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Paper Promises

Money, Debt and the New World Order

By Philip Coggan
13-minute read
Paper Promises: Money, Debt and the New World Order by Philip Coggan

Paper Promises offers a sobering take on the nature of money, the recent global financial crisis and what our attitudes about debt will mean for future generations.

  • Anyone who is deeply in debt
  • Students of history and economics
  • Older generations who struggle to understand why young people have so much debt

Philip Coggan is a columnist at The Economist and has written a number of books, including The Money Machine and The Economist Guide to Hedge Funds. For 20 years he has also worked at The Financial Times, most recently as investment editor.

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Paper Promises

Money, Debt and the New World Order

By Philip Coggan
  • Read in 13 minutes
  • Contains 8 key ideas
Paper Promises: Money, Debt and the New World Order by Philip Coggan
Synopsis

Paper Promises offers a sobering take on the nature of money, the recent global financial crisis and what our attitudes about debt will mean for future generations.

Key idea 1 of 8

Bartering a loaf for a lamb was how trade was done in early times. Today, money moves markets.

If money is just ink on paper, why is it that we worship it so? The answer rests in how we use it.

Money’s primary function is as a medium of exchange. Before we used money, deals were settled through bartering. If you were a baker, for example, and you wanted a pair of pants or a leg of lamb, you could find a shepherd and trade. If you gave him 100 loaves of bread, he’d give you a lamb.

But what if the shepherd had no need for bread? You’d then have to find something he did want, perhaps a new knife. You’d then have to find a blacksmith (who needs bread) to make the knife, which you could trade for the lamb.

Trying to find the right thing to trade could lead to some intricate, time-consuming bartering. Money cuts through this confusion: if you want something, you simply exchange it for money, which the seller can then use to buy something else. The transaction is simple, and direct.

Money also functions as a unit of account, or a means of measuring a product’s value.

To trade an item, we need to understand its worth. Bartering makes this difficult. Could you say accurately how many lambs one knife is worth? Or does it depend on the needs and resources of the shepherd and the blacksmith?

Money makes valuation easy, as beforehand its value is agreed upon.

Finally, money can be used to store value, for example, by maintaining the value of a specific product.

Most of the world’s countries keep the value of their money more or less stable to foster investment and prevent inflation, in which prices rise but the value of money decreases.

Understanding money’s many functions is essential to understanding the way it can influence the economy and society.

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