What even is money? Is it really the root of all evil? I’m here to tell you (in my opinion) that it absolutely isn’t the root of all evil. This is the type of thing I heard growing up and still hear as I approach the big 4 0 …
Money is a medium of exchange or a measure of value. When you get gold involved, money is also a store of wealth. For a more in-depth explanation of money, read this weeks recommended book, The Ascent of Money, by Niall Ferguson.
When you grow up on a council estate, money is scarce. And it is inevitable to grow up with a scarcity mindset around money. That is until you learn about money. When you learn about money, you realise that there is an abundance of money.
The problem is that most people are not taught about money. I certainly wasn’t and have subsequently had a difficult relationship with money until recently. Until I took matters into my own hands and decided to get some much-needed financial literacy.
1000s of years ago it was all about the barter. Then it was about exchanging coins in silver or gold. The first recorded paper currency dates back to about 770 B.C. in China. The bank of England jumped onto paper money at around 1694. Fast forward to 2021 and we still have paper money. But we also have digital currency and in my humble opinion, that is the future of money.
There are many examples of money and how people used to exchange value … Like seashells for example. This is just a brief overview if ya like …
Barter is the exchange of goods without money. This is what happened before money. Back in the day you would have had to exchange goods or services to get something you wanted or needed.
Let us take food for example. You might have been able to grow your own and be quite self-sufficient if you had suitable land. This effectively means you’re a farmer.
But what about clothes or shoes? Our farmer from back in the day would have to exchange his wheat (or whatever he was growing) and go and see the local shoemaker. Then it would be all about the barter.
The barter was a way for people to exchange value. This was done by 2 parties exchanging valuable goods with each other. The main problem with the barter is the fact it is impractical … very impractical. Just imagine how difficult it would be for our farmer to get his goods from A to B so he could complete the exchange.
Another problem was that there was no standard measure of value. There are many more issues with the barter and this led to coins…
The 1st coins date back to 1000 BC according to Wikipedia. The first official currency was minted by King Alyattes in the Kingdom of Lydia (Western Turkey) in 700 BC. This coin was a combination of gold and silver. Again, this little bit of info is from Wikipedia.
Coins being used in England dates to AD 886. The coins were produced by the Royal Mint in London. The Royal Mint is a government-owned mint that produces coins for the UK.
Fiat currency is basically currency backed by a government. It is not backed by any commodity such as gold or silver. The first example of a fiat currency was back in Ancient Rome. The denarius was widely used and was initially made up of pure silver.
Obviously, this is just a little taster for the history of coins in the history of money. Anyway, moving onto paper money …
Onto paper money. As I have said, paper money first appeared in China in the 700’s. Marco Polo’s travels into Asia brought the idea of paper money into Europe in the 1200 AD. A few hundred years later in 1661 and the first European banknote appeared in Sweden.
The U.S. introduced the U.S. dollar as the official currency back in 1792. The US dollar has been the global reserve currency since 1944. And after World War II the Bretton Woods system was introduced. This meant that the dollar was pegged to gold and most other currencies were pegged to the dollar.
To fund wars like the Korean War, the US printed more money. This effectively led to the demise of the Bretton Woods system. France and other European countries demanded their gold back from the US because they were printing money and going against the Bretton Woods system. By 1971, President Nixon removed the gold standard. Effectively, making the U.S. dollar a fiat currency.
Do we really trust our governments? I’m not going to get too political as this is just a blog for information purposes. But we really must be aware of QE (Quantitative Easing) in my opinion. Basically, governments like the US and the UK printing a lot of money and devaluing their respective currencies. This is leading to inflation and what many believe is going to be a big RESET … or the big RESET. This is only speculation at this stage, but there is a lot going on that most of us don’t understand.
A bit more relevant history before we move onto digital money. See below from an issue of Money Week (Issue 1072):
The fate of the Roman Empire is a warning about the consequences of Quantitative Easing (QE). Ancient Rome created the world’s first fiat currency, initially as a way of paying soldiers. It spread across the empire and the currency proved to be stable. You could travel far and wide and the value of your coins would be the same.
This price stability was damaged by Septimius Severus (193 to 211 AD). He doubled the wages of soldiers to recruit more and paid for it by debasing the metal coins. Just as today (2021), this inflation led to rising prices and eroded confidence in their currency. The Romans eventually abandoned their currency, the empire trade collapsed, and political chaos ensued, leading to the end of the empire itself.
When Britain had an empire, the pound was the reserve currency for about 100 years. The US dollar has been the global reserve currency since 1944 so just under 80 years. Looking at money from an historical point of view, it seems (in my opinion) that the dollar will not be the reserve currency forever.
Will China’s hoarding of gold lead to the Chinese Yen becoming the next reserve currency? Who knows?
1998 is where digital money started. Elon Musk and a few others founded Paypal. Sending money peer to peer directly using the internet became possible and the e-wallets revolution took off.
Fast forward to 2009 and this is the start of Bitcoin. A mysterious developer known by the alias of Satoshi Nakamoto created Bitcoin, a decentralised and anonymous digital currency.
Personally, the further I go down the crypto/bitcoin rabbit hole, the more convinced I am it is the future of money. Just look around at how many people are using cash. How many people pay for their weekly shopping with cash?
I’ve been writing about crypto for the last few years as I am learning about this exciting new technology. My hope is that my friends and family become interested in Crypto. Even if you haven’t got much spare money to invest, it is my opinion that by getting in early will help you going forward. In the digital/technology age we are currently living in things are moving fast – very fast. It is a good idea to move with the times and start to learn about and understand what many believe is the future of money.
What to do and what will more money do for you
Money is a tool that will buy you more time. More time to do what you love with the people you love. When I get to FI (Financial Independence) there will be no more working away. I will have my target monthly income from passive income and that will buy me the time I’m looking for to spend with family and friends.
What would more money do for you? And how will you get that extra money you are looking for? For me, I am pushing hard towards FI with property investing, index investing and crypto assets. In addition, I’m learning about business so I can get a little side hustle going.
To get more money, I think it is important to understand money. Financial literacy is important and will help you get some early FI. This week’s post was just to give you a little duffmoney lesson on the history of money.
If you have found value in the content, comment on this week’s blog or get in touch via social media. Understanding money is a big deal and as I learn more and more about it, the intention is to pass that info on via duffmoney.
If you want to get into crypto you can buy at an exchange like coinbase – free crypto … if you join via this link you get £7.45 free in crypto and so will I … then you get to do the same so everyone you introduce to coinbase you get free crypto they get free crypto – a win win!!
Book of the week: The ascent of money, by Niall Ferguson. This is an excellent book that explains the financial system, and how it was developed. It goes into the value of money, the system of credit and debit and how money has developed over the last x amount of centuries. Overall, a book that will take your understanding of money to another level.
For a hard copy visit the excellent Imagined Things Bookshop: Imagined Things.