Money is something that functions as both a store of value and medium of exchange

Classic Money Definition:

For something to me money, it must be all of the following:

Historical Examples of Money

  • Cattle, Salt, Sea Shells, Cigarettes

Asset Vs. Money Trap

  • Humans fall into the trap of thinking that the price of an asset is the same as money
    • A promise to pay is not money
    • Equity Values (stock market prices) are not money
    • We really own claims, promises and debt.  They are only valuable as long as someone else is willing to buy them from us
  • Example: Bank Deposits, Treasuries, etc are not money - they are a promise to be repaid money

Dishonest Money

Gold as Money

  • There are many reasons why gold is great for money
  • Aristotle defined 5 reasons why gold is money (classical reasons that gold is money)
    • DURABLE:  It should be indestructible and not fall apart easily
    • DIVISIBLE:  It should be able to be converted to smaller and larger pieces without losing value
    • CONSISTENT:  It always looks the same so it is easy to recognize
    • CONVENIENT:  It is portable and packs lots of value into a small object
    • INTRINSIC VALUE:  It must be something people want or can use

Famous Investor's Thoughts on Money: