Why Money?

April 2, 2010

Why money?

Trade, the exchange between people of goods for other goods, is older than recorded history. It made possible specialization and investment of time in making tools for more efficient production of goods. Exchange began as barter, the direct exchange of one kind of goods for another. The shoemaker might trade shoes with a baker for bread.

However, the shoemaker had the problem of finding a baker who wanted shoes. Barter used up much of a producer’s precious time, finding another producer who had what he wanted, and who also wanted what he had.

From the beginning of recorded history, people everywhere learned to reduce the inconvenience of barter by using some commodity, some kind of goods which almost anybody would accept in trade, as a medium of exchange, that is to say, as money. Such things as grain, seashells, and cigarettes have been used as money.

With such indirect exchange, a shoemaker could exchange shoes for money, which he could then exchange for food, clothing and shelter and anything else offered on the market. A laborer could exchange his time and effort for money, with which he could buy the things he wanted.

Without money, people would spend much of their time traveling around, bartering what they had for what they wanted, leaving little time to invest in tools and methods to improve their product and their productivity.

Only with money, a common medium of exchange, could we progress to the complex products of the present world economy, and to the living standard we enjoy. Think of buying life insurance or making a car using barter. No, thanks!

So money is essential to our well-being. What we use for money is crucial to the best functioning of the world economy. In many times and places when and where the market was free, the people have chosen gold and silver coins as money. Unfortunately, governments worldwide have long ago confiscated our gold and silver and replaced it with fiat money: bits of paper, and numbers entered in bank accounts. We are in trouble and government is the culprit.

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