Money unexplained
So.. it started with an innocuous conversation about couches, and how they fold down so people can sleep on them. My 5 year old daughter, Ruth, then commented on how people should sleep on couches. I begged to differ. I told her a story of a bad man who was lousy with money, squandering it whenever he earned it and who ended up homeless and sleeping on friends' couches when his wife left him.
I reiterated that we are a sensible stable family who doesn't go shopping for toys and prefer to spend on sensible things like our house. WE didn't want to end up sleeping on couches. Then she said, 'Imagine a world where everyone had all the money they needed and they could buy all the toys they wanted.'
How do you explain how it is the restriction of money that makes it valuable, that hyper inflation (ie. where everyone has unlimited amounts of money) makes things worthless?
I pushed my reluctant memory to the days of microeconomics and EconB, the first economics module we had in university.
Me: Ummmm, in the past, people would trade things instead of money to get what they wanted. What can I give you for you to give me baby rabbit?
R: nothing. i will never give baby rabbit away.
Z: What about this clay cat? What will you accept for this cat?
R: One stripy suitcase.
Z: So, what if someone else says that they want 2 stripy suitcases for a dress? It would be heavy to carry around 20 suitcases around just to buy they things we need! Hence we have money, and paper money represents the value of a stripy suitcase. But money always represents something real and since there are a limited amount of suitcases in the world, not everyone can have all the money they need.
R: or the world will be full of suitcases
But how do I explain how money now doesn't represent anything real, not really? It's not backed by gold or anything. It is a promise based on the current economy...
In conclusion, i'm all mixed up now.
Actually, i'm not mixed up. I am going to reopen this conversation about money tomorrow, whether my child likes it or not and re explain this! There's nothing like writing things down to clear the thought process.
The end.