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What is money?
Welcome! We're glad you're here and ready to start taking control of your financial life. Well, you can't do that until you get cozy with one concept: money.
You know what money is — it's the stuff in your pockets or purse that lets you buy things. But let's go back a little further to a time when money didn't exist. There was no money. Hard to imagine, we know — how did people buy their Xboxes?
Instead of cash or credit cards, people used cows and crops to buy things. In a farm society, one guy was growing grapes and another guy was growing strawberries.
So they were figuring out how to interact with each other, and they decided five grapes equals one strawberry. So they traded. The guy who had grapes could get some strawberries and the guy who had strawberries could get some grapes.
Then the baker came over with a loaf of bread, and he asked, "What can I get for this?" And he traded a loaf for, let's say, 20 strawberries. Then farmers had bread and bakers had fruit. Everyone was happy — all they needed was the peanut butter guy and they had sandwiches for life.
The problem came when Tommy came out of the Wild West with his cow. "What would you give me for this cow?" he asks.
Hmmm, quite a predicament — the farmers want to get a cow because they're tired of living on just sandwiches. The baker says, "Well I can't give you 1,000 loaves of bread." And the farmer says, "And I can't give you 20,000 strawberries." So the only solution was an objective measure everyone could work with: money.
And so coins and basic money were created as a way to facilitate trading. Money is an easy way to communicate value in terms of what goods are worth. Well, the idea stuck, all the way up to the money you used to buy your Xbox.
Three Facts to Wow Your Friends at a Party
1) The average $10 bill has a lifespan of only one and a half years, according to the Fed. The average $100 bill, however, lasts more than seven years.
2) Money isn't actually made of paper — it's 75 percent cotton and 25 percent linen.
3) Between two money-printing centers — in Fort Worth, Texas, and Washington, D.C. — the Bureau of Engraving and Printing goes through 18 tons of ink per day.
Case Study When Money Grew on Trees
The Mayans didn't have $100 bills to throw around like our stars do today, but they also wanted to buy and sell things. So instead of using Benjamins, the Mayans used cacao beans as their standard form of currency.
That's right: chocolate. Talk about a sweet return on your investment.
It just goes to show how important money has been to civilization — we've always needed a way to obtain the things we want. And trading one product for another just gets too complicated if one person is trying to swap livestock while another is using flour.
But can you imagine if we used cacao beans for money today? Everyone would grow them in their backyards and we'd all be set.
Well, not quite. You see, there's a reason the government is in charge of printing the money that's in our wallets and purses. If there's too much of it out there, it starts to lose its value. And that's when you get inflation.
So the government makes all of our money, which sounds like a great idea. They standardize it and they regulate how much will be in circulation, and it's all good, right? Except the Feds have made some pretty strange decisions when it comes to actually creating money.
Take the two-dollar bill, for example. The government doesn't make a lot of them, and that's led some people to believe they actually don't exist.
Surprise! They do, and they're being printed as we speak. And yet some people haven't been allowed to pay for their groceries with a two-dollar bill because the clerk didn't think it was real.
Then you have the whole "dollar coin" fiasco. Figuring that one-dollar bills were a thing of the past, the government decided to issue coins worth 100 cents. Très European, no?
Anyway, first came 1979's ill-fated Susan B. Anthony coin, which people dubbed the "Susan B. Edsel." Ouch. Then came 2000's brass-coated Sacagawea dollar — unfortunately, the brass coating started to rub off pretty easily. Who wants a coin that gets all smudged and raggedy looking (and could almost be mistaken for a quarter)?
At least give the Feds credit for trying. Besides, they have bigger problems to deal with: The new $20 bill is already starting to get rejected by certain places because it "looks fake."
Oh, to go back to the days of the cacao beans...
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