Eugene Cho

faith and money [2]: what is money?

The basic lesson that all people need to learn about money is that it is a tool as a medium of exchange.  Money has a purpose in our society.  In this post, I want to simply cut and paste a good defintion of money that explains what it is.  In the next post, I’ll expand on the idea that money is neutral in the eyes of Scripture.  It is neither inherently evil or good.  Simply, money is what it is.  But because it is neutral, one must choose how to use money.

And while some Christians are misled in thinking that money is the root of all evil, the Bible and Jesus makes a distinction between money [tool] and mammon [lust].  Money as a tool, per se, isn’t criticized.   In a later post, I’ll share [in my opinion] how much should be used for as Christians without falling into the temptation of mammon.  So, what is money?

Part I: Where is Your Treasure?

What is Money? [Investopedia]

Before the development of a medium of exchange, people would barter to obtain the goods and services they needed. This is basically how it worked: two individuals each possessing a commodity the other wanted or needed would enter into an agreement to trade their goods.

This early form of barter, however, does not provide the transferability and divisibility that makes trading efficient. For instance, if you have cows but need bananas, you must find someone who not only has bananas but also the desire for meat. What if you find someone who has the need for meat but no bananas and can only offer you bunnies? To get your meat, he or she must find someone who has bananas and wants bunnies …

The lack of transferability of bartering for goods, as you can see, is tiring, confusing and inefficient. But that is not where the problems end: even if you find someone with whom to trade meat for bananas, you may not think a bunch of them is worth a whole cow. You would then have to devise a way to divide your cow (a messy business) and determine how many bananas you are willing to take for certain parts of your cow.

To solve these problems came commodity money, which is a kind of currency based on the value of an underlying commodity. Colonialists, for example, used beaver pelts and dried corn as currency for transactions. These kinds of commodities were chosen for a number of reasons. They were widely desired and therefore valuable, but they were also durable, portable and easily stored.

Another example of commodity money is the U.S. currency before 1971, which was backed by gold. Foreign governments were able to take their U.S. currency and exchange it for gold with the U.S. Federal Reserve. If we think about this relationship between money and gold, we can gain some insight into how money gains its value: like the beaver pelts and dried corn, gold is valuable purely because people want it.

It is not necessarily useful – after all, you can’t eat it, and it won’t keep you warm at night, but the majority of people think it is beautiful, and they know others think it is beautiful. Gold is something you can safely believe is valuable. Before 1971, gold therefore served as a physical token of what is valuable based on people’s perception.

Impressions Create Everything
The second type of money is fiat money, which does away with the need to represent a physical commodity and takes on its worth the same way gold did: by means of people’s perception and faith. Fiat money was introduced because gold is a scarce resource and economies growing quickly couldn’t always mine enough gold to back their money requirement. For a booming economy, the need for gold to give money value is extremely inefficient, especially when, as we already established, value is really created through people’s perception.

Fiat money, then becomes the token of people’s apprehension of worth – the basis for why money is created. An economy that is growing is apparently doing a good job of producing other things that are valuable to itself and to other economies. Generally, the stronger the economy, the stronger its money will be perceived (and sought after) and vice versa. But, remember, this perception, although abstract, must somehow be backed by how well the economy can produce concrete things and services that people want.

That is why simply printing new money will not create wealth for a country. Money is created by a kind of a perpetual interaction between concrete things, our intangible desire for them, and our abstract faith in what has value: money is valuable because we want it, but we want it only because it can get us a desired product or service.

How Is It Measured?
Sure, money is the $10 bill you lent to your friend the other day and don’t expect back anytime soon. But exactly how much money is out there and what forms does it take? Economists and investors ask this question everyday to see whether there is inflation or deflation. To make money more discernible for measurement purposes, they have separated it into three categories:

M1 – This category of money includes all physical denominations of coins and currency, demand deposits, which are checking accounts and NOW accounts, and travelers’ checks. This category of money is the narrowest of the three and can be better visualized as the money used to make payments.

M2 – With broader criteria, this category adds all the money found in M1 to all time-related deposits, savings deposits, and non-institutional money-market funds. This category represents money that can be readily transferred into cash.

M3 – The broadest class of money, M3 combines all money found in the M2 definition and adds to it all large time deposits, institutional money-market funds, short-term repurchase agreements, along with other larger liquid assets.

By adding these three categories together, we arrive at a country’s money supply, or total amount of money within an economy.

How Money Is Created
Now that we’ve discussed why and how money, a representation of perceived value, is created in the economy, we need to touch on how the central bank (the Federal Reserve in the U.S.) can manipulate the money supply.

Among other things, a central bank has the ability to influence the level of a country’s money supply . Let’s look at a simplified example of how this is done. If it wants to increase the amount of money in circulation, the central bank can, of course, simply print it, but as we learned, the physical bills are only a small part of the money supply.

Another way for the central bank to increase the money supply is to buy government fixed-income securities in the market. When the central bank buys these government securities, it puts money in the hands of the public. How does a central bank such as the Federal Reserve pay for this? As strange as it sounds, they simply create the money out of thin air and transfer it to those people selling the securities! To shrink the money supply, the central bank does the opposite and sells government securities. The money with which the buyer pays the central bank is essentially taken out of circulation. Keep in mind that we are generalizing in this example to keep things simple. (For more information, see the Federal (the Fed) Reserve Tutorial.)

Remember, as long as people have faith in the currency, a central bank can issue more of it. But if the Fed issues too much money, the value will go down, as with anything that has a higher supply than demand. So even though technically it can create money “out of thin air,” the central bank cannot simply print money as it wants. [Investopedia]

Filed under: religion

4 Responses

  1. Ron says:

    The Federal Reserve is Guilty of Helping Create the Global Financial Meltdown

    Many investors and concerned citizens around the world are showing their outrage at what the Federal Reserve has done to the American economy with their easy money policies which caused the credit & real estate bubble and subsequent global financial meltdown.

    Join the thousands who are signing & commenting on the Abolish the Federal Reserve Petition at

  2. […] Eugene Cho discussed today the need to learn to treat money as nothing more than a tool. Eugene’s thoughts and mine on this issue aren’t completely congruent but his thoughts are no less worth consideration. […]

  3. […] series on Faith and Money.  You can the previous entries here:  [1] Where is Your Treasure, [2] What is Money, and [3] Control or […]

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One Day’s Wages

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the action of working with someone or a group of others  to produce or create something.

May we hold our logos, egos, and tribalism have their place. May we hold them loosely for they too shall pass. May we collaborate for the sake of the greater Kingdom of God ... which endures forever. As we honor Rev. Dr. Martin Luther King, Jr., don't forget the God behind the man. The one true God who deposited this dream into MLK is still speaking to us today. Are we listening?

Be courageous. Be brave.

Being invited by the King Family to speak at the MLK worship service at Ebenezer Baptist Church in 2016 remains one of the most unexpected honors of my life. On the right is his daughter, Dr. Bernice King and his sister, Dr. Christine King Farris. Walking throughstreet markets in different parts of the world is the best. Soaking in the culture. Listening to the local language and music. Enjoying the amazing cuisine. Meeting new friends. Praying for the Gospel to penetrate. #ChiangRai Blessed be the local, indigenous leaders for it is they who live in the very communities they seek to love. For it is they who understand their context and culture...better than a Westerner ever will. For it is they who will continue to tenaciously pursue a better world with hope, justice and love when visitors like me leave.

Yes, blessed be the local, indigenous leaders. What an honor and privilege to celebrate with the on-the-ground local @thefreedomstory team to celebrate the recent opening of their Education and Resource Center for the local youth in Chiang Rai, Thailanf. This was made possible through a partnership and matching grant by @onedayswages and The Freedom Story.

While it was an honor to be there to cut the cord and say a few words, this is an example of collaboration. Much love to the Freedom Story team including their co-founders Tawee Donchai and @Rachel Goble, to their staff who live in the community, who understand their context and culture, and who tenaciously pursue a better world with hope, justice and love. And of course, much love to the students themselves for they each matter. Finally, to each person that donated to @onedayswages to make this grant possible.

May hundreds and even thousands of youth be impacted, encouraged, and mentored. May they capture a glimpse of God's love for them.

Photo: @benjaminedwards Part 2 on my wrestling with the complex issue of human trafficking. In part, documenting my trip to Thailand for listen, learn, and visit one of our partner orgs @thefreedomstory. More to come.

There's such painful and poignant irony in pursuing justice...unjustly. One way we do this is when we reduce people into projects...and thus, propagating the dangerous power dynamic of US as heroes and THEM as helpless and exclusively as victims. So dangerous.

Human trafficking is not just an issue. It’s ultimately, about people. Depending on the sources of statistics, there are anywhere from 29-40 million people in some form of forced labor and slavery, including sex trafficking.

And one thing I’ve learned, personally, is how easy it is easy to reduce people into projects which is why mutuality, reciprocity, and dignity are so vital. These are critical because God never intended people to be reduced into projects.

We forget this and we indirectly foster a culture and system of victimization or worse, the pornification of the poor or in this case, "the trafficked." And when you start dehumanizing the poor or trafficked, you have no genuine desire to build relationships with them. You believe or build stereotypes in broad strokes, singular, black and white narratives that have been told about them. You believe the lie that they have nothing to teach us and are incapable of contributing to the larger society.

Lord, break our hearts for the things that break your heart. Give us eyes to see others through your eyes. Give us humility so that we acknowledge our own need to learn and grow. (Photo via @thefreedomstory)

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