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Why was money invented?

Before money came along, people got what they wanted by trading things between one another so in the end both people would receive what they wanted. Economists call this method of exchange or  the barter system. Bartering however was a very inefficient system because you had to look for someone who had what you wanted but in-turn also wanted what you had to offer in exchange. Economists call this the “Double Incidence of Wants Problem”.

Another large problem directly related to the bartering system is that it can be very hard to save up for something expensive such as a car if you have to pay for it, let’s say in live chickens. If you’re a small household raising chickens it could take years to grow and save enough chickens to pay for your new car. The problem being the first chickens saved will die, before there is ever enough saved to pay for your dream car. And as time passes along they will continue dying because they do not live long enough. So you will never be able to save the required amount of live chickens to pay for that car. Economists call this the “Retention of Value problem”.

However, when money is used as the medium of exchange in trading for goods or services both of these underlying problems go away. Money in its most basic form is simply an I.O.U, which people can keep and use easier for exchanging any goods and services rather than using chickens or other things.

With money, anyone can trade with anyone else no matter what they produce. Because now, while the first person has to want what the second person has, the second person does not need to have what the first person has (in exchange). Instead that person can take the money and buy what they really want from somebody else thus solving the first problem. In solving the retention of value problem, money can easily be saved, as it does not easily deteriorate. Once enough dollars are saved, that person would be able to buy that expensive item, such as the car.

Now that we remember why we invented money in the first place, it becomes clear why printing more money will not make people richer. Money is valuable because people will give you goods and services in exchange for it. Notably it also derives its value from goods and services.  Printing more of it does not make more goods or services appear. It simply spreads the value of the existing goods or services around a larger number of dollars. This is called inflation.

The average price level is similar to the numbers of dollars divided by the goods and services. Through inflation, you can increase the currency supply of dollars by two-fold. By doing so you’re simply doubling the price you’re going to pay for the goods or services that you purchase.

If everyone had twice the amount of dollars, but everything cost twice as much, there would be no monetary benefit and people would be no better off. Therefore we cannot be better off, because our wealth does not come from any quantity of money, but rather from the goods and services that our dollars can buy. Inflation equates to an excess in the money supply that ultimately destroys the purchasing power of your dollars over time.

The best way to protect your purchasing power from rising inflation, brought on by the central banks constant money printing (which increases the money supply) is to own physical gold and silver. Physical gold and silver have always been able to maintain their purchasing power throughout history. Regardless of any economic crisis wither a deflationary collapse or hyperinflation and the destruction of paper money. Gold and silver maintain their true value and are absolutely critical to your financial survival.

Tom Genot -

About The Author:

Informational news, books, articles and videos on investing in gold and silver and where the best places are to buy it. You will also find informational resources to educate you on alternate forms of investing and information on preparedness, for preparing and protecting you, your family and your assets from the pending economic crises and destruction of the US dollar. Author Tom Genot provides information and resources helpful to everyone. Insure you're prepared, while time is still on your side. Check us out at www.coinbullion.net.