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What is Money?

How does money work?

There’s an old saying that “money makes the world go around.” In an economy, people work, save, and spend money – plenty of them worry about it, too!

The dollar does not have any value in itself; you cannot eat banknotes or use coins to build things. But money has value because we agree to use it in our everyday lives. Money has two main uses. The first is to purchase goods (things or objects) and services (activities people do for you). The second way to use money is to save it, and use it to buy products in the future.

While countries around the world rely on pieces of paper and coins (or digital units) to buy and sell things, money could be anything that people agree to use. In the past, gold and silver were used. Today, some places still use large stones, seashells, and even Parmigiano-Reggiano cheese as money.

Before money was created, economies would barter – this means trading goods and services directly. For instance, if you grew onions and you wanted a chair, then you would need to find someone willing to build a chair in exchange for onions.  Bartering might work in small communities, but it does not work in large crowds. This is because you cannot give other people what they need every time, and you cannot save up onions for the future.

Whatever money is, it needs to be approved by the government. Otherwise, it is illegal.

Andrew Moran

Economics Correspondent at LibertyNation.com and LNGenZ.com. Andrew has written extensively on economics, business, and political subjects for the last decade. He also writes about economics at Economic Collapse News and commodities at EarnForex.com. He is the author of “The War on Cash.” You can learn more at AndrewMoran.net.

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