Table of Contents

What is clear to see from these 11 points, is that money in itself is an illusion. A social agreement. Where 80% of the money of the world is held in contracts and agreements known as derivatives. My gut feeling is that there is a better way. What do you feel?

Money conveys the importance that people place on it


Todays, money conveys the importance that people place on it and is backed by a socially accepted agreement on what it represents. Hence, it is a mental construct and has the value and meaning we as humans give it. Without any tangible backing by real-world assets. Is money an illusion? let's explore that question in the coming sections and let you decide the meaning it has in your life.


Have you ever wondered how much physical 'money' is in the world?

There is approximately US$ 40 trillion in circulation

This includes all the physical money and the money deposited in savings and checking accounts.

Money in the form of investments, derivatives, and cryptocurrencies exceeds $1.3 quadrillion.

The U.S. equity markets are the largest in the world and continue to be among the deepest, most liquid, and most efficient, representing 41.1% of the $122 trillion global equity market cap, or $50 trillion.

STORY: What If money did not exist?

Perhaps the easiest way to think about the role of money is to consider what would change if we did not have it.

If there were no money, we would be reduced to a barter economy or resource-based economy (The venus project). Every item someone wanted to purchase would have to be exchanged for something that person could provide. For example, a person who specialized in fixing cars and needed to trade for food would have to find a farmer with a broken car. But what if the farmer did not have anything that needed to be fixed? Or what if a farmer could only give the mechanic more eggs than the mechanic could reasonably use? Having to find specific people to trade with makes it very difficult to specialize. People might starve before they were able to find the right person with whom to barter.

But with money,

  • you don’t need to find a particular person.
  • You just need a market in which to sell your goods or services.
  • In that market, you don’t barter for individual goods.
  • Instead, you exchange your goods or services for a common medium of exchange—that is, money.
  • You can then use that money to buy what you need from others who also accept the same medium of exchange.
  • As people become more specialized, it is easier to produce more, which leads to more demand for transactions and, hence, more demand for money.

To put it a different way, money is something that holds its value over time, can be easily translated into prices, and is widely accepted (agreed upon). Many different things have been used as money over the years—among them, cowry shells, barley, peppercorns, gold, and silver.

Money and the medium of exchange are valued, dependent on the relative value of the problem you can solve for another person. It's the reason why two people with similar skill sets can charge $100 versus $1000 or even $100,000 to solve a similar problem for different people.

Example: Someone with a billion dollars, who lost their health, might be willing to pay over half of that to solve their health challenge. Whereas someone who is healthy, may not be willing to pay 1 cent.

What would happen if one day, we decided that silver was more valuable than gold? or bitcoin (or something new!) was a better and safer store of value? How would the mental construct of money change for the future? What would happen to the value of gold, silver, and bitcoin in a relative sense?

While early currency derived its value from the content of precious metal inside of it,

Today's fiat money is backed entirely by social agreement and faith in the issuer.

Money is backed by what we socially agree on something to be worth. No longer by physical assets. This is why people argue that money is an illusion. We give it value, not the other way around.  

1. History of '"money" and Barter

Money–in some way, shape, or form–has been part of human history for at least the last 3,000 years. Before that time, historians generally agree that a system of bartering was likely used.

Bartering is a direct trade of goods and services; for example, a farmer may exchange a bushel of wheat for a pair of shoes from a shoemaker. However, these arrangements take time. If you are exchanging an ax as part of an agreement in which the other party is supposed to kill a woolly mammoth, you have to find someone who thinks an ax is a fair trade for having to face down the 12-foot tusks of a mammoth. If this doesn't work, you would have to alter the deal until someone agreed to the terms.

  • Barter: Before money, people acquired and exchanged goods through a system of bartering, which involves the direct trade of goods and services.
  • The first region of the world to use an industrial facility to manufacture coins that could be used as currency was in Europe, in the region called Lydia (modern-day Western Turkey), in approximately 600 B.C.
  • The Chinese were the first to devise a system of paper money, in approximately 770 B.C.
  • Money enables anyone who possesses it to participate as an equal market player. When consumers use the money to purchase an item or service, they are effectively making a bid in response to an asking price.
  • Currency: In modern economies, the medium of exchange is currency.
  • According to some theories, money is inherently an intangible concept, while the currency is the physical (tangible) manifestation of the intangible concept of money.
  • The basic form of money is numbers; today, the basic form of currency is paper notes, coins, or plastic cards (e.g. credit or debit cards).

2. What is money backed by?

  • Fiat money is both physical money and legal tender and is backed by a nation's government. No longer gold or silver as of 1971.
  • Representative money is backed by a physical commodity such as precious metals or instruments like checks and credit cards.
  • Before 1971, the world's currencies were representative and backed by gold and silver. Until Congress changed this. Today, it is backed by..... nothing tangible.
  • Fiat money is subject to the effects of inflation, during which time it may lose its value in the global markets.
  • Todays, money conveys the importance that people place on it and is backed by a socially accepted agreement on what it represents. Hence, it is a mental construct and has the value and meaning we as humans give it. Without any tangible backing by real-world assets.
  • To prove this point, if all of us were to withdraw all of our money and savings from the central banks of the world. The simple truth is that they wouldn't have it.
  • Why? 92% of money doesn't actually exist. Only 8% of the money is real, tangible, and in circulation. This means that 92% simply numbers on a screen, subject to the rules and regulations of the governing bodies. The federal reserve, central banks, investors, and our governments
  • We simply need to hope that the 1% who owns 99% of the world's wealth will act in our best interest.
  • However, in 2020, we have seen the rich get richer. Over 600 billionaires were added to the list of 2000 previous billionaires, the 10 richest families made record profits, as did the leading fortune 500 companies.
  • Meanwhile, over 150 million people were pushed into extreme poverty, whilst 10% of the population and under 65,000 individuals made record profits. More money than they could spend in 5 lifetimes.

These are sobering thoughts that make you question whether we as humans are building longer tables or simply higher fences. I'll let you connect the dots for yourself to decide an answer to that. It might be worthwhile to take note of your current financial balance sheet and the cost of everyday goods next time you go to the store. Is life becoming easier or harder for you?

3. Why did we value gold?

Simply speaking, no natural substance has an inherent value aside from the value that human beings place on it.

What this means is, gold and silver are only considered valuable – and have been for thousands of years – because we decided it was precious. When it comes down to basic survival, modern humans are learning that freshwater, fresh air, and food are arguably more valuable than gold. The challenge of perceived value is that it is not rare. It is free and readily available until it's not.

4. What is more valuable than gold?

If we're stranded on a desert island with a million gold bars, we would exchange them for fresh food and water in an instant. Whether the other person would exchange their food and water for a million gold bars is the medium for exchange. The two parties would have to decide what is more valuable to them at that moment. If it was me, I would keep the water and food. No amount of gold would be worth my health or survival.

If you survived and the other person didn't, then I'm sure you would be able to keep their gold anyway. If human compassion and empathy came into play, then you would probably share your food and water in the hope that you both survive. If you did, I'm sure the person holding the gold would share his precious metals with you anyway. As a way of saying thanks for helping save their life too.

The value we place on metal comes from a simple equation we have in our minds. It's abundant enough to create coins but rare enough so that not everyone can produce them. Gold doesn't corrode, providing a sustainable store of value, and humans are physically and emotionally drawn to it. Societies and economies have placed value on gold, thus perpetuating its worth.

From a subjective sense, we can also link it to the Egyptians, Aztecs, and other ancient civilizations that created its value through its use of exchange as something rare and beautiful for kings and queens. We simply valued it because it was shiny and a sign of beauty and status. The public simply followed suit and centuries later,  here we are. I imagine what would have happened if the leaders of ancient civilizations valued something else instead, like diamonds or silver? Would our modern economy be backed by that instead?

5. Value - medium of exchange defined

A medium of exchange is an intermediary instrument or system used to facilitate the sale, purchase, or trade of goods between parties. For a system to function as a medium of exchange, it must represent a standard of value. Further, all parties must accept that standard. In modern economies, the medium of exchange is currency.

6. Financial instrument defined

Simply speaking "Money is a tool. A financial instrument. Something we as human beings mentally constructed as a medium for exchange, representing a subjective and agreed-upon value between two parties.

Financial instruments are assets that can be traded, or they can also be seen as packages of capital that may be traded. Most types of financial instruments provide efficient flow and transfer of capital all throughout the world's investors. These assets can be cash, a contractual right to deliver or receive cash or another type of financial instrument, or evidence of one's ownership of an entity.


  • A financial instrument is a real or virtual document representing a legal agreement involving any kind of monetary value.
  • Financial instruments may be divided into two types: cash instruments and derivative instruments.
  • Financial instruments may also be divided according to an asset class, which depends on whether they are debt-based or equity-based.
  • Foreign exchange instruments comprise a third, unique type of financial instrument.

7. Money Defined

Money is an economic unit that functions as a generally recognized medium of exchange for transactional purposes in an economy.

In short, money can be anything that can serve as a

  • store of value, which means people can save it and use it later—smoothing their purchases over time;
  • unit of account, that is, provide a common base for prices; or
  • medium of exchange, something that people can use to buy and sell from one another.

Money provides the service of reducing transaction costs, namely the double coincidence of wants. Money originates in the form of a commodity, having a physical property to be adopted by market participants as a medium of exchange. Money can be: market-determined, officially issued legal tender or fiat moneys, money substitutes, and fiduciary media, and electronic cryptocurrencies.

Money, whether it's represented by a metal coin, a shell or a piece of paper, doesn't always have value. Its value depends on the importance that people place on it—as a medium of exchange, a unit of measurement, and a storehouse for wealth.

Money conveys the importance that people place on it

This means that money is an illusion, a mental construct for what it represents. Where 92% + of "money" doesn't actually exist. Simply numbers on a screen, with agreed contracts and value for what it represents. Interesting thought to consider what role "money" plays in our own lives and decisions.

8. Currency defined

Currency is a medium of exchange for goods and services. In short, it's money, in the form of paper or coins, usually issued by a government and generally accepted at its face value as a method of payment.

Currency is the primary medium of exchange in the modern world, having long ago replaced bartering as a means of trading goods and services.

In the 21st century, a new form of currency has entered the vocabulary, the virtual currency. Virtual currencies such as bitcoins have no physical existence or government backing and are traded and stored in electronic form.

9. Fiat currency defined

Fiat money is a government-issued currency that is not backed by a physical commodity, such as gold or silver, but rather by the government that issued it.

The value of fiat money is derived from the relationship between supply and demand and the stability of the issuing government, rather than the worth of a commodity backing it. Most modern papercurrencies are fiat currencies, including the U.S. dollar, the euro, and other major global currencies.

  • Fiat money is a government-issued currency that is not backed by a commodity such as gold.
  • Fiat money gives central banks greater control over the economy because they can control how much money is printed.
  • Most modern paper currencies, such as the U.S. dollar, are fiat currencies.
  • One danger of fiat money is that governments will print too much of it, resulting in hyperinflation.

10. Cryptocurrency defined

A cryptocurrency is a digital or virtual currency that is secured by cryptography,  a kind of electronic encryption that makes it nearly impossible to counterfeit or double-spend.

Many cryptocurrencies are decentralized networks based on blockchain technology—a distributed ledger enforced by a disparate network of computers. A defining feature of cryptocurrencies is that they are generally not issued by any central authority, rendering them theoretically immune to government interference or manipulation.

11. Derivatives defined (80% of the money)

Derivatives are financial contracts that are designed to create market price exposure to changes in an underlying commodity, asset, or event.

In general, they do not involve the exchange or transfer of principal or title  (Randall, 2001). A derivative is defined by the BIS (1995) as

“a contract whose value depends on the price of underlying assets,  but which does not require any investment of principal in those assets“.

What is clear to see from these 11 points, is that money in itself is an illusion. A social agreement. Where 80% of the money of the world is held in contracts and agreements known as derivatives, speculating future growth and decline on a macroeconomic scale. Hedged bets. My gut feeling is that there is a better way. What do you feel?


Is it possible to have a resource-based economy created on decentralized systems?

Many ideas were once a dream that made their way into our conscious realities. From the wright brothers and the thought of traveling in a metal cylinder across the Atlantic. The worldwide web is a way to connect people with our telephone wires, wirelessly. As if by magic. The ability for everyday people to travel beyond Earth's atmosphere and maybe even visit mars and beyond one day. The point is this. If we can consciously engineer these innovations into reality, then why not a resource-based economy where everyone wins and meets their basic human needs without collateral damage to the natural environment. Building a hybrid economy like this, combined with a decentralized "financial" system as a medium for peer-to-peer exchange, could be the solution we have all been waiting for.

The only challenge is that the 1% that owns 99% of the world's resources, assets, and money in the current centralized system of money, governments, and central banks. However, these systems only have value if we choose to play in them. Ultimately money is a social agreement on what it represents. If one day we all agree on a different "social and mental construct" of what money is and how it is exchanged. We may find that we 'the people", the "majority", the 99%, have had the power all along. It doesn't need to be an us versus them mentality either. If the top 1% can one day realize that they have more than enough to live 100 lifetimes, then perhaps we can create a new world, where we focus on building longer tables, not just higher fences. Letting go of old paradigms that there is only one scarcity pie to be split by the many. Replacing it with an abundant pie that can grow, self-sustain, regenerate, and be shared/distributed value that can move with ease and flow to the people and areas of the world that need it most.


What do you feel would be best? A centralized economy like we have today? Or a decentralized and resource-based economy, where everyone wins together.

COMMENT below and share any thoughts, resources or ideas.


Our reference guidelines HERE

With all our REFERENCES We have done our best to reference everyone’s expert opinions, peer-reviewed science, and original thoughts, HIGHLIGHTED IN THE TEXT.  So that you can go direct to the source as you read.

Join the conversation

Great! You’ve successfully signed up.
Welcome back! You've successfully signed in.
You've successfully subscribed to Lifestyle Medicine with Rory Callaghan.
Your link has expired.
Success! Check your email for magic link to sign-in.
Success! Your billing info has been updated.
Your billing was not updated.