assume-xml-procins: false assume-xml-procins: false

Money: The Abstraction of Value
(Money is Magick!)

Money is a funny thing. It has very little (or even no) intrinsic value and yet it can be exchanged for items that do have value. It's like getting something for nothing! (Who says "There ain't no such thing as a free lunch"?)

Why would people accept a piece of paper (actually cloth) with symbols on it and then provide the other party things of value (food, shelter, televisions, cars, gasoline...)? It's all a matter of belief. When people accept those little pieces of paper (or coins), they expect that they in turn will be able to exchange those same pieces of paper for things of value.
Back in the old days, people used barter to get things they needed but couldnít supply themselves. They would trade their own goods for goods that another person was offering. Basically, a farmer might trade wheat for a horse. A builder might build a house in exchange for some chickens and some clothing. Generally, the exchanges would have been about equal in value.

Iím going to skip over the whole history of when and where money originated. Iíll just jump to the point where money was made from precious metals and was accepted by most people.

Precious metals were considered to have intrinsic value. An ounce of gold or silver was generally accepted to be worth some fixed value. The value was explicitly tied to the purity and weight of the metal. Coins with specific shapes, sizes and images on them, were used as a way to vouch for the purity and weight of the metal. It freed people from having to use scales or assay equipment. This was money, real money (as opposed to real goods).

Because the precious metals (primarily gold and silver) were perceived to have value and because that value was consistent based on weight and purity, people became comfortable with accepting them in exchange for real goods. But using gold or silver isnít quite the same thing as barter (see above). You canít eat gold, silver wonít keep you warm. And just like money today, the value of gold was subject to inflation (or deflation) relative to the amount of real goods it could be used to buy.

Now we've reached the first level of abstraction of value. People are willing to exchange real goods (food, shelter, warmth) for something that has value, but that is not in and of itself a real good.

The rant is just getting started. Please be patient, more will follow.