Money

It’s almost normal to listen to young people talking about their dreams and ambitions and equate having lots of money to success. We have come to refer to building careers or pursuing goals as chasing money. But really, how valuable is money? To answer this question, you have to take a step back and think about how people in the olden days survived or went about their daily lives without having money. Does it mean that they were poor?

Definition of moneyjmkb2w562wtyd62y7du28u2

Money can simply be defined as a medium of exchange. This is because it’s used in the intermediation of services and goods. It’s also a unit of account because it provides a standard unit for measuring the market value of services, goods, and different transactions by giving them a numerical value.

Money has no inherent value

The piece of paper or coin referred to as money has no inherent value. Other assets have value because they can be used to directly meet certain needs. For example, you can use your car to move from one location to another, or build a house on your piece of land and have it as a dwelling place. You can eat food to satisfy you hunger and put on clothes to cover your nakedness and shield you from bad weather.

These are things that are practically useful and without them, you could even die. Money, on the other hand, is just a piece of paper. Long ago, before the use of paper money was adopted globally, coins made of valuable metal were used as a medium of exchange and measure of value. Their values were mostly equal to the value of precious metals that they contained.

Until 1971, the value of paper money was based on the value of gold or silver ijmkb2we5twed62eyd7u28in several countries. The United States, under President Nixon, dropped this policy and started gauging the strength of the dollar based on market conditions without tying its value to any commodity. If the economy were to collapse today, the value of money that you hold would quickly diminish. The same would happen when the government prints too much currency. Money has value as long as it stays in demand. If this demand fades or ceases to exist, your money also becomes worthless.

True economists value real assets over liquidity because they can be used to meet human needs all on their own without depending on market forces. You may have millions of dollars in cash today but tomorrow the same millions could be worth nothing.