Money has fulfilled this vital role for thousands of years. Before its invention, people bartered, swapping goods they produced themselves for things they needed from others. Barter is sufficient for simple transactions, but not when the things traded are of differing values, or not available at the same time. Money, by contrast, has a recognized uniform value and is widely accepted. At heart a simple concept, over many thousands of years it has become very complex indeed.

At the start of the modern age, individuals and governments began to establish banks, and other financial institutions were formed. Eventually, ordinary people could deposit their money in a bank account and earn interest, borrow money and buy property, invest their wages in businesses, or start companies themselves. Banks could also insure against the sorts of calamities that might devastate families or traders, encouraging risk in the pursuit of profit.

Today it is a nation’s government and central bank that control a country’s economy. The Federal Reserve (known as “The Fed”) is the central bank in the US. The Fed issues currency, determines how much of it is in circulation, and decides how much interest it will charge banks to borrow its money. While governments still print and guarantee money, in today’s world it no longer needs to exist as physical coins or notes, but can be found solely in digital form.

This book examines every aspect of how money works, including its history, financial markets and institutions, government finance, profit-making, personal finance, wealth, shares, pensions, Social Security benefits, and national and local taxes. Through visual explanations and practical examples that make even the most complex concept immediately accessible, How Money Works offers a clear understanding of what money is all about, and

how it shapes modern society.