The dictionary definition of ‘money,’ has several definitions, but the first in my dictionary seems to describe it best: (a) “Standard pieces of gold, silver, copper, nickel, etc. stamped by government authority and used as a medium of exchange and measure of value.” (b) “Any paper note issued by a government or an authorized bank, and used in the same way.” That is technically true, but those definitions do not cover the actual labor saving and value possessing characteristics which money should possess.
The term ‘medium of exchange,’ means that if you wish to have something like milk, a tire, or a home, you must have the value of that item to exchange for that item, big or small. What value do you have to get quart of milk, a tire, or a home? It is impossible to define a value with which to exchange for those items. We therefore have money in a checking, savings account, wallet, or pocket, which we can exchange for those items. Coins were first used about 600 BCE, and in the Bible, money was always gold or silver. Coins don’t wear out nearly as fast as paper currencies, and paper currencies issued by governments can be de-valued overnight, as happened in India last year. The subject of money can require volumes of script, but I believe that money must have at least two characteristics. (1) Be convenient, and (2) Be a store of value.
Currently in America, we seem to have a 2% inflation rate, which the U.S. government thinks is great, but I cannot understand why. A 2% inflation rate, means that your dollars are worth 2% less every year, and are not a store of value, although they are convenient. As an example of how a progressive inflation rate of 2% can affect us, look at me, an old geezer, who can remember gasoline at 19 cents a gallon, a new tire for $9.95, and who grew up in a marvelous six bedroom home in northwest Washington D.C., which my parents bought for $3,300. That home is still there and worth close to a million dollars. Is it then ‘worth’ more now than it was ‘worth’ 80 years ago, or has the dollar decreased in value that much? Maybe the dollar, although convenient, is certainly not a long term store of value.
An interesting fact about money, is that a gallon of gasoline can still be bought for a couple of dimes. Silver dimes, that is. Similarly, a fine men’s suit can still be bought for the price of a one ounce gold coin. The problem with gold and silver coins, is that neither a gas station nor a haberdashery will generally accept silver or gold coins for their merchandise. They may be a store of value, but very inconvenient for common exchanges of money for merchandise. We do indeed need paper dollars. When I was a kid, I had never seen a hundred dollar bill, and now I keep a couple of them in my wallet
Should we store our net worth in dollars? Should we have IRA’s, and savings accounts, which are denominated in dollars? I don’t. As a matter of fact, in my entire life, I have never had a savings account. When I had extra bucks, I bought something I wanted, not always a car, but I have had 105 cars in my life…so far anyway. I’d take a trip, buy something I wanted which would give me pleasure, because I never thought that I would receive pleasure with a savings account. I’d chase steam locomotives, old merry-go-rounds, go to Colorado, buy tools, or whatever gave me pleasure with my extra dollars. But that is me, and I am certain not for most people. In my younger days I never even considered old age, and to me as a 20 year old, I thought that a 45 year old was ancient.
Eventually, I realized that I would get old and need to have money to live after I could no longer work, operate or start a business to earn money. In 1977, at age 43, I started doing precious metals, and realized that gold and silver were real money, and began saving for old age in those metals. I have never regretted it. – Don Stott 1-888-786-8822