the value of the money is stable (doesn't change much), it becomes the equivalent of exchanging a painting directly for eggs, without having to find someone with extra eggs who wanted the painting.

The lack of money is the root of all evil. 
Mark Twain 

From Miriam-Webster dictionary:


 noun, often attributive \ˈmə-nē\
plural moneys or mon·ies

Definition of MONEY

: something generally accepted as a medium of exchange, a measure of value, or a means of payment: asa : officially coined or stamped metal currencyb : money of accountc : paper money
a : wealth reckoned in terms of moneyb : an amount of moneyc plural : sums of money : funds
: a form or denomination of coin or paper money
a : the first, second, and third place winners (as in a horse or dog race) —usually used in the phrases in the money orout of the moneyb : prize money <his horse took third money>
a : persons or interests possessing or controlling great wealthb : a position of wealth <born into money>

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