The Origins and Evolution of Money: How It Has Shaped My Financial Decisions

Core Concepts

The evolution of money, from barter to fiat currency, has significantly influenced the author's approach to personal finance, leading them to prioritize tangible assets over traditional fiat currencies.

Abstract

The content provides a summary of the historical development of money, from the early days of barter to the modern fiat currency system. The author reflects on their personal journey of understanding the nature of money and how it has shaped their financial decision-making.
The author begins by recounting their childhood curiosity about the creation and purpose of money, questioning why governments don't simply print more money to make everyone rich. This leads to a discussion of the transition from barter to the use of precious metals as a medium of exchange, and the eventual development of paper money backed by gold reserves.
The author then explains the shift to the current fiat money system, where currencies are no longer tied to a physical commodity like gold. This has resulted in the phenomenon of "real wage erosion," where the purchasing power of money decreases over time due to inflation. The author recognizes that the value of money is now primarily based on the trust and confidence in the issuing government, rather than a tangible asset.
In response to this understanding, the author has adjusted their financial strategy. They now allocate a larger portion of their earnings to more tangible assets, such as stocks, Bitcoin, and gold, to preserve the value of their wealth. The author only maintains a smaller percentage of their funds in fiat currencies, which are primarily used for immediate purchasing needs. Additionally, the author prefers to support domestic products and companies that contribute less to inflation.
The content concludes by suggesting that the author may explore these topics further in future blog posts, depending on the level of interest from readers.

Stats

"I traded most of my earned money for more tangible assets (ex: stocks, bitcoin, golds) — So I can trade my time and skills for a store of value, which is precisely what I wanted in the beginning."
"I only holds around 25% of my earned money in the form of Fiat currencies — Fiat currencies still remain the most liquid form to trade, I need to survive and purchase foods etc, so I keep my fiat solely to trade products that I need ASAP."
"Whenever I want to purchase a product, I always try to find the substitute of the product made by my own country first — The idea of Fiat currencies is to store your value to the trust and confidence for your own country, this part is a no-brainer if you purchase most of your trust and confidence of your own country elsewhere."

Quotes

"The cool term for the scenario is called 'real wage erosion', which basically means that our increase in compensation got beaten by inflation."
"Money got inflated because governments are printing more and more money, leading to an increase in the money supply without a corresponding increase in goods and services, thus diminishing the value of currency over time."

Key Insights Distilled From

Summary about money and it’s origins: How it changed the way I decide

by Muhammad Ilh... at medium.com 07-28-2024

https://medium.com/@muham.am/summary-about-money-and-its-origins-how-it-changed-the-way-i-decide-b2b5274c7bea

Deeper Inquiries

How might the continued evolution of digital currencies and blockchain technology impact the future of traditional fiat money systems?

The continued evolution of digital currencies and blockchain technology could potentially disrupt traditional fiat money systems in several ways. Firstly, digital currencies like Bitcoin and Ethereum offer decentralized and secure transactions, reducing the need for intermediaries such as banks. This could challenge the monopoly that central banks have over issuing currency and managing monetary policy. Additionally, blockchain technology provides transparency and immutability, which could enhance trust in financial transactions and reduce fraud. As more people adopt digital currencies, the demand for traditional fiat money may decrease, leading to a shift in the global financial landscape.

What are the potential risks and benefits of individuals diversifying their financial assets beyond fiat currencies, and how can these be effectively managed?

Diversifying financial assets beyond fiat currencies can offer both risks and benefits. Benefits include hedging against inflation, as assets like stocks, real estate, and commodities may retain or increase in value over time. Diversification also reduces overall risk in a portfolio, as different asset classes tend to perform differently under various economic conditions. However, risks include volatility in non-fiat assets, liquidity issues, and regulatory uncertainties. To effectively manage these risks, individuals should conduct thorough research, seek professional advice, and regularly review and rebalance their diversified portfolio to align with their financial goals and risk tolerance.

In what ways could governments and policymakers address the issue of real wage erosion and maintain the purchasing power of their citizens' earnings?

Governments and policymakers can address the issue of real wage erosion and maintain the purchasing power of citizens' earnings through various measures. One approach is to implement sound monetary policies that aim to control inflation and stabilize the value of the currency. This includes managing the money supply, interest rates, and fiscal policies to ensure price stability. Additionally, promoting economic growth, productivity, and innovation can help increase wages and overall prosperity. Governments can also consider indexing wages to inflation to ensure that workers' earnings keep pace with the rising cost of living. Education and financial literacy programs can empower individuals to make informed decisions about their finances and investments, mitigating the impact of real wage erosion on their standard of living.