Name: Money: Humanity's Biggest Illusion
Uploaded: 2025-01-02T01:18:45.000Z
Duration: 17 min 53 s
Description: Thousands of YouTube videos with English-Chinese subtitles! Now you can learn to understand native speakers, expand your vocabulary, and improve your pronunciation...

The second conditional

If I asked you the question, what is man's greatest invention, what would your answer be?

Transition words & phrases

Would it be fire, because it gives us warmth, protection, and the ability to cook our meals?

Or perhaps you would pick the wheel, because it's the driving force behind the beginnings of trade, commerce, and travel.

While both of these are excellent choices, most of the time when we think about the greatest ones of all, it's money.

But unlike man's other great inventions, money is immaterial.

Maybe that's why we don't often think of it in the same breath as some of the other great inventions.

Things like fire and the wheel are tangible.

Money is merely an idea, an illusion whose value is non-existent, only determined by the importance we place on it.

However, the fact that money is an illusion does not in any way undermine its importance.

Before we created money, we were forced to trade goods and services directly in what we refer to as the barter system.

People exchanging goods and services for other goods and services in return.

Because there was no arbitrary value placed on these items, every single trade was determined by what each party was willing to give up for something that they wanted.

If I wanted some of your vegetables for dinner but I only reared cattle, I would have to give you one of my animals in exchange for a bag of vegetables.

If I wanted shoes to wear but I only made tents, I would have had to give you an entire tent in exchange for a pair of shoes.

And immediately you can already see one of the major problems with this system of trade.

As a tent maker, there's no way I wouldn't feel cheated having to exchange an entire living space for simple footwear.

Because there was no standardized medium of exchange, it was very difficult to get two people who needed things from each other to come to an agreement.

Having to wait until a double coincidence of once where two people need the exact opposite thing at the same time was also very difficult and inefficient.

You see, our money is not only a medium of exchange, it's also considered a store of value.

And before the invention of money, some people could never store their wealth for no fault of their own.

Think about the farmer who sells tomatoes and the man who makes tents.

The man who makes tents can create an entire village of real estate and barter it out with anyone who needs a place to rest their head all year long.

But the farmer who sells tomatoes can only barter when tomatoes are in season.

And because tomatoes are perishable goods, he cannot keep them for a long period of time.

So, although he would be putting in the same effort into his business as the tent maker, there's absolutely no way for him to remain wealthy all year long.

There's also the problem of having something that only very few people want.

Nowadays, when starting a business, you're often told to find a niche, a small group of people who are very interested in what you have to offer.

Before money was a thing, that advice would have nothing worth bartering.

The people who had the most were those who owned things that everyone wanted.

Things like weapons, animal skin, and salt.

But then since everyone knew that everyone wanted these things, they started buying them even if they didn't need them at the time, just so they could trade with them later.

People would exchange goods and services for the most common items, like salt or weapons, and just use that to trade for what they want from someone else.

From salt and weapons, to tiny collectibles like shells and bees.

Humanity had found a better way to trade and transact.

Instead of exchanging goods and services for goods and services you may not need at the time, you can exchange your goods and services for arbitrary objects to act as placeholders of value, an IOU, or I-O-U.

After that, you can use these placeholders to get goods and services you actually want from someone else.

The idea was brilliant, so brilliant that the entire world moved away from the barter system to the money trading system.

But there was still one problem with this medium of exchange.

You see, for money to be worth anything, it needs to be scarce.

The more available something is, the lesser its implied value.

If everyone can get their hands on something, it can't be worth that much, right?

So things like sand or shells that you could easily pick up on any beach weren't really a good measure of value.

As a result, around the year 770 BC, the first metal coins were created in China.

As a sort of homage, the Chinese made miniature versions of the tools that were once regarded as currency.

They made the coins circular so that it was easy to reach into your pocket and take them out without hurting your fingers.

You couldn't just go to a beach somewhere and pick up bronze.

At this time, money wasn't yet an illusion.

The value of a coin was determined by the value of the metal the coin was made out of.

If you had a coin that was made from 1 gram of gold, it was worth 1 gram of gold.

You could easily measure it and see for yourself that it is, in fact, 1 gram of gold.

However, kings and rulers quickly discovered the power of money.

They realized that the more of these tiny precious metals you had, the more power you could control.

And so in 600 BC, Aliades, king of Lydia, created the first official money mint.

He created the coins using a mix of silver and gold and stamped an image on the coin to act as denominations.

Now people could easily tell the value of the piece of metal they were holding simply by looking at the picture on its face.

But the kings of the world wanted more money, and precious metals were too expensive.

To produce more money, they started slimming down the coins, then mixing the more expensive metals with cheaper metals.

Soon, all the coins in circulation were worth less than what the image on their face said they were worth.

The value of the coin was no longer determined by the value of the metal.

The value of the coin was now simply what the rulers in the bank said it was.

So 1 British pound sterling represented 1 pound of sterling silver.

However, when international trade became a thing, people realized that metal coins were too heavy to log around.

And so kings around the world started issuing IOU certificates for long distance trading.

Because these pieces of paper were stamped by the king, people trusted its value and believed that they could use it to get back whatever it was worth in coins.

As more of these IOU certificates flooded the market, people needed coins less and less.

Until finally, the paper was worth what we believed it was worth, even if we no longer exchanged it for physical pieces of gold and silver.

From ancient kings to modern day governments and central banks, money has remained an illusion, a mere representation whose value is determined by the importance people place on it.

The most valuable banknote in circulation today is the 10,000 Singapore dollars note.

Although not being produced anymore, this single piece of paper worth 7,345 US dollars at the tender.

So you can still use it to buy things, valuable things like houses, cars, and even metals like gold.

The banknote itself costs less than 20 cents to produce.

But the illusion of the fiat currency system means it's as valuable as 120 grams of gold.

Fiat is the fancy word we use to describe the modern day illusion.

It's a Latin word that translates to let it be done.

It's a decree by the government that, in the case of money, determines what its value is and enforces it as legal tender.

The illusion of money is one that we never really think about.

But just like the kings of old, the governments of today understand the power of money and, as always, want more of it.

They know that the more of these pieces of paper you have, the more power you have.

Well, they can simply create more pieces of paper out of thin air.

Yes, if for example the United States government wanted 340 million dollars for, I don't know, maybe another F-22 jet, they can simply print the money to do so.

The thing about money is that primarily, it needs to be a means of exchange to be considered valuable.

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Money: Humanity's Biggest Illusion

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