We all know what we can do with money but do we all know how it is made or created? In this post, we try to understand how it is possible that something so "worthless" can actually have such a powerful effect on our lives? And is it possible to create our own money?
Money, money, money
Money is probably the one human invention that has had the most profound impact on our society. It is hard to imagine our lives without ... money.
Money and economics
Money is the lifeblood of our economies. It facilitates the exchange of goods and services and helps in carrying on trade smoothly. The present highly complicated economic system will not exist without money!
Money and finance
Money is the raw material of our present, complex and powerful financial industry which deals with how to deliver money through debts to individuals, companies, or governments and how they then spend or invest that money.
Money and society
Money defines wealth which organizes and divides society, impacts our morality, our status, and our relationships. Money changes us, the way we think, and how we behave or act. Money drives our society, creates opportunities, and is an effective instrument of control and power!
Money and health
Money provides security which is important for our well-being. However, the dogged pursuit of money itself can also become a compulsive and addictive behavior. Money and happiness have an enriching and often conflicting relationship.
Money can increase our short-term happiness by giving us more control over how we spend our time. Tom Rath
Etymology of money
So before explaining how we make something so magically as money, let us have a quick look at the etymology and origin. Money as a concept has a complex history extending beyond written records.
The word, however, refers to a temple on Capitoline, one of Rome's seven hills. The temple of Juno Moneta (literally "Juno the Warner") was the place where the mint of Ancient Rome was located. From this temple, moneta quickly gained the meaning "mint", and soon after extended to "money" in general.
Money does not exist by nature, but by law. Aristotle
Types of money
Through history, we can identify and distinguish three types of money: commodity money, representative money, and fiat money.
Most forms of money throughout human history have been commodity monies that gain their value primarily in virtue of the substance the money is made of, the potential use, or intrinsic beauty. For example, salt, gold, cocoa beans, tobacco, barley, large stones, etc.
Representative money is any medium of exchange, often printed on paper, that represents something of value supporting the face value, but has little or no value of its own (intrinsic value). For example, gold and silver certificates.
Fiat money is any money issued by a government and not backed by any physical commodity. Fiat money obtains its value simply because the government legislates and regulates its use. Most forms of money in modern economies are fiat and have no value in themselves.
Money is the agreement within a community to use something as a medium of exchange. Bernard Lietaer
Definition of money
Today, money can be seen as any item or verifiable record that is generally accepted as payment for goods and services and repayment of debts, in a particular country or socio-economic context. The main functions of money are distinguished as:
a medium of exchange for goods and services
a unit of account to define price and value
a store of value or asset that can be saved
a standard of deferred payment for debt management.
Any item or verifiable record that fulfills these different functions can be considered money. Any money is a social contract and created as a result of a consensus on an alterable game rule or agreement. Consequently, money is a social technology.
Money is a social technology. Felix Martin
How is modern money created?
National money, as a country's standard unit of money, has its origins during the emergence of centralized states and the industrial revolution.
Since then, central banks were granted the rights for the emission of money and held the monopoly. Central banks put money into circulation by lending it to banks and the federal government. The banking and financial system can then multiply the money supply by giving loans to individuals, businesses, or governments (multiplier effect).
A very small part of the money created by banks goes to the production of goods and services (real economy). Today, most money ends up in financial investments and speculation. While the money supply has grown exponentially over time it still is scarce because loans must be paid back with interest. In other words, there is never enough money in circulation to pay off debts and interests.
The interest mechanism also creates important money transfers from people who lack resources (borrowers) to people with financial assets. And given the centralized structure of money creation, the majority of the world's financial wealth and political power is controlled by a powerful few (money trust).
Money makes the world go round, but it is still an enigma.
A new ecosystem of money
Over time we have made our national money system too centralized, complex, volatile, fragile, and less trusty. However, nowadays new forms of complementary, simplified, and interest-free money are being created by the private sector and civil society.
Since money has only value by consensus, we can create that consensus between businesses and consumers, members of civil society, or any group of persons committed to accept that "money" and serve a particular purpose or objective.
New money can be created and administered with appropriate digital and mobile technologies that facilitate transactions, improve safety and help tracking. It can be backed by commodities, loans, national money, or just trust (such as many blockchain currencies).
This is a deep systemic crisis caused by the rift between a casino economics based on monetary speculation and the social and ecological realities of our time. The only answer is to reinvent money. Margrit Kennedy
From money to monei
The nature of money has changed profoundly in the last three centuries. However the human invention "money" is still a social technology, the operating system in which we run our economies.
As money architects we rethink money and write it with the "i" of innovation: "monei". We truly believe in an ecosystem of multiple and sustainable forms of decentralized money that:
Foments exchange of goods and services locally
Avoids interests and speculation
Connects people and strengthens social relationships
Avoids the dogged pursuit and promotes more happiness
However, money can only work properly when people trust its value and the agreement which establishes the value. So let us create "monei" with ideals and values, and look at the positive ways that "monei" can benefit more the most important things in our lives.