Q: What is Money?
A: Money is a unit of measurement. Money is used to measure the value of goods and services.

Imagine a world where there are only 2 people, An apple farmer and an orange farmer.

• The apple farmer grows 30 apples
• The orange farmer grows 30 oranges

Assuming that both the apple farmer and the orange farmer wanted equal numbers of apples and oranges (ie. 15 apples and 15 oranges each), then the apple farmer would trade 15 apples for 15 oranges vice versa. This simple trade is effectively a form of bartering.

In the above example, 1 apple equals to 1 orange. Now let’s introduce a carpenter who makes 1 ladder and assume 1 ladder equals to 30 apples. If the carpenter wanted 15 apples, the carpenter would be unable give 1/2 of his ladder for the 15 apples.

Money was introduced to allow the flow of goods and services between two people/parties. If the apple farmer, the orange farmer and carpenter decide to introduce a form of money, and each of them starts with 30 stones and each stone can buy 1 apple (i.e. the economy has 90 stones to allow goods and services to flow).

The stones (the money), is effectively a measurement of value. Think of it as an I owe you.

Now we have the following scenario:

Say:

• The apple farmer wants 1 ladder
• The orange farmer want 10 apples
• The carpenter wants 5 apples and 5 oranges

Then we would end up with:

We can see in this example that everybody still has the same “value” (networth), the only difference is that they are now in possession of the items that they want.

So to re-iterate what is money, hopefully you can start to understand that money is merely a unit of measurement.

Think about it, which would you rather have?

• the stones, or
• the apples, oranges or ladder