Inflation

(1/03/2010) - Though its so pervasive in our lives, I find that the nature/essense of money is tremendously hard to pin down.  On a physical level it is fairly useless – paper, cheap metal, or more often than not, electronic signals and magnetized ferromagnetic material.  You can’t eat, wear, or sleep in money (note to literalists – you know what I mean).  Yet in the experience of much/most of the world’s population, it provides you all these things and possibly much more.

On a very basic level, we can think of money’s value as a symbol for goods and services it can purchase.  For example, lets say I received this twenty dollars for mowing my neighbor’s lawn.  My neighbor works for Google, and received the money to pay me by working approximately 30 minutes developing web applications.  I can trade my twenty dollars for some apples, milk, a chocolate bar, and a movie ticket.  Each of these products was produced and brought to me by the work of hundreds, if not thousands of people. 

In our everyday experience, money is interchangeable for goods and services.  But at the same time, money is not equivalent to goods and services.  For example, the six dollars in my pocket is not a rain check for 2 gallons of milk or a used shirt.  If a plague kills half of the country’s dairy cows and the price of milk spikes to $10 a gallon, I’ll be out of luck.  Prices change for a huge number of reasons.  And there are hundreds of ways to acquire money.  For many Americans, money is acquired in exchange for paid work.  But there are other ways to acquire money – investing, bank interest, relatives, robbery, etc.