Bitcoin has invoked considerable conversation regarding money from many quarters and i am going to start by saying that money and more recently Bitcoin have been a metaphorical black hole in my life, affording both time travel to far and distant futuristic places of wonderment and equally in the early days that feeling of being lost sometimes... This is my own take on money and Bitcoin, which is not meant as a debate, for and against, more so an historic with some analysis. Most of the information is public knowledge and can readily be found on various search engines, and it really matters not, of one’s locality, heritage, upbringing or belief, as we all need a medium of exchange to trade goods and services. The most commonly used in society and the modern world today as we all know is money. Yes, there are others such as gold, and that is for another conversation, although have you recently tried to purchase a car or a house with gold? “Good luck”, and perhaps that is a good enough link as to the merits of a digital currency over a physical one.

Money

Money within society is the most recognised medium of exchange for goods and services and from a political, governmental and banking point of view, money has a number of key functions in our economy, … medium of exchange, unit of account and a store of value.

“We work to live” as the saying goes, working for the majority of our lives to earn a living and regardless of how much our income or we claim to be worth, all of us require money to function and survive, be that individually, part of a family, an employee or company director. From the moment we rise, until the evening comes, we all spend a certain quantity of money for every day goods and services. Money is what everyone in the world recognises as the common medium of exchange and every second and every minute of each day someone, somewhere, is transacting. We send children to school with a couple of pound, a quick glance at our banking app, buying a morning paper, purchasing a bus or train ticket, filling up your car before a journey, not forgetting that habitual morning coffee and then we lunch or dine out, again and again we use money, paying with cash or a credit card with our unique country currency, be that the pound, dollar, euro or chinese yen to pay for our food and drinks. The Weekend comes along and we go shopping, we pay for parking, we pay for groceries and then we pay for the cinema, popcorn and our entertainment etc… Bills need to be paid, the mortgage or rent, the car requires new tyres and little Johnny needs a new pair of shoes, we are spending money, consumed by money and for most, less privileged, worrying about money.

Although most of us do this automatically and instinctively without sparing a single thought to the Government’s role or control over our currency and the Central Banks role in implementing the monetary policy and issuing currency. Answer me this… when have you ever heard anyone in any queue or remember someone going on about their daily routine including lining up and waiting patiently in a bank to be served discussing the history of banks and the role Giovanni Medici played in the fourteenth century?… Or mentioning to the waiter in your favourite restaurant that The Bank of England is one of the World’s oldest banks established in 1694, and that 60% of all foreign currency reserves are held in dollars and more shockingly that in 1910 a quarter of the Worlds worth was held buy just six men who had a complete monopoly over the issuing and creation of American money (Federal Reserve System). Would you also be surprised to learn that today there are perhaps less than ten individuals with possibly half of the wealth on this planet and four of them come from US tech companies.

However, unless studying economics at advanced level or further education as part of an economics degree, working within the banking world or financial services sector, I am not aware of the history of money and more importantly money management being taught in elementary schools? Where money originates, the role governments and central banks play and that fiat money is a financial instrument originating from china in the 11t century. “I thought fiat was a quaint Italian car” I hear some of you saying. Amusing, but whilst i immensely enjoyed studying government and politics from my early teenage years, aided and drawn into the subject by a clever and thought-provoking teacher. I do not remember money being touched upon at all?… Ironic considering the importance money has in our lives.

“Fiat” incidentally is a Latin word, meaning “it shall be or let it be done.”

Additionally, when i use the term “money”, i am referring to “currency”, the cash in our pockets, the notes and coins within our wallet or purse and what is kept in our bank accounts, all is currency.

But how many of us know that currency is not true money?... While money stores intrinsic value within itself, “fiat currency” possesses buying power bestowed upon it by government. Before paper money, there was gold coins and a coin was an improvement over a gold nugget as it held the stamp of the mint which told you how much gold was in that coin and as you were using this as a commodity it was important to know the individual gold coins value. Coins were more transportable, and immediately recognisable, in fact arguably gold worked very well as money and up until recently, 1971, the gold standard existed as a monetary system where a country’s currency or paper moneys value was directly linked to gold.

Thank you for taking the time to read this....  

Michael D Polak is the founder of Tanden Charles International and Bitcoin Advisory Group

www.bitcoinadvisorygroup.co.uk 

Risk Disclaimer: We do not provide investment advice. The information presented is an opinion, and is not purported to be fact. Bitcoin is a volatile instrument and can move quickly in any direction.