What is money and how did money come about? In the old-times people would simply exchange one tangible resource for another, or in the case of a market setting, several people would exchange many tangible resources amongst each other otherwise known as the barter system.
As societies became more modern, there became a need to have a medium of exchange that can be easily measured.
A dollar for example, is a unit of measurement like a gallon or a pound of a commodity.
In all seriousness when someone says "give me 20 dollars" your response should be "20 dollars of what?".
That's all money is; a medium or temporary a holding state of something of value in a specific amount, the same as ice can be a temporary holding state of water.
The original purpose of money was not to become the permanent holding instrument for value as it has become in today's society.
Let's say that I am a carpenter and I have some wood and you are a butcher and you have some beef.
I need beef but you don't need any wood.
How do we exchange? How do we both get what we both need? How can we do business? This is why the medium of exchange became useful.
So since you don't need any wood, I can exchange money instead and you can go and get whatever it is that you do need.
So money is essentially whatever you want it to be.
The current form of money is different than it was in the early human societies.
Money was once a tangible resource such as gold, silver or some "real" commodity.
Today money is simply a number printed on fancy paper or some digits on a computer screen.
The way in which individuals get money and who controls the value of it is the important thing.
Let's suppose you are a farmer and you own a lot of natural and tangible resources.
However, you need to develop your resources in order to build an income for yourself and expand your farm.
So you go to a bank and ask for a loan of $100,000.
The Banker looks at you and asks, "Okay, what do you have as collateral?" So you tell the Banker that you have a lot of land, animals and wood.
So, the Banker says, "Okay, we will accept that.
" So you put up your farm as collateral and the Bank loans you the $100,000.
What did you just do? In essence, what you just did was hand over something of real value in exchange for something of no real value, hence the name Real Estate.
As if that wasn't bad enough, the Bank is actually still in control of the value of what they remitted to you, because the bank controls interest rates that they use to inflate and deflate the value of the money they just loaned you.
So, you borrowed the money to buy tractors and other farm equipment.
At the time you took out the loan a tractor cost $10,000 but now a tractor cost $12,500.
Its not that the tractor went up in value, it's that your money went down in value due to what is called inflation and who controls inflation? The bank.
In other words, if I were to loan you $5.
00 but I have a string made of inflation attached to the $5.
00 and as soon as you walk away from me I pull the string, suddenly your $5.
00 is worth $4.
50, I pull it again a few days later and now its worth $4.
00, then $3.
00, then $2.
25 then down to $2.
00.
However, as in the previous example, the Bank will own your farm if you fail to repay the loan with the agreed interest.
The value of your farm will not decrease but the value of the money you borrowed will.
It will also cost you more if you ever had to buy another farm after the bank foreclose on the farm you put up for collateral.