Sunday, May 3, 2009

What Is Money?

As I was doing my presentation on historical currency and inflation the other day, I was asked by an enthusiastic listener: "You mean we should invest in Gold".
I responded "Actually, No. Gold is one thing you could use to keep your wealth. So is silver. So is real estate. But so are nails, or 1/4-20 by inch and a half hex-head bolts. And virtually anything but shrimp and lettuce or the FRN."
I realized I was on to something. The first consideration of preserving your wealth was that it should be physical and non-deteriorating.

Officially, money is anything that is generally accepted as payment for goods and services and repayment of debts.[1] And the main uses of money are as a medium of exchange, a unit of account, and a store of value.[2] The principal use of money is as a medium of exchange. Even the shrimp would suffice for this. And a pound of shrimp could well be a unit of value, but it is declining in value almost as fast as the Federal Reserve Note.

But we know that money is really the physical manifestation on your life and labors. You trade that part of your life for it. To take it from you is to take that part of your life. Whether by inflation or taxation, [especially that taxation that provides no thing to you in return] your loss of wealth is theft of your life and freedom - That is slavery.
[1] Mishkin, Frederic S. (2007). The Economics of Money, Banking, and Financial Markets (Alternate Edition). Boston: Addison Wesley. p. 8. ISBN 0-321-42177-9.
[2] Mankiw, N. Gregory (2007). Macroeconomics (6th ed.). New York: Worth Publishers. ISBN 0-7167-6213-7.

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