Wealth is sweat. Wealth is taking something, or sometimes nothing, and by your labor making something others will trade their labor for.
Suppose you labored for a week, and earned a bushel of grain. At that rate, one bushel of grain has value equal to one weeks work.
You plant the grain, and after twenty six weeks of labor, you harvest 41 bushels of grain.
After taking out a bushel for seed for the next crop, you have 40 bushels left. Which you can sell, in return for 40 weeks labor. So you have turned one week’s labor into wealth. The bushel you keep represents the original cost of the grain. And you have created forty weeks worth of labors worth of wealth.
It does not matter what you do, taking mud that is free for the taking and turning it into bricks is one of the oldest ways of creating wealth in human history. And far more wealth has been created by brick making than gold mining. But mining gold is another way to create wealth. In fact, almost any labor that adds value to something creates new wealth.
That leads to a very simple definition of wealth. Wealth is labor. No more, and certainly no less.
But what about money? Money is a stand in for wealth. In the example above, the farmer with 40 bushels of grain to spare can expect to trade that grain for 40 weeks of labor. But perhaps he does not need 40 weeks of labor. He needs a new well, food for the family, a bullock to help plow, perhaps. And paying for these things in bushels of grain is often awkward.
So “money” was invented. Instead of a bushel of grain being worth six days labor, it was worth a dozen of the seashells called “thals,” each valued at one twelfth of the value of a bushel of grain. A half days work, from sunup to noon, or noon to sunset. A dozen thals would buy a bushel of grain, and one would hire a man for a half a day. But seashells in any size and type can be picked up on the beach.
So shells did not make very good money. The temporary solution was to put a mark on it, a sort of “IOU a half days labor,” with the grain buyers mark on it. When the grain seller needed labor, he took a man’s thal, his IOU, and went to him to collect.
And of course, there were problems. There always are. The most important was that the thal represented an awkwardly large amount of labor. Many small jobs did not take a half a day, so a smaller denomination of money was needed. So other shells were selected and marked to be small change. Just as we have dollars, halves, quarters, dimes, nickels, and pennies, so did the ancients have different types of shells, each marked by someone and representing some fixed amount of labor.
The marks were the thals downfall. It was too easy for Shum or Aano to say that was not his mark, and refuse to work out his debt.
Fortunately, an outcropping of nearly pure metal was found, and the headman started making coins in the various denominations. At the same time, he decreed that anyone with a taler was entitled to so much work in return for the coin, and the taler coin was worth a half days labor for anything a villager might have to sell. And so “money” as a medium of exchange was created.
BUT – and it is a very important but, money has no intrinsic value other than the value of the metal, or paper, that it is made of. You cannot eat money, you cannot drink money.
The only thing you can do with money is trade it for something of value to you. Something that has been created or transported by someone’s labor.
Therefore, the value of money is in the value of the labor that it will buy. No more, and no less. It does not matter if a days work is worth a Yankee dollar, as it was in the United State’s first century, or if it is in some other currency. Wealth is the product of labor, while money is a representation of labor.