Money solves a simple problem. If you bake bread and I fix roofs, swapping directly only works when each of us wants what the other has. Money breaks that deadlock: you take it for your work, and trust that someone else will take it for theirs.
So money is really a promise. It is worth something today because you expect it to be accepted tomorrow.
What makes a promise good
Over history people have used shells, salt, gold, silver and paper. The ones that lasted tended to share a few traits:
- Hard to fake. If anyone can make more, the promise weakens.
- Easy to divide and carry. You can pay for something small or large.
- Durable. It does not spoil or rust away.
- Widely accepted. Others will take it too.
One thing to remember
Money is only as good as the trust behind it. The next lesson looks at what happens when that trust bends.
CHECK YOURSELF
pick an answer for each question