What is Money?



What is Money?

Before we go down the track of Precious Metals, we must first backup and understand the basics. Throughout my studies and life I have been trying to find peace of mind, whether that is my current situation or peace of mind for my future. When looking at ones future the first thing that always pops in my mind is Money. What is money?

                              

What is Money? – Money is a good that acts as a medium of exchange in transactions. Classically it is said that money acts as a unit of account, a store of value, and a medium of exchange. <- About.com/Economics http://economics.about.com/cs/studentresources/f/money.htm

Money is any object or record that is generally accepted as payment for goods and services and repayment of debts in a given socio-economic context or country. The main functions of money are distinguished as: a medium of exchange; a unit of account; a store of value; and, occasionally in the past a standard of deferred payment. Any kind of object or secure verifiable record that fulfills these functions can be considered money. <- Wikipedia http://en.wikipedia.org/wiki/Money 

The last phrase from Wikipedia’s definition of money “Any kind of object or secure verifiable record that fulfills these functions can be considered at money.” You may be thinking okay, if I believe that Fiat is nothing but a piece of paper backed by a promise from a Private Company who is storing Gold, but not backing the fiat with it, then why don’t I use that fiat and stock up on goods, that I consider that are a store of value. Well you then fall into “The Double Coincidence of Wants”.

Definition: The phrase double coincidence of wants was used in Jevons (1893). “[T]he first difficulty in barter is to find 2 persons whose disposable possessions mutually suit each other’s wants. There may be many people wanting and many possessing those things wanted; but to allow of an act of barter there must be a double coincidence, which will rarely happen.” That is, paraphrasing Ostroy and Starr, 199, p 26, the double coincidence is the situation where the supplier of good A wants good B and the supplier of good B wants good A. http://economics.about.com/cs/inflation/a/deflation.htm

So back to the basics, what is money. Well Money is a medium of exchange. Right now money in todays social aspect is Fiat Currency.

So if I were to have you choose between a Gold Coin or a $20 Bill. Which would you choose? 

You would first think the Gold Coin, but believe it or not, there is a video on YouTube that would prove you wrong in today’s mindset. Since the start of the Federal Reserve, money at the time was Gold and Silver, and then the Government made Gold illegal to possess, so they told the public to give the Gold Coins up in exchange for a Note that was backed by Gold. Coins during and prior had Silver and other valuable metals. But slowly throughout time, our Federal Reserve Notes are just a piece of paper backed by nothing and the coins no longer possess the valuable metals anymore.

So what does one do when waking up to this discovery?