Invariably, this question always comes up. Why can’t money just be printed and given out to people who need it? This question shows that most people have no fundamental understanding of how money works. The lack of knowledge in this subject is very understandable given the huge debacle in Public Education today. I will attempt to give you a better understanding of why this doesn’t happen without consequence. I will also explain why this shouldn’t happen in my multi-chapter series.
Chapter 1 – What is Wealth?
Today I’m talking about wealth and what it means to have it. If we were having a conversation face to face I would ask you, “What is Wealth.” You would think about the question for a minute or two and you would answer, money. I would then have to tell you that you’re wrong. People say that wealth is what they have in their wallet. No! Wealth is not what’s in your wallet; Wealth is your wallet.
Your wallet has wealth because you, the owner, assign it value. You value it because your wallet is an asset to your daily life. It makes you more organized. Think about how you would maintain your money if you lost your wallet for some reason. Coins, credit cards, and cash would fumble around in your pockets. You may lose your money. No matter what, you would wish you had your wallet back. That wish to have it back is you understanding the value of that wallet. It’s valuable simply because your life is better with your wallet than without.
I used a wallet as an example but it’s not just a wallet. It’s everything we have in life. It’s your iPhone or Android, your car, electronics, and other things. All of these things are valuable to you. The biggest purchase most people ever make in their lives is a home. It’s the most valuable possession most people have. We commonly refer to our homes as an asset but all items we possess is an asset. That’s why you can borrow money against your home. It’s your most valuable possession or largest asset. The bank takes the home if you don’t pay the bank back. You become wealthier as you accumulate more assets. When the news speaks of rich people’s wealth (such as Bill Gates, Warren Buffet, and Jay-Z), they are talking about their assets, not their money in the bank. Their assets are usually investments or companies they own.
Other people want the same items you have to help improve their lives and are willing to negotiate an agreement to acquire what you have. They would’ve bartered in ancient times because there wasn’t any currency. The problems with bartering are it’s usually a one for one swap. For example, you want to make a hot dog. You only have a Weiner but no bun. You go to your neighbor and trade him your Weiner for a bun. How did that work out? It didn’t. Now you’re stuck with a bun but no Weiner. Or, you want to trade your bun with your neighbor but your neighbor is asking for your house. That’s not a good deal. This is why currency was invented.
Currency (or money) is simply a means of exchanging wealth without having to give up assets. Now I can go to my neighbor to buy a bun from him in order to make a hot dog for lunch. Also, the advantage of having currency is you can assign value to your asset using an exact point system. It’s called Dollars and Cents in the United States. The value of your wallet in Dollars is simply how much money would it take for you to part ways with it versus how much another person is willing to spend to part it from you.
There has been a number of currencies in the world since the beginning of time. You’ve had beads, silver, gold, paper, plastic, and now digital. Cows are even currency in parts of Africa. These forms of currency, however, aren’t wealth, they represent wealth. We will explore that in Chapter 2.
Thanks for reading and please comment.