UNDERSTANDING MONEY

Man created money. People run after it entire life. What is actually money?

We know, we used bartering or exchange of goods - long ago. That can be called commodity money. It has intrinsic value. Examples : Gold, silver, copper , etc,.

Sometimes, even drugs, cigarettes, food, are used as commodity money. This kind of money is used in prison even today. When Soviet Union collapsed in 1980, hyper-inflation came into being. They were forced to use bartering system. And the cigarettes were one of the commodity money.

The modern world uses "Fiat money. It has no intrinsic value. It is just notes and coins. They are decreed by the government to have certain value (signed by Governor of RBI). The bank notes are backed by country's legal system and the economic credibility.

Meaning of money:
1. Money is like a common language- a medium. We communicate with the language. We transact with the money.

2. It is unit of wealth. We measure length by "meter". We measure wealth by a Rupee or a dollar.

3. Suppose, we have 1000 rupee note, that is we are storing 1000 rupees in that 'bank note'. Hence the money gives us 'means' to store.

The credit card system and the 'Bank loans" are possible only because of the fiat money. Fiat money can be credited against commodity money- example gold loan.

Today we have digital money. It has 'nil' intrinsic value. One cannot touch and feel. We use it only based on trust.
"finally money is just a token of trust".
Tomorrow we may use crypto currency (Bit coin) without the intervention of any government and only governed by computer Algorithms.
As the time progresses Format of money will go on change.

"Money: More man has more be wants"
Do not fall into this trap.

Note: The British pound was actually the price of one pound of silver.
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