Money

• All forms of money are backed by other people's "confidence" in that form of money as a store of value
• Anything that more than 1 person values and is willing to accept as a form of exchange can be considered money
• Most people view money as their local currency (this is wrong) 
• For example, Americans view the US dollar as money. In reality is is a liability of the US government
• A promise to pay is not money
• Equity Values (stock market prices) are not money

Classic Money Definition:

For something to me money, it must be all of the following:

• store of value
• medium of exchange
• unit of account

Historical Examples of Money

• Cattle, Salt, Sea Shells, Cigarettes

Asset Vs. Money Trap

• Humans fall into the trap of thinking that the price of an asset is the same as money
• A promise to pay is not money
• Equity Values (stock market prices) are not money
• We really own claims, promises and debt.  They are only valuable as long as someone else is willing to buy them from us
• Example: Bank Deposits, Treasuries, etc are not money - they are a promise to be repaid money

Dishonest Money

• Dishonest money is money that is not based on something real
• Federal Reserve Fractional banking is an example - is based on faith in the US Government
• Money backed by gold is an example of real Money
• Dishonest money leads to:
• Dishonest Statistics
• Dishonest Accounting
• Dishonest Financial Statements
• Dishonest Valuations
• Dishonest Compensation
• Dishonest Policies
• Dishonest Priorities
• Dishonest Objectives
• Dishonest Relationships

Gold as Money

• There are many reasons why gold is great for money
• Aristotle defined 5 reasons why gold is money (classical reasons that gold is money)
• DURABLE:  It should be indestructible and not fall apart easily
• DIVISIBLE:  It should be able to be converted to smaller and larger pieces without losing value
• CONSISTENT:  It always looks the same so it is easy to recognize
• CONVENIENT:  It is portable and packs lots of value into a small object
• INTRINSIC VALUE:  It must be something people want or can use

Famous Investor's Thoughts on Money:

• Doug Casey - Currency is not money; it is a government substitute for money
• Doug Casey - Gold is Money