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What is money? And why are we so goddamn obsessed with it?

Updated: May 18


“A con! You want to con people!” George gasped.

“What do you think money is, huh? I’ll tell you what it is. It’s a piece of paper that’s not even big enough to wipe your ass. Yet banks and governments have everyone believing it can be exchanged for goods and services. Isn’t that a con? By your own definition?” Raymond argued.

“No, it isn’t,”

“Yes, it is. Only you don’t see it because you’ve taken it as a fait accompli.”

Readers of Dead Money might know this scene where Raymond Li, one of the principal characters, is trying to justify his scam: a fictitious currency called Afterlife Dollars. Raymond is no doubt a smooth-talking scoundrel who can rationalise just about anything but is there a grain of truth in what he’s saying?

Let’s begin by looking at how money is created these days. Say you need $100k to buy a house and borrow the sum from a bank. This money doesn’t come from the its deposit reserves. Rather when your loan’s approved, someone taps a computer key and lo and behold, $100k appears in the system. It’s then transferred to the seller, who might decide to splash out to a brand new car or gadget and that’s how this money enters the economy.

So if money is created purely by debt, hoe does it derive its value? When we were trading in only coins, that was an easy question to answer. It was from the metal the coin was minted from: gold, copper, silver or nickel. For a long time, paper money was exchangeable for gold. While that imparted value, it also meant the amount of currency that could be printed by a country was limited by its reserves of the precious metal. As economies grew and there was demand for money to pay for goods and services, the gold standard was dropped. Today governments and banks can print money, unconstrained by anything, except perhaps inflation.

So today if money can’t be exchanged for gold or any other commodity, what is its intrinsic worth? Short answer. Nothing. The cafe owner accepts your cash in exchange for a latte because he knows he can then use it to buy coffee beans. The guy who sells coffee beans accepts it because he can pay the farmer. On one count, Raymond was right. The system works because we’ve all collectively bought into it. Without this, a currency note, as he so eloquently put it, is just a piece of paper that’s not even big enough to sanitise your bottom.

Shocked to know this? I certainly was. It seems in a quest to create more and more money, we’ve stripped it of all value. Today there’s close to $90 trillion in circulation—$1.2 quadrillion if you include investments, derivatives and cryptocurrencies. Yet all of it is innately worthless.

In my mind, it raised an important philosophical question. If money’s value is purely perceived and not real, why are we so obsessed with it? Why is having enough simply not enough for some and why does it cause us to do terrible things to one another?

In my opinion, it’s all down to psychology. At a very basic level, money is a survival necessity, like air or water. We get out of bed every morning and go to work so we can pay our bills and feed our families. Money is also reward for effort. If I’ve spent ten years writing a book, I feel good when lots of people buy it. Equally, I feel disappointed when I don’t sell many copies. I start wondering: is the book good enough and by extension, am I. Now my self-image is tied to my earnings and I need to keep selling more to feel good about myself.

In other words, all actions with seemingly pecuniary motives are often driven by other factors. When a bargain hunter is pleased about scoring a good deal, it’s not because he’s saved a few pennies. It’s because he feels superior to someone who’s paid full price for the same item. When a Mafiosi dresses a debt defaulter in cement shoes, it’s not because he’s financially worse off. It’s punishment for disrespect. When families squabble over an inheritance, it’s not just about about money. It’s ego.

This is why we’re attached to money even thought it has no innate value. Because it satisfies deep-seated emotional needs. Or does it? If I need to earn pots and pots of money to feel good about myself or satisfy my competitive instincts, where do I stop? Because no matter how much I earn, the feeling of inadequacy might not go away, and even when I’ve got millions stashed away in Bahamas, there’s always someone who’s got more than me. If I’m driven by a fear of poverty—maybe because I’ve experienced it at some point—I may never feel completely secure, no matter how much I earn. In each of these instances, I’m a prisoner of a narcissistic thought process that makes me chase my own unattainable goals at great cost—to myself and others.

So does that make money the root of all evil? Far from it. Money is an inanimate object. It doesn’t have the power to define our self-esteem or prevail upon us to commit a crime. That decision is made by our minds. In other words, it’s not money. It’s us. We have the power to define our relationship with money. If it’s having a detrimental effect on us or others, we can tell ourselves that while money is important, it has no intrinsic worth. And there are other things that are far more valuable even if we can’t put a dollar figure on them.

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