There are innumerable guidelines on how to make money. This piece of writing is not about that. More accurately, we look at the explanation of currency, what makes superior currency, and how some terrible monies stay horrific although others have become adequate through new ideas and technology. In the conclusion we will talk about how currency and money will evolve in the future.
Explanation of money
Currency is something that is usually accepted as disbursement for goods and services In economics, economic yield is divided into tangible goods and intangible services. Use of goods and services is assumed to create utility (unless the “good” is a “bad”). It is time and again used when referring to a Goods and Services Tax. and repayment of debts. The key uses of currency are as a medium of exchange, a unit of account, and a store of value.
Aristotle on good money
Aristotle (384 BC – 322 BC) was a Greek truth-seeker, a apprentice of Plato and educator of Alexander the Great. Aristotle revealed, formulated, and analyzed the problem of commensurability com·men·su·ra·ble
adj.
1. Measurable by a common standard.
2. Proportionate; proportionate.
3. Math Exactly detachable by the identical unit an integral number of times. Used of two quantities. . He thought how ratios meant for a fair exchange of diverse things could be set. He searched for a rule that makes it probable to associate what is ostensibly not the same and non-comparable.
Aristotle says that currency, as a ordinary measure of everything, makes things commensurable com·men·su·ra·ble
adj.
1. Quantifiable by a common standard.
2. Proportionate; balanced.
3. Math Exactly divisible by the same unit an integral number of times. Used of two quantities. and makes it possible to equalize e·qual·ize
v. e·qual·ized, e·qual·iz·ing, e·qual·iz·es
v.tr.
1. To make equal: equalized the responsibilities of the staff members.
2. To turn out uniform. them. He states that it is in the variety of money, a material that has a telos (purpose), that persons have devised a element that supplies a gauge on the foundation of which just substitute can take place. Aristotle as a result maintains that everything can be expressed in the general equivalent of money. He explains that currency was introduced to please the requirement that all items exchanged must be equivalent in some way.
Within such frame work, Aristotle defined the characteristics of a good form of money:
1.) It must be durable. Money must stand the test of time and the elements. It must not fade, corrode cor·rode
v. cor·rod·ed, cor·rod·ing, cor·rodes
v.tr.
1. To wipe out a metal or alloy gradually, particularly by oxidation or chemical action: acid corroding metal. , or change through time.
2.) It should be moveable. Money holds a extraordinary amount of ‘worth’ relative to its mass and bulk.
3.) It must be divisible DIVISIBLE. The vulnerability of being divided.
2. A contract cannot, in general, be divided in such a manner that an action may be brought, or a right accrue, on a part of it. 2 Penna. R. 454.
4.) It must have intrinsic value Intrinsic Value
1. The worth of a company or an asset based on an underlying insight of the value.
2. For call options, this is the difference between the underlying stock’s price and the strike price. . This value of money should be independent of any other object and contained in the money itself.
Money, 1,000 years ago
Simply humans adequately solved commensurability with the thought and practice of currency. All the way through the past, we have seen the adaptation of numerous forms of money. Here are some examples with relative merits denoted.
One couldn’t treat oil as money since it was not exactly durable and portable. Neither could one use a business (such as a restaurant) as money since it is hardly divisible and ever lasting. Gold has been the choice of money for over 5,000 years because it is valuable, durable, divisible and relatively portable.
Trading assets on paper
A thousand years ago, the rights entitlement of a property parcel or a business is simply a piece of manuscript for decorative purpose and a registry for the tax collector. The oldest existing stock certificate was issued in 1606 for a Dutch company (Vereinigte Oostindische Compaignie) seeking to profit from the spice trade to India and Far East. Though very profitable in its day, when the company was dissolved in 1799, it was some 10 million Dutch guilders in debt.
American Stock exchanges This is a list of American stock exchanges. Stock exchanges in Latin America (where Spanish and Portuguese prevail) use the term Bolsa de Valores, meaning ‘bag’ or ‘purse’ of ‘values’. were introduced in the early 18th century and weren’t prominent until the 19th century, where we saw globalization globalization
Procedure by which the experience of everyday life, marked by the diffusion of commodities and ideas, is becoming standardized around the world. Factors that have contributed to globalization include increasingly sophisticated communications and transportation
Of, related to, or being liability securities that are secured with assets. For instance, mortgage purchase bonds are secured by mortgages that have been purchased with the bond issue’s income. and owned by world citizens. Title certificates to commodities stored around the planet are changing hands valued in the hundreds of billions on a variety of commodity exchanges.
Money, today
Oil, which has always approved built-in value however difficult to amass and exchange for other goods, all of a sudden becomes a feasible medium of exchange and store of value through the advent of Oil ETF ETF
See Exchange Traded Fund.
ETF
See exchange-traded fund (ETF). . Oil is stored in a warehouse and your digital ownership certificate is tucked safely in your brokerage account Brokerage Account
An arrangement involving an investor and a licensed brokerage firm that allows the depositor to deposit funds with the firm and place investment orders through the brokerage, which then carries out the transactions on the investor’s behalf. , which you can practically instantly exchange for anything else you want, whether it be Microsoft, gold, wheat, air ticket, hotel room, for less than 1% of commission. Established, we rely on dollars to calculate the swap over ratios but the role of dollars has diminished greatly in the process as we used it only as an exchange reference (and a lousy one at best) and never kept dollars.
Like oil, numerous assets once thought to be non-divisible, non-portable, and non-durable are gaining popularity and being saved in lieu of traditional money such as gold and dollars. REIT REIT
See: Real Estate Investment Trust
REIT
See real estate investment trust (REIT). ETF allows you to “store” real estate around the world and sell in any increment you like, S&P spider ETF allows you to own a piece of America’s 500 largest companies with auto rebalancing Rebalancing
The process of realigning the weightings of one’s portfolio of assets.
Notes:
For instance, if your portfolio’s proportion of stock has grown too large for your planned assets weightings and risk tolerance, you might rebalance by selling some stock and putting . You can own Japan, Banks, Wheat, Motion Picture, anything you desire with transparency, liquidity, and low transaction cost.
Those assets are becoming more appealing as store of value with enhanced trading volume Trading volume
The number of shares transacted every day. As there is a seller for every buyer, one can think of the trading volume as half of the number of shares transacted. That is, if A sells 100 shares to B, the volume is 100 shares. , portability, durability and divisibility di·vis·i·ble
adj.
Capable of being divided, particularly with no remainder: 15 is divisible by 3 and 5.
di·vis .
Fiat currency
Money must be a good store of value by definition.
Fiat manuscript currencies are well-liked at times because they are handy and can be created at will to please the public. Nevertheless fiat money fiat currency (fī`ət, fī`ăt), inconvertible currency that is made legal tender by the decree, or fiat, of the government but that is not covered by a specie reserve. fails the all important “intrinsic value” test, as its value is solely derived from legal tender laws. The compliance of such law rests on the credibility and strength of the issuing authority. As we know government and political factions can rise and fall faster than pop stars in some cases. It’s no shock that no fiat money has ever survived through time, and they can by no means be viable money in spite of of scientific breakthroughs or other human advances.
The worth of a world currency
To recap
What Aristotle described as decent currency 2,000 years previously has not changed, sound money ought to be a fine average of exchange as well as a amass of value. Assets such as oil or land once weren’t considered to be good forms of money due to poor physical or liquidity constraints, have received renewed interest thanks to novel ideas and innovative technology. The internet and various pooled products (ETF) on world markets enabled those once immobile and/or illiquid Illiquid
An skill or security that cannot be transformed into money very rapidly (or near prevailing market prices).
Notes:
A house is a good example of an illiquid asset.
See also: Cash, Liquidity
Illiquid
In the background of economics. goods to be transacted with ease, speed, transparency and low cost amongst world money buyers and sellers.
The position of fiat currency is vanishing. This sunup, I sold Newmont Mining to book a hotel in Hong Kong without owning dollars for long. I don’t own many dollars, oeuros or yuans. Fiat currency carries a heavy percentage for being a good currency but bad store of value. There is no reason to keep any currency without essential cost.
My sight on gold from this development is mixed. On the plus side, gold will crowd out lower fiat currencies at a faster pace. On the minus side, the choices of store of value have expanded vastly, reducing gold’s role to being a fair medium of exchange. Accordingly I don’t see the combination of a $2,000/oz gold price, a crashing stock market and $30/barrel oil. If that happens, I’d be selling gold, storing oil, and paying with oil.