Money and the value of things

Money and the value of things

Sometimes they ask me the question:

What is money and what gives value to things?

I will briefly tell you that money, which is something common for everyone, is elusive and therefore not so simple to define.

A simplistic way of doing so, would be to say that money replaced barter by creating an agreement of equivalence of goods to be exchanged.

That is to say: A cow is equivalent to how many hens, how many lettuces …?

And therefore is a means of exchange.

There is a well-known story that well exemplifies the ethereal of money:

In a small town where everyone is in debt, a foreign customer arrives with money at a hotel and pays with a 100 euro bill and goes up to his room.

The owner of the hotel takes the bill and runs to pay the butcher the 100 he owes him for a delivery to his restaurant.

Upon receiving the bill, the butcher runs to pay the 100 he owes the farmer who provides the animals.

The peasant with the bill in hand runs to pay his debt to the prostitute, who upon receiving the bill runs to pay her debt of 100 euros with the owner of the hotel for the use of room with her customers.

In that the foreigner comes down, he asks that he be reimbursed because he does not like his room and he takes his bill and leaves …

In certain cases like yours and mine, a backup is required, but definitely not our own endorsement.

That is, I can issue a check to make a payment, but that check has no value, if there is not a bank account with funds to back it up.

In other cases like the US Federal Reserve, they do not require this support to generate new money and make any payments, they simply generate that money without needing a reserve of gold or silver for example.

In the modern world money (which no longer has an endorsement in goods like gold as it had formerly) is defined as exchange paper money.

Of course this is already changing with the era of electronic money, in which case we talk about transactions through electronic means.

But returning to paper money as exchange, there are those who argue with right reason that a note of change is a paper currency and that what it produces is a debt and not an exchange, and is not part of a monetary economy, but a credit economy.

So we speak of exchange paper for final payment (there is no debt).

Taking these factors into account, the Italian economist professor Augusto Graziano spoke in his book “The theory of the monetary circuit”, before the advent of electronic transactions, that money is fundamentally the promise of a bank to its customers and a monetary payment is the transfer of that promise from one client to another.

Therefore, in a monetary transaction are involved at least three parties, the seller, the buyer and the bank.

Now talking about the value of things.

Who determines the value of things?

For me there are two values, one commercial and the other the personal.

The first is the value that the owner or manufacturer gives to his merchandise or service.

For example, two shirts of the same quality can have diametrically opposed prices.

That price is put by its manufacturers and the article acquires that commercial real value when there are consumers willing to acquire it, hence the so-called brands, with exorbitant prices.

On the other hand, we have the value that we individually give to things and which is based on the person, his needs, the place and the whole context that surrounds it.

For example, a person can have an immense pool in their house and that can be very valuable commercially, however, if that person is in the middle of the desert all dehydrated, a glass with water is much more valuable.

It is not the same if I have a large refrigerator in my kitchen in a big city, than a small refrigerator in a small town in the middle of nowhere.

During the Second World War, people with diamonds and gold exchanged them for food.

Diamonds can not be eaten and for survival food is paramount and third in the scale of the human’s essential needs, after breathing and drinking.

There is also the sentimental value. For example, a grandmother’s jewelry has a lot of sentimental value and we are not willing to get rid of it for any sum.

That same jewelry in a pawn shop would be paid with a price even below the commercial value, because for the lender the value of the same object is very different.

One of the factors that gives value to things, is precisely the scarcity. But everything is relative.

There are things that are scarce and not valuable.

For example, they say that Iceland is one of the places where pollution is scarce and I assure you that does not make pollution valuable, but the place.

I remember being a boy, when the first Star Wars movie came out and they sold figures of the characters, R2D2 the robot was one of the most quoted, because everyone wanted to have one.

The figure that did not have much value was the one of Obi-Wan Kenobi, the old Jedi master that few understood at that time.

As children, no one wanted to play with the old character. It was even mockery.

For the same reason, they made a few of that character.

Now that character, the first one they pulled that was not even worth $ 3USD is auctioned in thousands of dollars. Time gave him worth. And simultaneously, time is the most valuable thing we have.

That is why it is a great time for us to take the reins of our destiny and determine our own value, to invest in ourselves and grow.

It is important to continue learning. Read books like Napoleon Hill’s “Think and Grow Rich” and many more.

Do not depreciate or despise yourself. It is a question of attitude.

My value, doesn’t come from what I own, but from who I am!