Money in One Lesson combines history with economics to break down money, which as the front cover so aptly puts it – we spend it, we save it, we never have enough of it, but how does it actually work?
In an interesting and easy to understand manner, Gavin Jackson helps you better understand money (along with my favorite parts – tidbits of history, to add to your trivia knowledge). From bartering to precious shells, gold coins to government currencies and bitcoin, he traces each form of payment throughout history. He explains where our faith in money comes from, how it is sustained, what it allows a society to do and what we can do with it in the future. His hope is that by reading this book, you will be able to watch the news and understand financial pieces, like why interest rates go up and currencies fluctuate.
4 things I learnt from Money in One Lessons
1. Money is Social
Money, like language is social. It gets its meaning from everyone using the same one and its value lies in the fact that we believe it holds value. It’s a collective agreement and if we all recognize the same thing as money, it works. It only exists as a relationship between people making it inherently social (even though money or talking about money is often considered antisocial).
2. World history is financial history
Throughout history as different countries have become more and less powerful, so has their money. This has allowed them to influence the world in new ways – shaping it in line with their interests and values. If you want to change the way the world works, you probably want to change the way money works (as demonstrated by the person who created Bitcoin).
3. For currency to work it needs to fulfil 3 functions
Money is only valuable to the extent that we believe it is and trust that we can use it to acquire goods and services. After all, it’s (oftentimes) not money we want, but what money can get us.
For currency to work it must fulfill three functions.
- It must be relatively stable
- It must be easy (and relatively inexpensive) to transact with
- It must have a large market willing to use it
4. The history of Cryptocurrencies
During the financial crisis of 2008, a person who goes by the name of Satoshi Nakamoto came up with the idea of bitcoin (their real identity is still unknown). They published a paper detailing the mathematics that could provide the foundation for an alternative vision: bitcoin, a kind of digital money that could be kept out of the hands of governments and corporations.
The first block of the bitcoin blockchain, the technology that underpins the digital currency, was ‘mined’ by Nakamoto in the early 2009s. Inside that code was a reference to a newspaper headline – a string of text that said, ‘The Times 03/Jan/2009 Chancellor on the brink of second bailout for banks.’ This both recorded the date of when it was first created and the foundation of this new project, criticism of the relationship between the state and an unstable banking sector. Bitcoin uses mathematics as a substitute for authority and reputation. Users can remain anonymous, and the promise of bitcoin is to create a digital equivalent to cash or gold: anonymous, private and relatively stable value.
The failure of bitcoin to catch on with the public is its failure to fulfil the three traditional functions of currency: Their price has been extremely volatile, they’ve struggled as a means of exchange because of the volume of computing power needed to make them secure, which has made small transactions expensive. Lastly, the size for the potential market is limited. Most people aren’t concerned with their online privacy, so the demand for a limited currency is limited.
The book is jammed with useful information that will help you understand money better. It’s a book we can all learn from and one that those who have an interest in economics, finance or history would particularly enjoy.