Money and the stored value of trade

Yesterday I published a quick post on my changing perception of money. I got several emails about that post, including one I wanted to share. Darren Meyer kindly gave me permission to re-print his message here.

“You ask if money ‘as you’ve always understood it’ even exists anymore. I wonder if your understanding of what money is has been flawed for some time — I know mine was until I became friends with an economic historian.

Money is, simply put, a method for storing the value of a trade. If you barter, no money is needed, because you just trade directly. However, if you have pigs to give away but don’t immediately need anything, the buyer can give you something of more universal value in your culture — originally, this would have been precious metal, or rare stones, or rare shells, etc.

Those objects represented a *concept*: that there was value in the pigs, even though you no longer have them. You can then use that money to transfer the value of your pigs to someone else, usually in exchange for something you would have traded before.

Now that money is less and less tied to the object, it’s becoming clearer to people that money is just conceptual value; now it’s debits and credits in a ledger that’s universally accessible and  highly trusted instead of physical objects is all.”

A great perspective and interesting that money is, in a way, reverting to that old definition, in that the objects — coins and bills — are less necessary.