5 things about money that are strange when you start to think about them

I typically think about money in terms of what it can do for people, but sometimes, I think about money itself, in the abstract. Kind of like this guy:

Okay, actually not at all like that guy.

But sometimes it is interesting to think about money in the abstract. And the more you think about these things, the stranger they become.

So here are five things about money that get stranger when you think about them. Because chances are, you haven’t thought about them.

Debt

Debt has been around for thousands of years; in many ways, it predates money itself. The word itself came into its modern English usage in the 13th century, taken from the Latin meaning “thing owed”.

But there’s debt as a “thing” owed, and then there’s debt as the numerical opposite of wealth.

I define financial net worth as what you own minus what you owe. And isn’t it odd that that value can be negative? (It’s only recently that we “believed” in negative numbers.) What does it mean to have a negative amount of something? Is it really something, or some thing?

And isn’t it even stranger that you can transfer this negative thing around? Debt is traded, after all. If I have a car debt and I sell the car to you, now you might have a car debt.

Even stranger: we allow all this. We allow people to have things that they haven’t yet purchased (yet), often in exchange for more money (interest) that the person didn’t have in the first place.

Wealth creation

Speaking of interest, where does this interest come from?

Everything costs more now than it did before (well, most things). Inflation makes the numbers higher, while the underlying value stays the same, but wealth, a different number from inflation, is indeed being created.

From where is it created exactly? If I make something that everyone wants, I make lots of money, but does that make the rest of the world poorer? It doesn’t seem to be (well, except for Apple products, but I digress). Money isn’t a zero sum game on the macro scale, although it seems to be on the individual level (when I pay you, and you have the money, the sum over the transaction certainly feels like zero to me).

If you think of the proverbial village where everyone does each other’s laundry, there’s clearly no way that anyone can get rich doing that. (Or can they?) But how is that different from what happens in the global economy? Everyone does something that’s the equivalent of laundry. Where is the wealth coming from?

Also, everyone knows that the wizards of Wall Street make tons of money. And how do they do that? By helping to make other people more money.

It really feels like turtles all the way down.

Coins

For the longest time, literally thousands of years, we’ve denoted value in the form of coins. They are almost always round (presumably for practical reasons) and pretty much always made of some kind of metal, originally gold or silver.

Why did we do this? How did we decide what shape or composition would denote wealth?

And we’re still doing it today, but with a postmodern flourish. Today’s US dollar coin is made of 77% copper, 12% zinc, 7% manganese, and 4% nickel over a copper core, so as to match the electromagnetic properties of the previous coin, which was 75% copper and 25% nickel over a copper core, all while being golden in color. You can’t make this stuff up.

Since the value of the coin isn’t tied to the value of the metal underlying it, there are issues where the lump of metal is worth more than the coin itself, leading to people melting down coins. For money.

Like I said, isn’t this strange?

Coins vs. bills

You likely haven’t used a dollar coin in the U.S. And that’s okay, because we have dollar bills. Because it totally isn’t redundant to have two different things that have the same value.

But why have both coins and bills? I get that bills were once a certificate denoting access to a certain amount of metal (gold or silver). But we abandoned that years ago.

So today’s situation is that we have the heavier object, the metal, denoting things of very little value (cents), while we have the lighter object, the paper, denoting things of larger value (dollars). If we have to have both coins and bills, shouldn’t that be the reverse?

Why not a paper cent and a $20 coin?

Money

Finally, money itself is pretty strange.

When it moves, it acts as a medium of exchange. But inherently, it isn’t really anything. If it’s anything, it’s a store of value. But what does a quantifiable value of, erm, “value” mean?

Actually, I think we better stop here before we go any further. When you ask too many questions about the meaning of things, you can get into a Phaedrus-like spiral, and we don’t need that. At the end of the day, all these things are the elements of our financial life and we need to work with them on a daily basis, no matter how strange they are.

And once you manage it well, there’s nothing at all strange about what money can do for you and the people around you.