In traditional economic textbooks money is defined as a medium of exchange, a store of value, and a unit of account. Now, while these are all fine descriptions of what money can do, this doesn’t really tell us what money exactly is. This might seem to be trivial, but if you really think about, it might help open up a whole new world of possibilities. To bring it down to its most essential nature, money is an agreement within a community to use something as a medium of exchange. Let me say that again: Money is an agreement within a community to use something as a medium of exchange. Being an agreement, this means that money is something we create in our heads. And I mean “our heads” because money can’t exist if only one person believed in it. It would have no value. In the end money is whatever we agree it to be. It’s much like other things human societies create to organize themselves and develop customs. Money falls in the same category as marriage, as political parties, and business contracts. These are things we think up in our heads and then institutionalize via a legal framework. They would have no value without us agreeing upon its value. If money is like other kinds of social agreements, this means that different money systems hold different kinds of values and can motivate people to behave in different ways. Most important of all, money isn’t something that can only be created by a government or a bank. This just happens to be the case most of the time because these are often the systems we are born into, and we don’t figure to question them. Now, we use money to live our lives. And we like to think that we can live our lives according to our values and principles. BUT, if our values and principles are different than the values and principles within our current money system, why would we want to remain constrained by it in order to live our lives? In other words, the question to be asked is “does the money you use hold your values and principles?” THIS is the essential question anybody should ask themselves after they understand what money really is.
