How Money Works Explained in One Minute

A one minute video which explains how money works, it really isn't all that hard to understand how the economy functions and if we add a bit of historic context to the mix, everything will seem like a piece of cake. Please like, comment and subscribe if you've enjoyed the video. To support the channel, give me a minute (see what I did there?) of your time by visiting OneMinuteEconomics.com and reading my message.

Comments

1. there's still one thing i don't understand: why the government doesn't just produce tons of money?
2. Hey do you have an one on one coaching program teaching how money works? Thanks
3. wtf this was in a link from a anti new world order site on reddit. and explaisn nothign about how money, well federal reseve notes anyway are backed by debt and not gold or other items of real value? guess its pro new word order site....
4. People didn't simply barter before money was used, from a reddit post:
   >It was debunked by a three pronged attack.
   First prong, examining the origin of the theory of barter. It began as a thought experiment by a Scottish philosopher in the 17th century (can't remember specifically who). As you say, "it seems natural", and that thought experiment turned out to sound reasonable to many other people as well, so it got propagated. The people who invented the idea were just using "imaginative historical reasoning" to suppose how exchange in early societies worked. Since it was untestable, it stuck, and became virtually the first "truism" in the canon of traditional western economics.
   Second prong, no data. Anthropological research into the history of money and exchange show an absence of data for barter economies existing in history. One thing we might reasonably expect with a barter system is that (1) pre-currency societies would still be around who use barter, and (2) the historical record would show tally sheets, exchange value calculations, or historical literature indicating barter. And according to him, neither of these things can be found.
   Third prong, an alternative method of exchange that actually is found to exist in the world (for example in Madagascar or Papa New Guinea), and is quite widespread, is the "social credit"/gift economy. This also has decent historical support, I believe. Basically you gave people whatever they asked for, because they were your kin, and because strong social traditions controlled what they could and couldn't ask for, and also because an idea existed of 100% reciprocity. (I'm providing my own, much fuzzier understanding of the dynamic, but I think it hits the core of it). You'd have to read more for the specifics.
   In a nutshell, one of the reasons why barter never existed is because the prices of things were never considered independently of the social relationships that underpinned the exchange. 5 chickens might equal a cow if you and me are doing a deal, but if you and your brother are doing a deal, 0 chickens equals one cow; if you and a cousin with a bad reputation are doing a deal, 15 chickens might equal one cow; perhaps the largest part of our local population, you might outright refuse to sell to, given the social nature of exchange, hence infinity chickens equals zero cows, for them.
   If everybody pays a different rate of exchange, then it can't be implied that the prices themselves have a de facto existence outside of the social relationship which determines them. Prices didn't exist, in the abstract sense, because there weren't yet socially atomized, anonymous individual consumers to show up and get "the flat rate". All exchange was social. There was no anonymous customer. Thus there was no disembodied "economy" that could be seen as separate from the social body.
   Edit: just realized I actually supplied one of the weakest arguments for why pre-currency exchange wasn't barter. By my description above, it would still be barter, just without fixed prices. The actual reason it isn't barter requires more paragraphs than I can succinctly muster, but here's a nutshell. Its because the exchanges were not atomic (i.e. considered as having a beginning and an end), but rather each person had something like a 'tab' with each other person, based on personal reckoning, and this extended to non-material goods like positive social relationships. The 'tit-for-tat' in modern exchange happens each time per 1 exchange. The 'tit-for-tat' in pre-currency exchange happens spread out over possibly an entire lifetime. You might give someone something, and not ask anything of them for 5 years time. Then in 5 years, you might ask them for a favor (instead of a good). In this sense, it was not 'exchange', but rather a gift economy, because people gave each other what was requested, knowing that they would later have leverage to request things in turn. Whew! wipes forehead