FP Article 12
What Is Money?
by Rajen Devadason
People who don't respect money don't have any.
Jean Paul Getty
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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!
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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!
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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
