"Money" is just a word. A word we use in America. That is it. Historically the definition of money is the exact same definition as for the word "currency."

But that is not going to cut it anymore.

We need to separate these two words. And once you do, everything becomes really really clear.

First of all, currencies arise naturally. No need for government.

Primitive people trade, and one day someone notices that people always need beans. Everywhere they go, people tend to need beans.

So you start saving beans up. They are useful for trading for several reasons.

Soon other people realize this too and everyone is saving up beans and trading beans.

Beans are now more useful as a 'currency' than as a food-source.

But let's not call beans 'money'.

No. Lets save that word.

So God is the perfect thing for a currency. Gold doesn't rot. Gold is divisible. Gold is rare.

So gold has always been valuable, not because aliens want it, but because societies need a currency.

But all currencies are PHYSICAL. And people have to lug them around.

So tough guys started making Banks. Everyone stores their currency in their. The bank issues redeemable notes. And then people trade the paper bank notes.

So... are the paper bank notes 'Money'?

No. Still currency. Bank notes=currency.

And then a govt takes control. And they decide they want to make...

AN ARTIFICIAL CURRENCY.

So they make a point system. And they put these points into 'accounts'. And they create a currency based on these points. (cash)

The sum of the cash and the points = money.

And people trade ownership of the points and the cash. And that is how all human activity is regulated.

So why is this important? Because people talk about the value of things in terms of Money.

They say... that house is WORTH a million dollars.

But guess what? It is not actually million dollars.

A dollar is our version of a 'point'. And it doesn't matter how much wealth you have. Houses and cars and diamonds or even gold. You need to own some of these points to trade effectively in our society.

So money is not gold. Money is not time. And money is not debt!

If you owe me a pound of gold. And I have a contract saying that you owe me that pound of gold...

I don't own any money. I just have a contract. And you don't have any money either. You have debt. But no money.

And if I want money, then I have to find someone WHO OWNS SOME MONEY... and see if he will trade me some of his money for my stupid contract.

Once again... why is this important?

Because people are always talking about the billions/trillions of dollars that banks have. And then they will say something like, "but they only have this much cash"

Ummm... yeah. Actually owning money is important. All these inflated numbers of net worth are meaningless.

I could owe you a million dollars. And you could owe me a million dollars. But what if there is only a thousand dollars in existence? This concept is actually pretty important.