What is money anyway?

As all the world’s financial markets are losing trillion’s of dollars almost daily, I am having to think “What is money anyway?”

It is more than pieces of paper with pictures of deceased notables on it as Anthony Robbins says. Some say that it is financial currency for the value placed on the exchange of service from one party to another. But it is more than that as well. Below is the definition that I like the best. 

“It is the physical representation of value that rises and falls in ourselves, within us. Not within ‘things’ outside of us, but within us. For without us, what can the value of a thing, such as a car, be to us? Nothing, at least not to us. In other words, it is we, the observers, that place value in things, but this value is really value in us – we give value to the material things. The material things have no ‘money’ value in themselves – we give that to them. So, money is the external physical representation of a particular section of our internal value, within us, within you.That is why a house or a block of shares valued at $1 million today can fall to a valuation of half a million dollars tomorrow when fear is introduced into the hearts of those involved. The fear kills a portion of the internal values of the participants and that is reflected by the paper money, the ‘body’ of value.”*

So how does this all apply to our current financial crisis? Let’s think of the sub prime mess that we are currently still suffering through. Lenders were creative with their borrowing requirements, and as a result lots of people who otherwise would not have been able to afford a home now had one. These same lenders then sold their books of mortgages to investors for the value that they put on them. Everything was working fine until people were not able to make their payments, thus changing the value of the book of mortgages. As a result investment firms and banks who bought these books of mortgages (or still have them on their books) are now unable to find investors to buy them and are now suffering massive losses.  As these banks and investment firms are dropping like flies, it is unraveling our confidence in the financial system as a whole.  Of course, panic in the market does not mean that you should panic yourself! In this environment it is vital to be clear about what does, and what does not, need you to respond.  Those who are strongest financially stand to gain enormously, as perfectly sound assets are sold off at fire-sale prices. 

To minimize the effects of this financial meltdown personally, then you must make sure that you are in the best financial shape possible. That means paying off your debt as quickly as possible and having cash available in your portfolio to invest in the market as the buying opportunities present themselves. Contact my office now and leave a message, if you are interested in checking out a new way to pay off your debt quickly so you can then have more cash available to take advantage of the buying opportunities.



* Taken from David Cameron Gikandi’s “Happy pocket full of Money“.

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