Where does today’s money come from?

Posted on Posted in Business Tips, Interesting

I’m not talking about historical money right now, though that is an interesting tale! For now I am just looking at where today’s money comes from.

rands+mandela+randelas

The money in your pocket.
The money owing on your bond.

 

Okay, you worked for it.
Or you borrowed it.

 

But where did it come from?

 

Yes, your employer.
The bank.

But before that?

 

It was created out of nothing.

 

Once it was backed by gold, but no longer. So, once you could exchange a dollar for a certain amount of ‘real money’ – gold. But now it is literally just paper and coins. Or more likely, figures on a computer screen. (Only something like 2-3% of America’s money is in notes and coins, the rest is listed on computers)

 

So modern money is pretty well worthless – unless everyone agrees to treat it as if it is worth something!

 

Think about it – you wouldn’t accept money in payment for your work unless you knew that you could use it to buy something real. Groceries. A house. A Car.

 

That means money is really created out of trust.

 

And trust is created by human relationships and societies.

 

If you think about it, trust isn’t just what makes money work: it’s also what makes the economy work. You can only conduct business if you are confident of having a market; getting paid; the protection of the law for your property. Things that make you confident about today – and the future.

 

It’s interesting. We may not think of these times as being times of great trust. But without trust, nobody would put in the time and the effort and there would be no society as we know it.