What is money? Where does it come from? Why are people currently exchanging pieces of paper for goods and services? Why is this paper in demand? These are crucial questions you might not have asked yourself, but their answers have a major impact on your life. Money, markets, and economics are portrayed as subjects too complicated for the average person to understand. This notion isn’t true, but it does serve the interests of those in positions of power.
Economics is the study of human action and a market is voluntary human action. The purpose of a market economy is to fulfill the needs and wants of individuals by allocating resources through voluntary exchange. One of the most critical concepts within a market economy is money. Money is a market invention that simplifies trade and makes cumbersome barter obsolete. Money is a common medium of exchange which saves time and labor during trade, thus increasing the standard of living.
Logic dictates that the ideal form of money should be durable, divisible, portable, fungible, scarce, and in demand for purposes other than a medium of exchange. Market supply and demand dynamics demonstrate that precious metals, specifically gold and silver, meet these criteria better than any other good. Many people voluntarily chose to use gold or silver as money throughout history for this reason.
However, today the world operates under a system called fiat currency. Currency is a temporary substitute for money and is typically redeemable for money. Currency is distinct from money because while currency is durable, divisible, portable, and fungible; it is not significantly scarce or in demand for purposes other than a medium of exchange. Examples of currency are paper notes, tokens, or electronic digits which do not have much demand other than as a medium of exchange. In contrast, gold or silver are in high demand for many applications including electronics, medicine, construction, aerospace, dentistry, and jewelry. Fiat currency is irredeemable currency that has been made a permanent substitute for money due to threats of violence from “government” (a euphemism for men and women in costumes forcing you to obey their arbitrary commands). These threats take the form of “legal tender laws” as well as “taxation” which is collected in the form of fiat currency. These threats give fiat currency artificial demand which would not exist otherwise.