What is money and how does it work?

What is money and how does it work?

New Rule of Money #6: Learn the Language of Money

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It’s all around us. We use it everyday.

We can’t live without it. But do we really know what is money?

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We are talking about money.

If we want to be wealthy, i.e. have a lot of cash flow, then it would follow that we need to know what money is and how money works. Unfortunately, many people think that they know these things, but in reality they don’t. And that is one of the reasons why they never get rich.

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What is money?
The first thing we must understand when we ask the questions, “What is money?”, is that money has evolved over time.

“Money” was originally in the form of barter, such as chickens or milk, then shells and beads, then gold, silver, and copper coins. They were physical objects that were deemed to have tangible value, and thus were traded for other items of a similar value.

Today, most money is paper money, an IOU from a government, also known as a fiat currency. Paper money is worthless in and of itself. It is simply a derivative of the value of something else.

In the past, the dollar was a derivative of gold; now it is a derivative of debt, an IOU from taxpayers of a country.

Today, money is no longer a tangible object like chickens, gold, or silver. Today, modern money is simply an idea backed by the faith and trust of a government. The more trustworthy the country, the more valuable the money, and vice versa.

This evolution of money from a tangible object into an idea is one reason why the subject of money is so confusing. It is difficult to understand something we can no longer see, touch, or feel.

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