What is Money?

WITH OUR GOVERNMENT ISSUING DEBT, AND THE FEDERAL RESERVE PRINTING DOLLARS LIKE TOMORROW DOESN’T MATTER ANYMORE, LET’S GO BACK TO THE BASICS.

It has been said that it’s a means of exchange, it’s a tool to build or destroy, it’s full faith and credit… But let’s go back to the beginning. When humans progressed beyond the hunting and gathering stage of civilization and started planting and harvesting, we quickly learned that we could divide labor and grow, mine, weave, cook, and sharpen independently and provide a higher output than if every family produced all their needed goods for themselves. Then the first exchange happened where someone who was maybe a fisherman, was able to trade some fish for salt, or grains for livestock, or perfume for jewels.

Bartering ran into a wall when goods had a shelf life or there were large amounts of production in reserve. To store larger amounts of wealth, they needed a scarce resource, and precious metals and coins began as the new form of currency. The next problem was security. If your neighbor knows you have a hundred pounds of gold, well, civilization has some bad motivations too. So, storing your gold in a safe, secure place was the best idea. Instead of trading the gold or silver by hand, the banks began just issuing “bank notes” that could be exchanged, and you know most of the rest…

In the end, money was meant as a store of wealth which represented the prosperous production created from the division of labor. It was the profit of specializing in farming, auto mechanics, sewing, baking, teaching, coffee shop ownership, etc. Profit is the main driver in satisfying demand in civilization based on the wants and needs of the citizens. If you provide for others first, you will be provided for in the next transaction when you need a good or service. This is the fundamental understanding in a capitalistic society.

Richard Matthews, CPRC®, CLTC®

Matthews Wealth Management

However, there have been large shifts in how American generations have come to understand what money is. In 1833, Andrew Jackson shut down the 2nd Bank of the US for lack of oversight and transparency, Greenbacks were issued during the Civil War, then the Creature from Jekyll Island established a central bank in 1913. After confidence in the system crashed in 1929, under Executive Order 6102, FDR ultimately had to attempt to confiscate gold to force citizens to live by the US dollar, with unprecedented government spending. However, nothing was more obvious than President Nixon taking the US Dollar off the gold standard, changing from an asset-based currency to a debt-based fiat currency. Then you have Gordon Gecko saying “greed…is good,” followed by effectively ending banks’ prohibition on playing in the casino with your deposited money, with FDIC “insurance.” Thanks Bill and Newt… For the first time in our financial history, we cannot take for granted that the US dollar is really worth what it says it is. As I stated in the opening, it can be a tool to build or destroy.

So, who is surprised that we printed $4 Trillion (that is $4,000,000,000,000) in the year 2020? There were only $15 Trillion in the economy in 2019, so if you define inflation by how many dollars exist, that was 24.3% inflation in one year. Who is wielding this power and is it in line with providing a benefit to the few or the many?

Here is the bottom line, every extra penny that is given to the US Government, to the large banks’ bottom line, to lawsuits, to divorce, to wasteful or wayward spending, to lost buying power due to the effects of inflation, to commissions, fees, or market loss is an extra penny too much. Every extra penny not passed from generation to generation or to church, charity, and community services is an extra penny too much. We’re only 1 in 330 million Americans, but we have power over our finances if we choose to wield it.

From asset management to retirement planning, tax planning, cash flow management, and business finance, Matthews Wealth Management ensures that you are managing your treasure in line with your heart. We take the time to explain as much as you would like to know for complete transparency. You must know the rules to win the game, especially as the rules are changing and can appear to be rigged against you given the nuances of the system.

If you ever have a question or an interest in anything financial, don’t hesitate to set up a no-cost meeting or start up a conversation when you see me around town!

If you ever have a question or an interest in anything financial, don’t hesitate to set up a no-cost meeting or start up a conversation when you see me around town!

Matthews Wealth Management (“MWM”) is a Registered Investment Adviser. Advisory services are only offered to clients or prospective clients where MWM and its representatives are properly licensed or exempt from licensure. All information has been obtained from sources believed to be reliable, but its accuracy is not guaranteed. There is no representation or warranty as to the current accuracy, reliability or completeness of, nor liability for, decisions based on such information and it should not be relied on as such. The information provided is for educational and informational purposes only and does not constitute investment advice and it should not be relied on as such. It should not be considered a solicitation to buy or an offer to sell a security. It does not take into account any investor’s particular investment objectives, strategies, tax status or investment horizon. You should consult your attorney or tax advisor. The views expressed in this commentary are subject to change based on market and other conditions. These documents may contain certain statements that may be deemed forward-looking statements. Please note that any such statements are not guarantees of any future performance and actual results or developments may differ materially from those projected. Any projections, market outlooks, or estimates are based upon certain assumptions and should not be construed as indicative of actual events that will occur.