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The Two Essential Facts About Money

There are two fundamental facts about money that everyone should thoroughly understand. The first everyone knows, but few understand its implications. The second is just as essential but is understood and appreciated by almost no one.

The First Fact. Money is the most important thing in the world.

The Second Fact. Money is trash.

Both of those statements require qualification, but both are essential, however paradoxical that may appear. Money is important only because of its enormous power; other things, such as human relationships, are arguably much more important essentially, but the power of money touches everything that we do. Unfortunately, its power tempts many to put it ahead of all else, including love and ethics.

Calling money trash is not to pronounce some pious moralistic platitude to which we can gravely nod our heads and promptly forget; the paradox is not resolved that way. We can say money is trash because it is valuable not for what it is but for what it represents. Much money has no physical existence at all—not even pieces of paper. It may be only spreadsheet entries in a computer program; before computers it would be marks in a ledger. Forgetting this fact can create enormous misunderstanding.

Both facts are capable of creating much mischief. Let us look at them one at a time.

Money Is Immensely Important. The textbooks will tell you that money fulfills three basic functions: Primarily it is a medium of exchange. It is also a unit of account. That just means that it is the yardstick we use to measure the value of things. Finally, it is a store of value, which means that it a good way to accumulate wealth. People just love this last attribute, but it is how money can cause so much trouble.

The second two functions derive from the first. That word “exchange” is significant. It implies that we all produce something of value which we can exchange for things and services that others produce and we need. Money can do this because, since everybody wants it, it can be exchanged for just about anything. It does not take a genius to realize that if one can figure out how to skip the “produce something of value” part and just acquire lots of money one can avoid that tedious business called work. So we dream of buried treasure, striking it rich, finding that vein of gold, or winning the lottery. We lust for wealth, that last function of money.

St. Paul was not the first nor the last to observe that there is something unhealthy about such lust. We are apt to think of wealth as the ability to have lots and lots of stuff, but to the wealthy wealth is power. It is the control of the resources needed for economic production, which bestows the coveted status of troll or super-troll. To be wealthy is the ability to take without the necessity to give.

Money and its power are complex and fascinating subjects, but mostly beyond the scope of this short summary. It is the subject of numerous books, the best of which (albeit somewhat dated) is probably Galbraith's Money: Whence It Came, Where It Went. There is also an interesting, if somewhat contentious, video called “Money As Debt”.

But you do need to understand why money is trash as well. Failure to understand this essential fact misleads us in exceedingly mischievous ways.

[Next: Money As Trash.]