 What is money? It is common to hear that money is the root of all evil. We are told that money is synonymous with greed, and that desiring it is somehow inherently bad. This is not true. Money is perhaps the single most important creation in the history of mankind. Just take a moment to consider a world without it. Think about all the things in your life that you enjoy. A house, a cell phone, a book, a new computer game, new clothes, car, a meal at your favorite restaurant. How many of these things could you provide for yourself? Luckily, thanks to money, you don't have to. Instead, you can specialize in doing a specific task. Maybe you play music, or build surfboards, or repair cars. And then you use the money you earn to buy products or services from others. This wasn't always the case. Before money, peaceful societies used a system called barter, exchanging one object for another. Imagine Bob has a fish, and Tom has clean water. The two could trade with each other. But what if Tom doesn't like fish? In order to get the desired water, Bob could trade with someone else for something Tom wants. This is called indirect exchange. In the different societies, there were certain items that everyone wanted. These made up the earliest forms of money. Throughout human history, all sorts of things have been used as money, such as salt, tobacco, grain, seashells, livestock, or furs. Over time, societies ended up embracing some form of metal, such as gold and silver, as their preferred form of currency. Why is this? Many societies value these shiny metals as jewelry, luxuries, and for industrial use. But they also have many other benefits. Metals are hard to destroy. They are uniform and divisible. Any two ounces of pure gold are the same. And they are easy to carry around if turned into coins. They are also scarce and difficult to mine, so you can't manufacture new money as if it grew on trees. It was the invention of money that truly allowed human civilization to thrive, because you could now buy things without having to make them yourself. This brought freedom and choice to people, a choice for a real livelihood instead of simply living hand to mouth. You could now be a farmer, a seamstress, a sea captain, pirate, or tradesman. This specialization, called the Division of Labor, allowed people to become more learned and skilled, and to produce more complex and useful things, improving the quality of life for everyone. Money also made it easier to save for the future. By saving some of the money they earned for doing tasks, people are able to purchase larger and more complex items, like a new house. Of course, when people began to have savings, they wanted new ways to protect their money. This gave way to banks, where you could deposit your coins with someone who would keep them safe, in exchange for paper receipts that you could redeem when you wanted to get them back. The paper bank notes themselves became a form of money, since you could exchange them with others who could then go and claim the gold you promised them. In fact, many of the names for currencies today are derived from this system. The name dollar, for example, was Spanish for a weight of gold. The way Bob earns money is by producing goods or services that others want to exchange for. Once societies began using paper, it was easy for governments to print new money, even if they had not collected any gold to redeem with a paper bank notes. Throughout history, this has been a popular way for governments to generate new money because it was easier than other options, such as collecting taxes. Although this was good for politicians, it was bad for the rest of us, as our money lost its value. This is called inflation. During the 20th century, we saw governments completely take over money. In America, you used to be able to exchange dollars for gold, a system called the gold standard. In 1913, America created a central bank, the Federal Reserve, which began creating new dollars without new gold. In 1933, President Franklin Roosevelt made it illegal to own gold. In 1971, President Richard Nixon stopped exchanging dollars for gold with other countries. And after that, there was nothing of value left backing the American dollar. The result? 100 years before the founding of the Fed, the price of gold was $19.39. 100 years after the Fed, the price of gold was $1,204.50. Why did this happen? With the monopoly to create money, the government has been able to finance massive wars and government programs. All of this has come at the expense of the value of our currency and your savings.