Client Support: (877) 258-0181    Mon-Fri 9am-6pm MST
Client Support: (877) 258-0181    Mon-Fri 9am-6pm MST

What is money?

That’s a daft question, surely? Money is the stuff we carry around in our wallets, purses, handbags and so on – it’s the green/blue/red banknotes, maybe the coins, we use to pay for things. Even the small bits of plastic we use instead eventually refer back to actual money, don’t they? Everyone knows what money is.

Except they don’t.

A fascinating read in a recent issue of The New Yorker pointed out that money is an invention; all of us who believe that money has value are deluded, or at least naïve. John Lanchester writes there that the “instruments of trade and finance are inventions, in the same way that creations of art and discoveries of science are inventions – products of the human imagination. Paper money, backed by the authority of the state, was an astonishing innovation, one that reshaped the world.”

Download on the app store
Download in the google store
Download on the app store
Download in the google store

That “authority of the state” is interesting. States never like having their authority challenged, and control over money – or at least, the factitious version of it most of us use – is one of the main ways in which states demonstrate their authority. When paper money goes haywire (think Germany in the 1920s or Argentina more or less any time in the 20th century) then the state is very soon in deep trouble.

The creation of cards to use for payments is much older than we might imagine, although it feels more recent; not until 1993 did half of all UK adults hold a debit card. Cash is certainly on the way out almost everywhere – the Bank of England (BoE) has a helpful online page which tells us that 96% of all money in the UK is held electronically and only 4% in physical form. Sweden has almost eliminated cash entirely.

The BoE however is practising a deception, in its own interest, or the interest of its de facto boss, the British state. The same BoE page states that “money…helps you to store value…if you were given an ice cream worth £2, you could enjoy it right now…but if you were given £2 instead, you could spend it any time you like.” Reflect on that statement for a moment. “It helps you to store value” sounds good. After all, everyone wants to preserve what wealth they have. But think about what happens to those two pounds over time. Their relative value over the past 50 years has shrunk enormously. To buy that same ice cream in 1969 would indeed have cost £2; but today it would cost you anything between £28.73 and £84.86, depending what kind of measurement you apply.

So the idea that ‘money’ – paper and coins issued by the central bank – is a long-term “store of value” is frankly absurd. Maybe if you consider a week, a month, or even a year, to be long enough to hold onto your £2, then it might be true that ‘money’ is indeed a store of some value. It all depends on where you are, at which point you are in of the endless economic cycle. “Store of value”, when it comes to central bank controlled currencies – money as we all assume it to be – is a very elastic concept. No doubt Germany’s Reichsbank, with the full “authority of the state” thought in 1914 that the Marks that it issued were a great “store of value”, but by 1923 you would have needed 6,000 billion marks to buy a single kilo of butter. In the decade 1914-24 Germany’s prices went up a trillion-fold.

Let’s consider another measurement. Another item which is often spoken of as a “store of value”. Gold.

Download on the app store
Download in the google store
Download on the app store
Download in the google store

How has gold fared since 1969? Rather better than the pound in your pocket. Fifty years ago, when the USA was still just about on the gold standard, the gold price was around £16/oz; since then it has steadily climbed to £1,265/oz. Sure, there have been some dips – but it has never retreated all the way back down to £16/oz. Not only has gold been a store of value; in the past 50 years it has been an almost unrivalled source of wealth creation. What else has improved by more than 7,800% in the past 50 years?

You would imagine that the Government (of any stripe) or perhaps the BoE might be a a trifle shame-faced at this shocking decay in the national currency – the pound sterling. Not a bit of it. In fact, as is generally known, the BoE (and just about all nations’ central banks) officially seeks an inflation rate of 2% a year. Your money – the currency you own – is not a store of value, but a store of declining value. And intentionally so.

Back to the BoE website. Towards the end of the section we have already quoted from is a statement that is actually true – “carrying precious metals around is a considerable physical burden.” No question about that; carrying a bag of gold coins would weary the fittest person after a while. Which is one reason why we have invented the Glint Mastercard, so you can own physically allocated (meaning it’s yours and no-one else can touch it) gold, in comfort. This is a plastic card which is completely inflation-proof, thanks to the fact that it enables you to possess gold, conveniently. So don’t be naïve about money – it is yellow, cold to the touch, and hard. Very pretty: but definitely not paper.

Download on the app store
Download in the google store
Download on the app store
Download in the google store

Download the Glint App to start saving and spending your gold