What is Money? – Stored Human Energy…

Money has assumed many different forms throughout its history, affecting everyone from the strongest monarchs and the lowliest peasants, to you and me.

Money originated as barter in many different forms, from wampums in Native America to whale teeth in Fiji. Other barter items recorded were seashells, amber, ivory, decorative feathers, cattle, and a large number of stones including jade and quartz. Gold and silver were eventually established as money in most countries as most of the barter items listed were subject to decay, corrosion, and other forms of wear and tear. Over time and through competition with other forms of money, gold and silver emerged victorious. Gold and silver have properties that are unique and scarce enough to solve many of the issues that came with most barter items.

As medium of exchange, money should comply with the following five characteristics:

(1) It must be durable, which is why we cannot use cattle or corn;

(2) It must be divisible, which is why we cannot use a work of art;

(3) It must possess intrinsic value, which is why we should not use mere paper;

(4) It must be limited in the quantity that is available, which is why we do not use aluminum or iron;

(5) It should have a long history of acceptance in the free-markets.

Money, regardless of its form, is in reality an agreed value within the community.

We collectively give money its value. For much of recorded history, gold and silver not only complied with the points above, but it was also accepted as real money in the US until quite recently–1971. At that point forward the WORLD made an unparalleled decision to move currencies off the gold standard and onto an experimental global fiat standard (thanks to the Bretton Woods Conference).

All government-issued money today is fiat and voids all characteristics above save for the second point (divisibility) and, if you consider coins, the first point as well (durability). But who really uses coins all that much? Even though money today is just a piece of Monopoly paper with a number and two signatures on it, it still represents an agreed value for exchange. Even if money would turn into a digital entry on a computer, if people accept it, then it can be considered money.

What exactly does money represent?

In essence, money is more than a number printed on a note of currency; it is a unit of labour that traditionally represents work that was or will be carried out. In other words, money is stored human energy.When we go to work, we are exchanging our time and energy for money; the accumulation of money, therefore, means the possibility of acquiring this “human energy.” If instead of a service your purchase an item, it is still the purchase of someone’s labour, as the manufacturing of that item required someone’s time and energy. The more money a person has, the more access one has to this ‘stored energy’ (in the form of labour) and resources at a future date. Therefore, if you control money, you control humans and their time and energy. (This is, in fact, what I consider to be one of the hidden messages in the movie The Matrix.)

The more restrictions there are to money creation, the harder it is to control. Commodities like gold and silver require extraction from the ground, which entails elaborate machinery, capital, labour, safety considerations, and a long and arduous process before the product even reaches the market. The implications of extracting gold are great, much more so than printing paper money or merely creating money digitally. This makes gold less manipulative as a form of money. While the gold standard is not the best system out there, it is nevertheless a better system than that of a fiat currency. Competing currencies (self-issued currencies) that create competition, much like business competition, is in my opinion the best option.

Whoever controls the volume of money in any country is absolute master of all industry and commerce.

-James A. Garfield, 20th President of the Unites States

Although money represents “stored human energy,” to a certain degree, its ultimate perception will vary among different people.

What do you view money to be?

How money is perceived differs from person to person. The list below includes but a few examples of common thoughts regarding the nature of money. With what do you associate money? There are no right answers. Post your comments below.

  • Money = Freedom
  • Money = Time
  • Money = Evil
  • Money = A tool
  • Money = Survival

  • jj

    From the link-

    Hard money in circulation is insignificant to the amount of credit. The result to our economy is that boom periods are hardly driven by true money. Credit is what drives the markets, and it is this same credit that busts the markets as well (in times of credit contraction).

    **********

    Credit in contraction = deflation = default risk = rising price of gold

    Completely agree about the tiny amount of cash vs credit supply-even with the printing presses running day and night….it’s just too little-

    Gold is always wrongly bet as an inflation hedge and really-data exists that proves gold is a rather poor inflation hedge-such as the period 1980-2001..true central banks were dumping it which had a negative price effect-but not even gold can compete with cheap easy money ie: credit.. which is why we had/have a housing bubble –

    “Mount a beggar and he will ride to the devil”

    Anyway the point is..gold only fly’s under 2 conditions–currency risk and default (credit) risk-

    In 2001 something happened that was different than the run of the mill inflation of the previous 20 years-

    While printing was actually decreasing–

    http://tinyurl.com/ajhmgwv

    Gold broke out of a 20 year bear market and has never looked back–imo– gold was not looking at currency–it was looking at credit expansion-still genuine inflation by any other name-I will go as far as to say hyper-inflation of the credit supply-

    Something else seen what gold was looking at–at the exact same time-
    Look at the violent yield reaction in 01-
    http://research.stlouisfed.org/fred2/series/WTP30A28
    There’s an old saying..
    Although both are open to manipulation–in the end-
    You can’t BS the long bond and you can’t BS gold-

    • economicreason

      JJ,
      you are right about the poor gold performance between 1980-2001. However, there are a few types of inflation. Price inflation, wage inflation and asset inflation. During the 80’s, the slash in wages and jobs sent abroad reduced the inflation, and this was counteracted by sending jobs overseas to lower cost jurisdictions. The end result was that inflation seemed unnoticed, especially after the Volker raised the interest rates. but this is not true, inflation was sent abroad.

      Today, jobs are already sent abroad. So inflation is appearing in prices and assets. The FED is running out of options, and ammo to keep the gold price down.

      • jj

        you are right about the poor gold performance between 1980-2001. However, there are a few types of inflation. Price inflation, wage inflation and asset inflation.

        *************

        er-

        imo-there is only one type of inflation and that is monetary inflation-

        currency and credit as per Rothbard-

        “Actually, bank credit expansion creates its mischievous effects by distorting price relations and by raising and altering prices compared to what they would have been without the expansion. Statistically, therefore, we can only identify the increase in money supply, a simple fact. We cannot prove inflation by pointing to price increases”

        http://mises.org/rothbard/agd/chapter6.asp

        *******************

        The logical outcome of the above discussion is that a proper definition of inflation or deflation must be built on the foundation of a sound definition of money supply that distinguishes between money itself and credit. The definition should also ensure that the horse and the cart are in their proper places.

        With the above in mind:

        Inflation is best described as a net expansion of money supply and credit.

        Deflation is logically the opposite, a net contraction of money supply and credit.

        Read more at http://globaleconomicanalysis.blogspot.com/2006/02/inflation-what-heck-is-it.html#EEyYtUp5uUghvbsI.99
        *************

        Credit acts like money in expansion-therefore it is money but-it acts very differently in contraction

        The rest you mention may or may not be a symptom of monetary inflation-

        Yes we export inflation (money supply) to China et al–simply because we run deficits with those countries-when/if the trade balance shifts to us running trade surpluses-all that money will come home–

        • economicreason

          Correct, I agree with you. but monetary inflation can affect different areas differently, that’s what I’m trying to say. Money flows in the path of least resistance. For instance, the dot com bubble was replaced with the real estate and now bonds.

  • little poots

    i wonder why salt isn’t included in the list of historical money ?

  • allenwoll

    Money is stored human labor, labor being necessary in order to prodce goods and services — ’til soon.

    What happens to Money as less and Less and LESS human labor is required to produce goods and services — until finally, virtually NONE is required ?

    Yes, and what happens to Capital AND Capitalists ? ? ?

    Some of us living today may see this virtual death of Money (NOT me).

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