Since the beginning of civilization, there has been an ongoing tussle between governments and the public about what money is exactly. As a matter of fact, lots of things have been used as money over the years and there have been some strange things used to be sure.
Here are just a few of the stranger ones: conch shells, rice, copper, tea leaves and even bat guano. Now, the common thing about all of these items, however, is that they actually have some other uses and as a result each of them have some inherent value.
Today we use an entirely different item that everybody calls money but that has no other inherent use at all and that thing is just a piece of paper printed with ink.
It’s called currency, or to be more accurate fiat currency. Pull one out of your purse or wallet and just look at it. What is it exactly? It is in fact fiat currency, which is just a piece of paper with ink on it and is virtually worth nothing regardless of the number printed on it.
However, if it has a 100 printed on it everyone treats it as if it’s worth $100 U.S. dollars. The other thing about all currencies is they are affected by what economists call inflation. But exactly what is inflation? In reality, inflation is the value of your currency becoming worthless over time based on the inflation rate.
The reality is that an inflation rate is a man made number marking the decline in the value of that currency and is more like a built-in tax on your money. It sounds strange but that’s exactly what inflation is.
There has only been one item in particular, though, that has been accepted throughout history as real money, and that is Gold. The reasons are fairly obvious too. Gold is rare. You can’t just crank up the presses and print a billion dollars worth. It’s hard to find and mine and this scarcity add to its value. It also has other uses in manufacturing and commerce.
Very important and even critical uses. This also adds to its real value. The most interesting aspect, though about Gold is that it is inflation proof. If you bought $100 worth of goods and services in 1966 and paid for it in Gold you could buy virtually the same amount of goods and services today in 2016 with a $100 of gold. To do the same thing today with Federal Reserve notes it would cost you $750 dollars. That’s what inflation does to all currencies.
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