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Monthly Archives: June 2015

Money Matters – Article 3 – May 2015


Money Matters 3

Dear Readers,

May 2015 is behind us; Was there anything significant that caught your attention this month?
We are following the Federal Government’s Annual Budget (on what, where and how they are going to spend our hard earned tax money).
In particular, we note Tax Incentives (discount in income tax to small business) and ‘Accelerated Depreciation’ Allowance (a ‘one off’ opportunity to spend upto $20,000 on business related capital expenditure, and avail immediate tax deduction).
What does it all mean?
How does it affect my business?
Why are they doing it?
To spend or not to spend?
Please contact us if it all means anything to you; We can discuss, debate and Assist you.

Now, moving to Money Matters:

This is Article 3, part of a series of monthly articles with the intention of discussing matters related to Money and Finance.

I am sure you have read our previous two articles with curiosity and interest.
We look forward to your active readership, participation, critique, feedback, comments and suggestions. Come, join with us, and let us explore this most important of subjects in detail.
We will be covering a wide range of issues – Income, Savings, Cash-flow, Debt, Finance, Property, Assets, Managed funds, Shares, Super, investments, and many more.
We plan to interact actively with you and will promptly respond to your queries and suggestions.

In our previous 2 articles we started a conversation on a fundamental question – What is Money?
Love it or Hate it, we know that Money is the other half of our lives, part of almost all transactions we conduct, big and small.

We discussed the Origin of money in our previous articles, as follows;
Hundreds of thousands of years ago we humans started to form a concept of ourselves as productive, purpose driven and objective beings; We started to observe, think, anticipate, react, understand and finally plan for our lives and future.
We started to live as families, then groups, then tribes, etc. We learnt to grow and cultivate crops and livestock.
We soon learnt that ‘some of us in the group are better at some things, and others are better at other things’. And we started to do more of ‘some activity’ and less of ‘other’.
(He is better at hunting, She is better at cultivating crops).

Today, we call this Specialisation.
We then started to be more productive, and we moved from survival mode to more comfort and security.

We started Producing Surplus and learnt to manage, store, and use these surpluses for a better life.
With more comfort and security came boldness and an adventurous spirit. We began to observe, think and explore; We began to form ideas and concepts.
We also began to travel and came more in contact with other groups, to interact with them, learn about (and from) them and exchange ideas.
We gradually evolved from being a ‘pack’ to a Civilisation.

We soon started to exchange surplus Goods and Services (grains, livestock, jobs, expertise) with others; ‘The Barter system’ had begun.

With more productivity, barter and trade came more prosperity. We soon started realising the limitations of ‘exchanging goods and services’.
Bartering now became more complex; Our potential to barter was very limited.
(“I have sheep, he has wheat, I need fish, and he needs salt”)
or, (“I have plenty of fish, need salt now, he needs grain now, but may have salt next year”).

How did we solve this problem?
We learnt to improvise, to nominate certain ‘Commodities’ (things which are less perishable, more in common, easier to store and transport, etc.) as the ‘Means of Exchange’.
These commodities started to be seen as more valuable; As a ‘Storage of Value’.

A lot of commodities, in various different places, across thousands of years were experimented with, for different reasons.
Metals in general, and Gold and Silver in particular, became more and more the choice.
Why? Gold is divisible, non-corrosive, exclusive, rare and desirable; A natural choice.
Gold became the natural storage of value, as means of exchange – As a CurrencyAs Money.

Now, our populations were getting bigger, we had started to form villages, towns, cities, kingdoms.
Specialisation had brought us surplus, leading to economic progress, leading to prosperity and power.
And one of the most important specialisation was to provide ‘safety, security, dispute resolution, administration; The ‘Rule of Law’; Religious and Political Power.
The Priest, Chief, King, Emperor; Government became more and more important, and powerful.
And rulers needed more and more money to maintain and increase political power …..
And Rulers, governments, do not produce anything (do not make things, or do jobs), or create economic value; Rulers Do Not Create Money; People, citizens Do.

As time passed even gold as the means of exchange became troublesome; storing it safely, carrying it over vast distances and keeping physical possession of it became dangerous; Theft, looting, confiscation, etc. became problematic.

An innovative Idea Of ‘offering to store (Banking) gold safely’ began to take shape.
(I have a secure place and armed men to guard your gold safely)
(You keep your gold with me. I will issue you ‘promissory note)(A piece of papyrus, silk, tree bark, stone or clay tablet, paper, etc. – A “NOTE” promising to safely hold your money in trust and storage, until you need it back).
(You will get back your gold, when you need it, on producing the ‘NOTE’ – For a small fee).
The Concept Of Banking and Notes had begun.
People soon realised that it was much easier to transport, carry, exchange and trade with these ‘Notes’ compared to the danger of carrying gold around.
(You steal my Gold (Money), I lose everything)………..
(You steal my notes (Currency only, NOT Money), it is worthless to you unless the banker accepts it and exchanges for Gold (Real Money).

The era of Banking And Notes as Currency had arrived.

And what was political power (Chiefs, Kings, Emperors, Government) doing in the meantime?????

We shall explore that in our next article.

Once again, we hope this article was of some value to you. We will continue with the story about the History of Money next month. We look forward to your active feedback, comments and suggestions.

Talk to you next month.

About the Author: Harish Narayana is a Sydney based Finance Professional and Adviser.
Contact: hari@harionmoney.com.au
Web: http://www.harionmoney.com.au

 
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Posted by on June 2, 2015 in Uncategorized

 

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