What is money, what is credit, how does it work, and why do we need records?
Money, alas, is a necessary evil of the modern day. So what is money? How does money work?
Firstly, money is a construct of value. Value is often determined by a set of structures: longevity, usefulness, shiny, rarity. Yes, shiny is a key term to value for humans. We love shiny shit. We also love rare things.
Possession, in terms of unique, something I can have that you can’t have, is a term of value for us. How or why is that logical? Who knows! Man is a weird weird beast.
Usefulness makes some kind of sense. In the desert water is more valuable than stone because it’s useful. We need that shit, thus water is of greater value. Diamonds, though how anyone understood this back in the day, are incredibly sharp. Like as sharp as lasers, sharp. Yeah. But that’s not why humans fell for diamonds.
Shiny. Humans love shiny; but shiny is weird because shiny isn’t necessarily visible. Shiny can also be a concept. 2019 humans love to talk about their shiny more than they actually enjoy possessing shiny. The concept of shiny, the bravado of it. By talking about the shiny it makes them feel shiny. Now they have value.
Lastly, longevity, or really, rarity. This is a weird one too, as some things gain value with age and some things don’t. It’s all application. Really, it is. Paintings often appreciate in value, become more valuable. Yet the same might not be true for a stone sculpture or a diamond. Why? The temporary nature of things. When things hold too much longevity they make man feel inconsequential and subsequently are often devalued or underappreciated. When things hold longevity, but only for so long, that state of temporary longevity, the coasting edge of life just before death, that holds great value. Again, humans are very weird.
Once upon an ancient civilization, money was a construct based on trade. I have what you want, you have what I want, and we hagel about the value of the worth of those things until we come to something mutually beneficial. This worked well when everyone was a tradesman or a farmer, and tribes were small.
There’s no shortage of historical documentation on who decided a form of commerce should transition from trade to a dollar system; sometime around 5000 BCish. Sources vary from China, India, Africa, and Northern Europe. The key thing to understand is this: When man found metal they understood its value immediately. That value was relative to transit, to cooking, and to weapons. Man is a fighting species, and iron changed the game. Man also love shiny, and jewels and fine fabrics quickly became a thing. It’s all about the shiny. Gold, silver, platinum, copper, rubies, sapphires, emeralds, diamonds. Bla bla bla. Shiny. Gold thread in dresses. Gold leaf on walls. The short side of a long conversation is that man loves shiny and as soon as someone said a ruby the size of fist is worth your house we had the money system. It took no time at all to regulate the trade to a value system, and to regulate the currency from trade of goods to the trade of goods and services for currency.
In a lot of ways it makes sense. Things that have a misrepresented value, or a little value to one person, may be of great value to another. By establishing a value system in currency one can regulate the value of goods and services into something more consistent across regions.
What does that mean today?
You may have heard of the Federal Gold Reserve. The idea is that the US has much physical gold. The gold holds value. Shiny. But the government doesn’t want to give the people the gold. If gold is in circulation then the government doesn’t have the gold. I mean, technically they do, as its on the land, but they cant hold it physically and that makes em nervous. That won’t do. So the government prints dollars. The dollars represent the gold. Say 1oz of gold for $100 (not accurate amount – value fluctuates daily, look it up). So long as the dollars stay in the country the trade should be localized. The government never loses money because the value in dollars out on US soil is always the same through a series of checks and balances. Always $100 in circulation, being traded back and forth between citizens. Up and down and back around.
That’s the basis of what money is – dollars representing assets. Little pieces of paper with numbers which represent real assets to big and impractical to carry around. Thing is, people are always trading things. Where the US prints dollar bills which represent gold, a person from Spain may have a Spanish dollar which represents the value of a painting. But dollars have worth. Both dollars represent real assets. Those assets are not the same kind of assets. A painting is not gold. But the value may be greater or lower for either of them at any time. The values of those assets fluctuate which begs the question: how does the dollar represent anything real and steady?
The truth is that it doesn’t. The reason money does not fail constantly is because it’s being traded constantly – and not just with its own kind, but with other kinds. It’s being traded so much that it’s impossible to keep track of all of it. It’s also impossible to pinpoint hard failure. Occasionally the system realizes a failure and crashes – like the stock market crash. For the better part, it’s easier for the system to accept that a percentage of the value doesn’t exist and just cope to keep things running.
Ever see a Lira, Turkish money? It’s a banknote from Northern Europe that pretty much doesn’t exist much anymore. It’s amounts were printed in denominations of $5,000. $10,000. $100,000, etc. Their economy was so inflated that they actually printed bills to describe the ridiculousness of the financial situation. Inflation is what happens when the system realizes that there are no real assets to back to currency (dollars). When basic things, like water, suddenly get real expensive, that’s inflation – that means our dollars have lower value – it takes more of them to represent the value than before.
Right, so that’s all painfully complicated. Should give you a good reason to take a finance and statistics class. Anyway, let’s move along to credit, something I think we can all get behind.
So, here’s the dealio with credit. A private institution, who does have much gold, says ‘Hey, I have much gold. You have no gold. I’ll let you have some credit under my name. You give me your name, and I’ll give you a voucher saying that you can access some of my gold. At the end of a month, you must pay me back that gold, and a little more, since I loaned you some out of the kindness of my heart.’
Cool. Neat system. Wait. What? Give you my NAME?
In America you have the person and their name, and then their LEGAL NAME. This name represents you. Everything tied to money or legality is cited under your LEGAL NAME, verse your legal name. In legalese the capitals make the difference. When you file for bankruptcy you’re basically declaring that your LEGAL NAME has no money. That doesn’t mean you have no money.
The bank is lending you credit against the value of your LEGAL NAME [CAPITALS]. Your legal name [lower case] has no value as we don’t cut off people’s hands for not paying bills. Your LEGAL NAME [CAPITALS] has value, represents your avatar in The Game of Life. Your legal name [lower case], is you the player behind that avatar. Clear?
No? Okay, one more time. You’ve signed up to play a video game. When you sign up you’re provided with an avatar with a bag of gold. That’s for you, just for playing – for existing. The avatar is your LEGAL NAME [CAPITALS] – you are the player [legal name – lower case]. If shit in the game goes badly they stick your avatar [LEGAL NAME] in jail. The key is to understand that you can change your avatars name so that if something goes badly they only stick your avatar in jail, and not you, the player, also. Right now, your LEGAL NAME and legal name – avatar and player – are the same, which means if things go badly you both go to jail.
Anywho, banks take your LEGAL NAME as trade for gold and ask for the amount of gold back, and a little bit extra. Good credit is when you pay that gold back on time. Great credit is when you continue to borrow and continue to pay ontime over and over again, at larger and larger amounts. Everyone starts out at the middle with credit. Not really good, just under good. When you turn 18, that’s when your meh credit is the best. It’s the best because you have no points against you. You start with a credit score, call it just under good, or 650. If you start credit then, small amounts, and you pay that shit back on time, your credit will grow to good, to great, really quickly. Great is 800 or above. Good is in the 700’s. Seems like a stretch, right? Those numbers represent how much interest, or extra gold, yer gonna have to pay back.
Now, two things. In the interest of helping people continue to borrow the lenders won’t ask you to pay back the whole amount of the loan in full. You borrowed much gold. Cool. Instead of paying me back that much gold and little bit extra, just pay me back that little bit extra, and a portion of that much gold. That means your payment will be less than what you borrowed, but still a little bit more than the little bit extra. Get it?
The second, if, at 18 you don’t choose to credit, well, your score doesn’t go down. You stay at 650. But you do lose points. A lot of points actually. Every year you don’t play the credit game you lose points. They don’t like that you have not borrowed. That means when you try eventually, say at 30, sure, your credit is at 650… but in their eyes, it’s more like 400. Really bad. That little bit extra, it tends to be a lot. In fact, most of the time they gonna say, ‘sure, you can borrow much gold, but you have to pay back all that you borrowed, all that much gold, immediately. Like now.’
See, by not participating in The Game, the system, you’ve done something wrong. If you don’t play from the start then you are really gonna have to work to play later. The reason for this is that it’s likely that if you didn’t start playing at the start that it means you’re not gullible. I’m not saying playing from the start is a bad idea, it’s very practical if you want to be apart of this system. The system can provide you with easy housing, vehicles, abilities to buy, and to live. But by not playing you are are saying that you don’t want to be part of the system and anything that is not part of the system is dangerous. It means you may analyze the system and once you do, you may see things the system doesn’t want you to see. It’s arguable to say that if you play within the system you relinquish some of your human rights for the benefits of being protected. That’s the nature of our system.
And so the system says: ‘Why don’t you want to be apart of our system? What do you see that is unappealing? Why don’t you want our protection and convenience? We only take YOUR NAME. That’s a fair trade, right?’ Back to that whole value of gold thing, discussed before… I think it’s a bad idea to participate in a system whose worth is based in control.
Then again, I have an incredibly hard time buying a car, renting, buying a house, or getting a loan. The government doesn’t like me for not participating. Even though the banks are mostly private, they still fund and integrate with the government. The System. All together.
At this juncture, to participate in The Game, I have to prove myself. I have to show I’ve learned the errors of my ways and want to sell MY NAME for the benefits of ease and protection.
The easiest way to enter the system late is to get a prepaid card. That means I pay much gold first into a card and then I spend only what I’ve already put onto the card. No credit involved. Just like a debit card, except it wears the hat of a credit card and references to my credit score instead of my bank account. I do this again and again, by the rules, until I prove that I have much gold incoming, and that I can manage my gold accordingly. I begin to build up my credit score by proving that I can stay within the set parameters. My credit goes from bad, to medium, to good. Once my credit is good, I apply for a new card and begin to add credit like normal people at normal credit rates; then I add a loan of much gold, and now they give it to me, same as everyone else. It’s a process that can be done in a year. Not hard, but not instant either.
Then again, at 18 they probably won’t offer you a big loan either. So maybe it’s just the same, except at 18 it does feel more instant.
Ok, So credit down, let’s move onto banks and savings.
Banks come in a handful of forms. Private, Public, and Unions. The major ones will yell at you early. Chase, WellsFargo, Bank of America. They want your business. Each bank will offer mostly the same things: Checking and Savings accounts, debit cards, and credit. Each one comes with a series of benefits and drawbacks. A Checkings and Savings account has nothing to do with credit. That’s important to understand. When looking at a basic account contemplate, minimum balance, transaction fees, access, and overdraft fees. Some banks offer accounts where you must have $100 in your account at all times. If less, then they fine you a fee. Wells Fargo has $35 overdraft fee. It can happen at any time. Fuck Wells Fargo Transaction and ATM fees. Means that when you withdraw or transfer money they charge you for the pleasure of using their systems. It’s unnecessary. Credit Unions are better. They often have low or no fees and easy access. They just aren’t as well known. Worth looking into, especially if you live nearby your local Credit Union. Most will allow direct deposit and some sort of break for taxes. Good stuff. There are banks for Doctors, for Service (armed forces) for Welfare. There are banks categories offering certain benefits to any class of person. Choose wisely for your personal life circumstances. I wouldn’t send a grocery clerk to the same bank as an art student. Different money situations.
It’s good to save, if you can. The best way is to take a portion of every paycheck and put it in Savings. Open a second savings, so that if you have overdraw from Checking it comes out of Savings 1, which has $100 in it for just such occasions, and a second Savings, which can’t be touched unless you intentionally transfer money in or out of it. Save if you can. There is always a rainy day.
Alas, now we must talk about records. Records should be kept for 7 years. Make files. We all have them. Records include bank statements, paystubs, car charges (like payments, DMV stuff, pink slip and repairs), medical records (keep all that shit), and legal documents (passport, drivers license, rental records, credit reports). Some argue for saving receipts. It’s not a bad idea, especially if you work for yourself. You’ll need all of that for reference, for taxes, for accidents, for legal issues. Stuff you hope never to have to deal with and probably eventually will have to deal with, cause life can be a bitch. If you keep this shit and have a system for it life will be easier. Start at 18. Make one for every year. Spend one day every year organizing and detailing this shit. Me? I get yellow envelopes, like 7-10 of them, and I write on the envelope whats in them. This envelope has all my pay stubs. This one has my 2019 car shit, including insurance. This one has all of my W4’s. Quick reference. Sealed and easy. That’s my style. Some people do filing cabinets. Some people put this shit online. DO NOT PUT THIS SHIT ONLINE. Seriously. These are your personal details. If someone hacks your system, or the system breaks, it becomes a free for all, forever – most identify theft is people being dumb with their information. In many cases, hard documents are final. This is especially true of licenses, bonds, certificates, proof of ownership, deeds, wills. Hard copies. It’s not a bad idea to make copies of these serious bits and leave them in holding at a bank or a family members house, just for safekeeping. Fires can be real.
Lastly, I know this all seems like alot. Overwhelming. It’s really not. It will be if you don’t deal with it and dont organize it. If you start with a system, it will be easy to put stuff into the system and access the system. That’s the point of the system. Even if you don’t play with credit, to live in this world you’ll likely have to deal with a system at some time, play The Game. Don’t be afraid. Get a friend. Watch a youtube instructional. Read a Nolo Book. This doesn’t have to be overwhelming but you do have to try and participate. This is just one small thing of all the things that make adults adult.