Is Money An Illusion?

"Do you think that money just grows on trees?" Have you ever thrown this famous question to your child or, better yet…to your spouse?

What is money? Is it a piece of metal? A printed paper backed by a Government promise (?)? Wealth? Freedom? Evil? Is it the root cause of all problems or solutions to every problem? 

In earlier days, cave dwellers exchanged pebbles and cowries. Then moved to minted coins; nowadays, we use currencies to buy things we desire. 

The value of anything is derived based on what is happening within us and the circumstances around us. 

For Example, if you are in a supermarket and you see 2 bottles of water of the same quality, quantity, and brand, the only difference is their price. The first bottle of water will cost you 1$, whereas the price tag on the 2nd bottle is 10$. Which one will you choose? Now, if you are in your senses and aware of the general cost of a water bottle in your city, you will go for 1st bottle. Why would anyone pay 10 times more for the same stuff? Isn't it? Wise decision! Congratulations!!!

But when you are in a 5-star hotel with your vital client to impress and, if the same bottle of water costs you 10$, would you pay that price? Of course, you would. After all, you are with an important client and in a 5-star hotel. So now it is a matter of your reputation.

Imagine you have been lost in the desert for the last 10 hrs. Your throat is as dry as a dust. The only thing on your mind is to get some water to drink. You don't want to die thirsty. Suddenly you found a hut in the middle of the desert selling drinking water. But now the price tag on that bottle is 100$. What would you do? 'I'll buy it, you silly!' I can almost hear you shouting. After all, now it's a matter of life and death. Nothing seems more important than grabbing that water bottle and quenching your thirst. 

You see how the same water bottle is valued differently in different situations. The monetary value of the thing differs based on what situation you are in. The material things have no 'money' value in themselves - we give that to them. So, money is the external physical representation of our internal value within us.

It is the same reason why a bunch of shares valued at $1 million today can fall to a valuation of half a million dollars tomorrow when fear is introduced into the hearts of those involved. The fear kills a portion of the internal values of the participants, and the paper money reflects that.

The most exciting part is, do you know that physical paper money does not even represent money in full? It cannot reasonably do that. It will take a massive bout of paper pulp (eventually trees) and storage to keep all that paper money. By some estimates (and this varies from nation to nation), only as little as 10% of the money in the banks exists as paper money. That means for every $100 or its equivalent in any other currency, only about $10 exists as printed-paper notes or coins. In contrast, the remaining $90 exists as numbers written on paper and in electronic format in computers, banks, businesses, and other entities. 

The only reason this system does not collapse is that we all believe in it. The last time people stopped believing in it to a large enough extent was just before the Great Depression, when large numbers of people rushed to their banks to withdraw their money and found that they could not all get it. Now we know this is not the cause of the Great Depression, but it certainly accelerated it.

So next time you hold money in your hands, give it a thought. What is money? What value does it represent for you?