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What Money Really Is

This lesson is a part of an audio course The Truth about Money by Scott F. Paradis

Welcome back.

As you recall we were discussing worker's earning in the United States. We had established a floor – minimum wage; and loosely defined an average – mid-sixty thousand dollar range annually. Now we're looking for a ceiling.

It's possible to make a lot of money in the United States. Some individuals will bring in more than one billion dollars this year – one billion with a "B" dollars. If we take the top 500 earners in the U.S. together, they average around 300,000,000 dollars per year. That's nearly 1,000,000 per day; 1,000,000 dollars a day.

Our floor for workers is 50,000 annually; our average is mid-sixties, and our high earners or ceiling is about 1,000,000 a day.

We know millions of men and women work for minimum wage. Most workers however are doing better than the minimum; some much better – but how many are doing much better? How many millionaires do we have in the United States?

Millionaires – let me define that. In this case, I'm talking about household net worth – all assets minus liabilities; and I'm taking away the value of the primary residence; the house they live in. Of our 120,000,000 households; how many or what percent are worth at least one million dollars?

In the United States, roughly 10% of households are millionaire households; 10%. One out of every ten people lives in a millionaire household. We have somewhere between twelve and fourteen million millionaire households in the United States.

That's amazing to me.

If you were to ask the typical American how they are going to get rich most would say; by winning the lottery. The odds are of winning the Powerball lottery are three hundred million to one. Your odds of being a millionaire in the United States are one in ten; one in ten. Unbelievable.

Now a million dollars is not what used to be. But if you want to be in the top 10% of American society, on an economic scale, you must be worth at least 1,000,000 dollars.

Do you want to be in the top 10% – one of the ten? Do you want to be rich?

Ah, that's a loaded question.

I've asked that question to thousands of people. Rarely do I get half an audience to say "yes, I want to be rich". It seems the ones who don't commit are suspicious of that word "rich". What exactly does "rich" mean?

For those who aren't sure about being rich, I ask, "who wants to be financially free?"

Then, then I routinely get everyone to commit – everyone's for financial freedom.

What does being rich or financially free mean?

I'll share with you in a later session my attempts to get rich, for now though let's begin with some fundamentals.

Jeff Bezos, the founder of Amazon – currently the world's wealthiest individual, is the first person to achieve a net worth in excess of 200,000,000,000 dollars – quite a fortune. There is however a wealthier family – perhaps the wealthiest family the world has ever known.

This multinational banking family is a byword for wealth, power, and discretion… Kings and queens, princes and popes, governments, and principalities did not act but with the consent of the Rothschild's.

Facilitating the flow of money the Rothschild's were able to rise from virtual obscurity to the pinnacle of international finance and political influence in two generations.

The dynasty's rise began with Mayer Amschel Rothschild in the late 1700's helping his father in a money-changing business. As a young man Mayer built relationships within the tight-knit community of bankers and financiers – he built a foundation of trust. Eventually, he forged bonds with royalty and soon served as a banker for the royals brokering international financial agreements.

Mayer was a man who saw and seized the opportunity. As the nineteenth century dawned he dispatched his five sons to the seats of financial power around Europe. By 1812, the year Mayer died, the Rothschild's had banking and finance operations in Frankfurt, Vienna, Naples, London, and Paris.

Recognizing information was the master-key to riches, the Rothschild's built an efficient system of couriers; what their competition called "spies" around the continent, so they could routinely communicate with one another; sharing key business, financial and political information.

Through disciplined lending, investing and shrewd maneuvering the Rothschild's became a financial force to be reckoned with.

"Unity, Integrity, Industry" was the Rothschild's motto.

The family surely stuck together, they were industrious – but the key to their influence was that principle of integrity. The Rothschild's amassed a fortune perhaps unparalleled in the history of mankind by facilitating the flow of the currency of trust.

What is the currency of trust? Money is the currency of trust.

If you think nobody cares if you're alive; try missing a car payment or a mortgage payment. Money matters.

Would you stop to pick up a crumpled piece of paper lying on the ground? Perhaps you would – to keep things tidy – but you assuredly would if you recognized that crumpled paper as a one hundred dollar bill.

Two scraps of paper; each with symbols on them. Why is one piece of paper more valuable than another? What gives?

One is worthless; the other "we agree" is valuable. Why? Why is the one hundred dollar bill valuable? Because we agree it's valuable.

These days paper is a common form of money. In other times and places a variety of things have served as money: seashells, salt, grain, cattle, chocolate, cigarettes, animal skins, stones large and small, gold and silver, you name it.

How is it that any of these things; how is it that pieces of paper are valuable?

Because we, collectively say; because we agree they are valuable.

The money these days, what I've illustrated as paper money, is what we call "fiat" currency. This fiat currency is not backed by anything tangible. Nixon severed the last vestiges of the gold standard in 1971. Our money is not backed by gold or silver or any commodity.

Money has value because government authorities have declared it does – by fiat. The assumption – in democracy anyway, is government authority originates from the consent of the governed. So fiat currency – dollars, euros, yen, pesos – have value because and only because the people – we, you and I, say and trust that it does.

What exactly is money?

The American Heritage Dictionary defines money as: "A medium that can be exchanged for goods and services and is used as a measure of their value on the market, including among its forms a commodity such as gold, an officially issued coin or note, or a deposit in a… readily liquefiable account."

The formal, traditional, concise definition of money stipulates: Money is a medium of exchange; a unit of account; and a store of value.

Money serves as our means for getting what we want in the nearly inexhaustible market of goods and services.

We'll peel back this concept of money in more detail in the next session.

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Written by

Scott F. Paradis

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