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Writen by David Stern.
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The True Value of Money

This post is about something most of us (if not all of us) deal with – money. It seams that money rules the world. People that have a lot of money are stronger and have more influence on other people. Countries with stronger economies have more influence on other countries – in culture, military, politics and more.

What is money? In prehistoric times, there was no money at all. People would get what they needed by themselves, if by gathering, hunting, growing etc. Then they would barter – exchange one valuable for another. Only then coins were invented – little pieces of metal with artificial values, used for exchanging them with real valuables.

What meaning, then, does money have? Does having a lot of money in your bank account or earning a high salary make you rich? Not necessarily. You don't have to be an economic genius to understand, that if one gets a high salary, but saves most of the money for a rainy day, he is not rich. Only the one who makes the best use of his money, like buying a big house or an expensive car is really rich.

Look what we have today: banks, stock markets, currency exchangers - people who exchange money for money, stocks, or for other things that have only artificial values. They profit from the change in the values of their so called goods. For example, if you buy a stock and sell it for a higher price, the stock stays the same stock, and you actually get money for creating nothing new. Foreign currencies exchangers profit from the change in currency values – changes the exchangers themselves have a part in making them. Even if you buy a house, which is something real, and sell it for a higher price – the house stays the same house. You didn’t create anything that wasn't there before.

Imagine a hypothetical situation, where we all quit our jobs and get salaries for free. What would happen then? We would starve to death. If nobody worked, who will grow our food? Who will build our houses? Who will manufacture cars to drive? Who will teach our children lessons in school?

Recently, there has been a financial crisis all over the world. It's been said that billions of US Dollars have been lost worldwide. What actually happened? Did a natural disaster occur? Did buildings fall down? Did any damage happen to anything? Not at all! Only numbers have changed – numbers in bank accounts, stocks, currency exchange rates etc. Nobody has lost anything materialistic, besides workers who have lost their jobs. These are mostly people who worked in companies that were dependent on bank loans and stock markets. Companies that manufacture and sell materialistic goods or services were hurt less.

The country which was hurt most in the financial crisis was Iceland. Why is that? The country's economy was based on banking. The Icelanders hardly manufacture anything. They even hardly have any agriculture. Most of the food on the island is imported, and so most of the other goods they have there. The Icelanders' ancestors were Viking fishermen, until they discovered banking, believing it's a lot more profitable (and it was profitable for them, for a time). Now they are discovering fishing again.

In conclusion, what makes us rich and wealthy is not money, but what we do with our money. We are able to buy goods with our money thanks to the fact we do something for our money, which means manufacture something or give a service.

I wish all my readers a productive week.

August 11th, 2009.

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