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What is Money?

February 4, 2015 by · Leave a Comment 

By Samuel Phineas Upham

Money is more than the dollar bills one holds in one hands. The paper bills in your wallet could be easily substituted for stones, tobacco leaves, tea leaves, copper, paper, cigarettes, vegetables, fruits or anything else that can be exchanged. The thing that we call money is not a defined object in itself. If the government and society collapsed tomorrow, basic necessities would take the place of currency.

So money is not what is printed, it is what is exchanged that gives money its value.

Money can be something valuable, like gold, or it can be something akin to credit like the dollar bills in a child’s piggy bank. When you consider that the dollar is a government IOU, it’s much easier to understand.

Money, as in what is printed by the US Mint, is a universal medium of exchange. In the old days, a vendor might review your wares and make what is considered a fair trade for goods. Sometimes, these goods would be valuable like gold, but other times the goods might consist of something like spices. These goods carried value according to individual demand, somewhat like what we have today. This old system was fragmented. You would have to make several stops on your way through a region to be sure that you have traded all goods you have of value, and to get their maximum return.

Paper notes, and coins in the olden days, largely simplified the bartering process. In this way, money became little more than universally agreed upon notes that came to represent forms of payment.

About the Author: Samuel Phineas Upham is an investor at a family office/ hedgefund, where he focuses on special situation illiquid investing. Before this position, Phin Upham was working at Morgan Stanley in the Media and Telecom group. You may contact Phin on his Samuel Phineas Upham website or LinkedIn.

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