Classification of money

Money is something that is usually accepted as payment for goods and services In economics, financial yield is divided into physical goods and intangible services. Use of goods and services is understood to create utility (unless the “good” is a “bad”). It is often used when referring to a Goods and Services Tax. and repayment of debts. The key uses of money are as a means of exchange, a unit of account, and a store of value.

Aristotle on good money

Aristotle (384 BC – 322 BC) was a Greek truth-seeker, a student of Plato and educator of Alexander the Great. Aristotle discovered, formulated, and analyzed the problem of commensurability com·men·su·ra·ble
adj.
1. Measurable by a ordinary standard.

2. Proportionate; balanced.

3. Mathematics Precisely detachable by the same component an integral number of times. Used of two quantities. . He thought how ratios intended for a just exchange of heterogeneous things could be set. He searched for a theory that makes it promising to equate what is seemingly unequal and non-comparable.


Aristotle says that currency, as a common measure of all, makes things commensurable com·men·su·ra·ble
adj.
1. Measurable by a common standard.

2. Commensurate; balanced.

3. Mathematics Exactly divisible by the same unit an integral number of times. Used of two quantities. and makes it possible to equalize e·qual·ize
v. e·qual·ized, e·qual·iz·ing, e·qual·iz·es

v.tr.
1. To make equal: equalized the responsibilities of the staff members.

2. To create uniform. them. He states that it is in the form of money, a substance that has a telos (purpose), that individuals have devised a element that supplies a gauge on the foundation of which just substitute can take place. Aristotle thus maintains that everything can be expressed in the widespread equivalent of money. He explains that currency was introduced to please the obligation that all stuff exchanged must be equivalent in some way.

Within such frame work, Aristotle defined the characteristics of a good form of money:

1.) It must be durable. Money must stand the test of time and the elements. It must not fade, corrode cor·rode
v. cor·rod·ed, cor·rod·ing, cor·rodes

v.tr.
1. To wipe out a metal or alloy slowly, particularly by corrosion or chemical action: acid corroding metal. , or change through time.

2.) It must be moveable. Money holds a great amount of ‘worth’ relative to its mass and bulk.

3.) It must be divisible DIVISIBLE. The defenselessness of being divided.

2. A contract cannot, in general, be divided in such a manner that an action may be brought, or a right accrue, on a part of it. 2 Penna. R. 454.

4.) It must have built-in value Intrinsic Value

1. The value of a company or an talent based on an underlying perception of the worth.

2. For call options, this is the difference between the underlying stock’s price and the strike price. . This value of money should be independent of any other object and contained in the money itself.

Money, 1,000 years ago

Simply humans satisfactorily solved commensurability with the idea and practice of currency. All through the past, we have seen the adaptation of numerous forms of currency. Here are some examples with relative merits denoted.

One couldn’t treat oil as money since it was not exactly durable and portable. Neither could one use a business (such as a restaurant) as money since it is hardly divisible and ever lasting. Gold has been the choice of money for over 5,000 years because it is valuable, durable, divisible and relatively portable.

Trading possessions on paper

A thousand years ago, the rights entitlement of a land parcel or a business is merely a piece of paper for decorative purpose and a registry for the tax collector. The oldest existing stock certificate was issued in 1606 for a Dutch company (Vereinigte Oostindische Compaignie) seeking to profit from the spice trade to India and Far East. Though very profitable in its day, when the company was dissolved in 1799, it was some 10 million Dutch guilders in debt.

American Stock exchanges This is a list of American stock exchanges. Stock exchanges in Latin America (where Spanish and Portuguese prevail) use the term Bolsa de Valores, meaning ‘bag’ or ‘purse’ of ‘values’. were introduced in the early 18th century and weren’t prominent until the 19th century, where we saw globalization globalization

Procedure by which the experience of everyday life, marked by the diffusion of commodities and ideas, is becoming standardized around the world. Factors that have contributed to globalization include increasingly sophisticated communications and transportation

Of, linked to, or being debt securities that are secured with assets. For instance, mortgage purchase bonds are secured by mortgages that have been purchased with the bond issue’s earnings. and owned by world citizens. Title certificates to commodities stored around the planet are changing hands esteemed in the hundreds of billions on various commodity exchanges.

Money, today

Oil, which has always approved built-in value but tricky to amass and exchange for other goods, all of a sudden becomes a practical medium of exchange and store of value through the advent of Oil ETF ETF

See Exchange Traded Fund.

ETF

See exchange-traded fund (ETF). . Oil is stored in a warehouse and your digital ownership certificate is tucked safely in your brokerage account Brokerage Account

An arrangement linking an investor and a licensed brokerage firm that allows the investor to deposit funds with the firm and place investment orders through the brokerage, which then carries out the transactions on the investor’s behalf. , which you can practically instantly exchange for anything else you want, whether it be Microsoft, gold, wheat, air ticket, hotel room, for less than 1% of commission. Granted, we rely on dollars to calculate the exchange ratios but the role of dollars has diminished greatly in the process as we used it only as an exchange reference (and a lousy one at best) and never kept dollars.

Like oil, numerous assets once thought to be non-divisible, non-portable, and non-durable are gaining popularity and being saved in lieu of traditional money such as gold and dollars. REIT REIT

See: Real Estate Investment Trust

REIT

See real estate investment trust (REIT). ETF allows you to “store” real estate around the world and sell in any increment you like, S&P spider ETF allows you to own a piece of America’s 500 largest companies with auto rebalancing Rebalancing

The process of realigning the weightings of one’s portfolio of assets.

Notes:
For example, if your portfolio’s proportion of stock has grown too large for your intended assets weightings and risk tolerance, you might rebalance by selling some stock and putting . You can own Japan, Banks, Wheat, Motion Picture, anything you desire with transparency, liquidity, and low transaction cost.

Those assets are becoming more appealing as store of value with enhanced trading volume Trading volume

The number of shares transacted every day. As there is a seller for every buyer, one can think of the trading volume as half of the number of shares transacted. That is, if A sells 100 shares to B, the volume is 100 shares. , portability, durability and divisibility di·vis·i·ble
adj.
Capable of being divided, mainly with no remainder: 15 is divisible by 3 and 5.

di·vis .

Fiat currency

Money must be a good store of value by definition.

Fiat paper currencies are popular at times since they are handy and can be shaped at will to satisfy the public. Nevertheless fiat money fiat money (f?`?t, f?`?t), inconvertible currency that is made legal tender by the decree, or fiat, of the government but that is not covered by a specie reserve. fails the all important “intrinsic value” test, as its value is solely derived from legal tender laws. The compliance of such law rests on the credibility and strength of the issuing authority. As we know administration and political factions can go up and plummet faster than pop stars in some cases. It’s no surprise that no fiat money has ever survived through generation, and they can never be feasible money despite of technical breakthroughs or other human advances.

The worth of a world currency

To recap

What Aristotle described as decent currency 2,000 years ago has not changed, firm money must be a fine average of exchange as well as a store of value. Assets such as oil or land once weren’t considered to be good forms of money due to poor physical or liquidity constraints, have received renewed interest thanks to novel ideas and innovative technology. The internet and various pooled products (ETF) on world markets enabled those once immobile and/or illiquid Illiquid

An asset or security that cannot be converted into cash very quickly (or near prevailing market prices).

Notes:
A house is a good example of an illiquid asset.
See also: Cash, Liquidity

Illiquid

In the context of finance. goods to be transacted with ease, speed, transparency and low cost amongst world money buyers and sellers.

The role of fiat currency is vanishing. This sunup, I sold Newmont Mining to book a hotel in Hong Kong without owning dollars for long. I don’t own many dollars, oeuros or yuans. Fiat money carries a immense percentage for being a good legal tender however bad store of value. There is no grounds to keep any currency without inherent value.

My observation on gold from this evolution is mixed. On the plus side, gold will crowd out inferior fiat currencies at a quicker pace. On the minus side, the choices of store of value have expanded vastly, reducing gold’s role to being a fair medium of exchange. Therefore I don’t see the combination of a $2,000/oz gold price, a crashing stock market and $30/barrel oil. If that happens, I’d be selling gold, storing oil, and paying with oil.

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