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FP Article 12

What Is Money?

by Rajen Devadason

People who don't respect money don't have any.

Jean Paul Getty

  We all know what money is, which makes the title of this article rather odd. However, there is a bona fide reason for asking the question, "What is money?"

Most of us are so familiar with money that we fall into the trap of the unconscious incompetent. That's a person who not only doesn't know something but, worse still, doesn't know that he doesn't know!

So, congratulations on stopping by here! By the time you finish reading this piece, you'll know a lot more than your friends!

 

 

 

 

 

 

 



What we'll do in this brief article is explore the three functions of money, learn about the three types of money used throughout history, and come to understand why treating it correctly is a prerequisite of becoming hugely successful in the earning, managing and growing of money!

This is an article on the nature of money. I hope you enjoy reading it. But if it isn't what you're looking for, you're welcome to search for something that better meets your needs. Thank you for allowing me to serve you.

Rajen Devadason

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In ancient times, the hunter who best used the bow and arrow or who most accurately hurled the spear was a big - pardon the anachronism! - 'gun' in society. Later, that elevated position migrated to the farmer who understood how to coax a great harvest out of the earth. Then dawned the day of the industrialist who was adept at harnessing the economic inputs of land, labour and capital to create a valuable enterprise.

As society changed, the perceived value of some skills fell and that of others rose.

Today, in addition to needing to be knowledgeable and creative - because we live in what has variously been christened the Knowledge Economy and the Idea Economy - the success seeker must understand what money is so he or she can harness its latent power to get important things done in our shrinking Global Village.

At the most basic level, money fulfils 3 functions:

1. Money is a medium of exchange;
2. Money is a standard of value; and
3. Money is a store of value.

Long ago, when the act of bartering became increasingly cumbersome, many different items were initially used as money; they included seashells, beads, tea, fishhooks, fur, cattle and even tobacco.

Then along came coins made of precious metals. Those coins became the first of 3 types of money - commodity money.

Later, when paper money was introduced, each note was effectively backed (or represented) by a certain amount of gold or silver kept elsewhere in a safe haven. This type of money was known as representative money.

Finally, with the explosion of the global money supply, it was inevitable that the value of a country's currency would end up becoming backed solely by confidence in the issuing government. This third - and current - type of money is called fiat money.

In today's world, an inability to handle money well dooms individuals to a lifetime of servitude in an economic system that seems intent on binding them up in self-encircled chains of debt.

On the other hand, those who understand how to harness the latent, amoral power of money are able to make it work for them.

Robert T. Kiyosaki, author of the phenomenal bestselling Rich Dad, Poor Dad book series has observed, "The poor and the middle class work for money; the rich have money work for them."

If you desire true economic success, it is vital that you learn how to have money work for you. In doing so, don't rush.

Remember you must learn to crawl before you can walk before you can even attempt the Olympic 100 metre sprint or 26-mile 385-yard marathon!

To make it a little easier for you, if you'd like to learn more about money basics, you're welcome to check out this resource page.

Happy reading, studying and applying. I wish you all the best in making money a great servant for yourself and your family in the years ahead.

 

© Rajen Devadason

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Rajen Devadason, CEO RD WealthCreation Sdn Bhd & RD Book Projects
349, Desa Rasah, Jalan Bayan 7, 70300 Seremban, NS, Malaysia
Tel/Fax: +606 632 8955

 
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