MoneyMoney

What is Money?

• Money is nothing more than a way for people to exchange labor.– Paper money can be thought of as a ticket

entitling the holder to a certain amount of someone else's hard work.

What is Money?

• Money is anything that meets these qualifications:–Money as a medium of

exchange–Money as a unit of account–Money as a store of value

Money as a Medium of Exchange

• Money makes it possible for you to acquire goods and services.

• Anything that can be used to buy goods and services can be considered money.

Money as a Unit of Account

• Money provides the means for comparing the values of goods and services.

Money as a Store of Value

• Money keeps its value, even if you decide to hold on to it for a while.

M1 and M2 Money is measured according to how we use it

Money Measures

• In June 2006, M1 was approximately $1.4 trillion, more than half of which consisted of currency.

• While as much as two-thirds of U.S. currency in circulation may be held outside the United States, all currency held by the public is included in the money supply because it can be spent on goods and services in the U.S. economy.

• M2 was approximately $6.8 trillion and largely consisted of savings deposits.

What makes your money valuable?

• Money Equals Debt. What?–The paper money we use today is

debt, government debt.–The paper money you carry is

nothing more than a governmental promise to pay you back, a promissory note.

• Your money is “Fiat Money” –money that has value because the

government said it does.

Representative Money

–The government used to maintain sufficient amounts of Spanish dollars, gold and silver on deposit to provide collateral for our paper money (in latter days, just gold and silver was held).

One Dollar Silver Certificate

Ten Dollar Gold Certificate

Your money used to say at the top "Silver Certificate or Gold Certificate”. It was redeemable for an actual amount of silver or gold. Other larger denominations were backed with gold as "gold certificates."

Commodity Money

• In earliest times, items that had value and other uses were sometimes used as money - “Commodity Money”.

• Salt, cattle, precious stones have all been used. In this country furs and tobacco were also used as money.

• Commodity money works only in simple economies.