Wealth Is All In Your Head
From the Recaps Archives posted on 4/30/2019
Wealth Is All In Your Head
April 6, 2019 By Mr. Tako
When you think about it, money is a pretty funny thing. For a couple thousand years humans used precious things to represent this idea of “money” — ivory, colorful shells, precious gems, livestock, silver, and most notably gold. This worked well for humanity for a very long time… as long as the values were small.
The general inconvenience of physically carrying a whole bunch of “precious stuff” eventually gave way to paper certificates. Stand-ins for the real thing.
After-all, nobody wants to cart around a wheelbarrow full of silver just to buy a new car. You were liable to get mugged by Robin Hood on the way to the car dealership….
Paper certificates were just so much easier and convenient. In the past, those paper certificates could be redeemed for the actual “precious stuff”.
I still have a few U.S. $1 bills somewhere from the 1950’s that are actual silver certificates. It used to be that a person could walk down to the nearest Federal Reserve and exchange those certificates for actual physical silver. Why anyone would want to do that? I have no idea, but it was possible all the way up into the 1960’s.
Some of my relatives were really into precious metals. I received a number of these “silver certificate” dollars as gifts when I was a kid.
Back then, it was mostly the belief that you owned a precious metal that supported a currency. The fact that you could still convert it into precious metals was sort of a “bonus feature” for the currency.
All this ended in 1971, when President Nixon officially took the U.S. off the gold standard. The dollar became what’s known as a fiat currency, and around the same time most of the G-10 economies moved to fiat currencies as well.
The only thing really supporting a currency now is belief. We believe that money has value and therefore it does. Nowadays, most of our money is simply ones and zeros in a bank database …. data that probably resides in a secure data center somewhere.
Today, hardly anyone I know still uses physical money. We’ve simply moved on to credit cards, bank transfers, and digital payments. Only a few of the crazier people I know still keep gold or piles of cash at home.
In essence, money is now simply digital bits (in just the right order), shuttled around with electrons. Money couldn’t be more ethereal.
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