Muhamed Ahmed

When we think of money, we picture banknotes, digits in our accounts, and the ‘money’ we use every day. But that is a huge misunderstanding — because the truth is, that’s not really money.

Have we ever been taught in school or university what money actually is? It seems like such a simple question with an obvious answer — right?

The fact is, most people, including Muslims, get it wrong. Seriously, ask your friends, your family — anyone. Chances are, they’ll miss it. Why? Because we’ve never been taught the real answer. And honestly, it might not be a coincidence.

So… what is money? Let’s see what the Bank of England has to say:

“What counts as Money?” (source)

“The first role of money is to be a store of value- something that is expected to retain its value in a reasonably predictable way over time. Gold or silver that was mined hundreds of years ago would still be valuable today” (source)  – So think of it as something that doesn’t really get affected by inflation, and hence won’t lose its value.

Money’s second role is to be a unit of account. The thing that goods and services are priced in terms of. For example, the price of items you see on menus and tags. Pound is currency of the United Kingdom, but it could be a type of good instead. It could also be barter: ‘give me 5 goats if you want my new horse.’

Third, money must be a medium of exchange — and this means that it is regularly used to buy goods and services.

To call something “money,” the Bank of England confirms, it must have:

• Store value
• Be a unit of account
• Act as a medium of exchange

But here’s the problem – does the “money” we use today actually store value? No. In fact, it loses value over time thanks to inflation and endless currency creation.

The Bank of England even admits: “Gold or silver that was mined hundreds of years ago would still be valuable today.”

But notice what they don’t say – they don’t mention that pounds, dollars, or euros from a hundred years ago hold the same value today. Why? Because the truth is – they don’t.

So can we really call pounds, euros, and dollars ‘money’ if they fail the basic test of holding value?

It’s something worth thinking about. From 1975-2015, a total of 40 years, we have lost over 88% of our purchasing power:

(source)

The Bank of England claims that one of its main goals is to “safeguard the value of the currency” But how can that be true when the pound has lost over 88% of its purchasing power? If their job is to protect the value of our currency, it looks like they’re failing – badly. Would you trust someone to guard your house if 88% of it was gone?

The Bank of England admitted that “the medium of exchange needs to be a good store of value”.  But let’s be real – how can our current pounds, euros, and dollars be called a “store of value” when they’ve lost over 88% of their purchasing power? If something isn’t a good store of value, can we really call it money?

The matter of the latter is that: the currencies we use today (dollars, euros, pounds, etc.) aren’t actually money. They’re what’s known as fiat currency – backed by nothing, but trust. So, the next time someone calls pounds or dollars ‘money’, they’re wrong.

And If someone tries to argue with you, here’s a simple response to them:

“Do you think that money should be a store of value?”

If they say yes, show them this fact which was given in the above Figure. Then explain how a currency that has lost over 88% of its value can be considered a good store of value? And if they say no, claiming money doesn’t need to be a store of value – well… they’re still wrong. Just point them to Bank of England quotes and the history of fiat currencies failing due to their poor store of value – it speaks for itself.

Saying fiat currency is “money” is like calling a shadow a real person. You need to differentiate between the two. Chinese Philosopher Confucius said:

“If names be not correct, language is not in accordance with the truth of things. If language be not in accordance with the truth of things, affairs cannot be carried on to success” – (source)

If we are not getting our names and definitions right, we’re blinding ourselves from the truth. The more we misuse the word “money,” the further we drift from reality – like burying our heads in the sand. And when the truth becomes uncomfortable, we cling to ignorance as an excuse. But pretending not to see the problem doesn’t make it disappear – it just leaves us vulnerable.