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What Is Money I: Introduction - Lifestyle Articles - Love Ambassadors Ministries

WHAT IS MONEY I: Introduction

Source: Investopedia.com

Everyone uses money! We all want it, some of us work for it and think about it all the time. If you don’t know what money is, you are like most humans.

However, the talk of defining what money is, where it comes from and what it’s worth belongs to those who dedicate themselves to the discipline of economics.

While the creation and growth of money seems somewhat intangible, money is the way we get the things we need and want naturally. Here we look at the multifaceted characteristics of money.

Trade By Barter And The Problems With It

Before the development of a medium of exchange, people would barter to obtain the goods and services they needed. This is basically how it worked: two individuals each possessing a commodity the other wanted or needed would enter into an agreement to trade their goods.

This early form of barter, however does not provide the transferability and divisibility that makes trading efficient. For instance, if you have cows but need bananas, you must find someone who not only has bananas but also the desire for meat.

What if you find someone who has the need for meat but no bananas and can only offer you bunnies? To get your meat, he or she must find someone who has bananas and wants bunnies...

The lack of transferability of bartering for goods, as you can see is tiring, confusing and inefficient.

But that is not where the problems end: even if you find someone with whom to trade meat for bananas, you may not think a bunch of them is worth a whole cow. You would then have to devise a way to divide your cow (a messy business) and determine how many bananas you are willing to take for certain parts of your cow.