With the massive expansion of trade that accompanied the discovery of the Americas and the growth of nation states in Europe in the 16th and 17th centuries, individuals began to think in more detail about the idea of economics. They variously suggested that controlling the level of imports (mercantilism), trading only in the goods a country made best (comparative advantage), or choosing not to intervene in the markets (laissez-faire) might improve their people’s economic well-being. In the 18th century, economist Adam Smith proposed that government intervention—controlling wages and prices—was unnecessary because the self-interested decisions of individuals, who all want to be better off, cumulatively ensure the prosperity of their society as a whole. In addition, he believed that in a freely competitive market, the impetus to make profit ensures that goods are valued at a fair price.
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.
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.
People originally traded surplus commodities with each other in a process known as bartering. The value of each good traded could be debated, however, and money evolved as a practical solution to the complexities of bartering hundreds of different things. Over the centuries, money has appered in many forms, but, whatever shape it takes, whether as a coin, a note, or stored on a digital server, money always provides a fixed value against which any item can be compared.
In his 1935 book General Theory, John Maynard Keynes argued that government spending and taxation levels affect prices more than the quantity of money in the economy. He proposed that in times of recession a government should increase spending to encourage employment, and reduce taxes to stimulate the economy.
For investors trying to decide whether a particular company represents a good investment opportunity, net income helps them to understand the way the business is run and is a guide to the real profit the company is making, rather than just the revenues it is generating. Revenue earned is the starting point, and the cost of tax, banking and interest charges, depreciation of assets, staff costs, and any other expenses involved in operating the business are deducted from this figure.
If businesses were simply to report the money they had earned, this would give an unrealistic picture of the underlying health of the business. For example, a business could be earning plenty of revenue, but also incurring a lot of expenses via investment in new markets, premises, or machinery at the same time. In order for investors to work out whether a company is financially healthy, therefore, they need to be able to see how it is managing costs, and whether it is spending money in the right way.
Net income is a good way to understand how much real profit a business is making, and whether that profit is likely to be sustained in the future. It is also a way of calculating earnings per share (see “Need to know”), which investors use to weigh up the value of a company and its shares. Analyzing the balance of revenue earned against the cost of tax, investment, and other expenses is one of a number of ways to assess how a company is faring compared with its competitors, and if it has a sound financial basis going forward.
Quality content, but not recommended on Kindle. I don't recommend reading on Kindle (paperwhite in my case) because every page is displayed as an image, so there is no way to search for words or highlight sentences. Also the font size is very small. I recommend getting a physical copy, not a Kindle version.
A great little visual tutorial that perfectly explains how money works at a high level. Informative
An incredible book. I learned a lot and enjoyed it from the illustrations. I'm buying How Technology Works.
A very informative book that is easy to read / understand. These books hold the reader's attention well.
How money really works. Five money secrets that will guarantee you to be rich or poor.
Money secret number one, and that is money moves to those who are not afraid to talk about it. People ask me all the time, Dan, why do you talk about money all the time? You see, there's nothing wrong or evil about money.
Money is neutral. Imagine if you enjoyed talking about basketball. Raptors, NBA, Canadian team, right? If you enjoyed playing basketball or watching basketball, would you be ashamed to talk about basketball with your friends, your buddies? No, you wouldn't.
Then why would you be ashamed talking about money? You see, you have a story in your mind right now about health, about success, about life and also about money.
You have a story in your mind right now and guess who created those stories? Could be your parents, could be your relatives, could be the people that you know, you love, your brothers and sisters, your cousins, it doesn't matter, but you picked up those stories from somewhere.
Remember when you were a little kid? The horror story, the scary story, the spooky story, the boogie man hiding in the closet? Someone planted those thoughts in your mind and someone planted those thoughts about money in your mind as well.
That it's hard to get money, that rich people are bad, that you have to do something bad to make money and it's one thing to make money and it's very difficult to keep money and if you make the money and now you lose it, then you look really, really stupid.
This is simply not true. The people who are struggling with money, they're afraid to talk about money and believe me, they do talk about money. The difference is they argue over money. Do your parents argue over money? Do you argue over money with your loved one, your spouse, your boyfriend and girlfriend? I remember one of the few times in my life that I saw my mom cried was because we ran out of money, so remember money secret number one, money moves to those who are not afraid to talk about it.
Money secret number two, money moves to those who love it the most. Money is a lovely thing. It is a statement of abundance, not scarcity. You see, only people with money forget about money. Take this moment for example. You don't think about oxygen, why?
Because you have plenty of it. You are breathing in and you are breathing out. You don't spend a second thinking about it, but the minute let's say you're under water, and you're running out of air, you're running out of oxygen, guess what? The only thing you can think about is (inhales) air, oxygen. When you have plenty of something, you don't have to think about it. It's very difficult to not think about money and care about money when you don't have any. When you are worried about paying the bills, when you are worried about your credit card debt, when you are worried about paying your rent, you have to think about it.
It occupies your mind, it restricts your ability to do other things and focus on other areas of your life. You see money gives you the ability to love, to give, to express yourself, to be more, to do more, to uplift others, so love money, love your family, love yourself, love helping people. There is nothing wrong with that. You can love everything else including money.
Money secret number three, and that is money moves to those who understand it the most.
How much do you understand money? Think of the language you're speaking right now. How long did it take you to learn this language? How many years you spent learning, writing and speaking the language you're speaking right now? How much time you spent learning about computer or the internet?
Now the question is, how much focused education did you get about money when you were growing up? How much time did you spend learning about how money works, how to make money, and how to create wealth as an adult? Do you speak the language of money, which is accounting? Do you understand these words, words such as retained earnings, return on investments, depreciation, cost of goods sold, accounts payable, accounts receivable?
You first have to understand the words, then you can master the language, then you can use the language, but first you have to understand how money works so you can become a master of money.
Money secret number four, money goes to those who know how to circulate it. Now in Chinese, the term making money (speaks Chinese) it also has a separate meaning, meaning to circulate money, (speaks Chinese). It's not just to hold onto it and keep it, and not spend it, it's to circulate it. You see whenever there's a contraction in the economy, what does the government tell you?
You go out there and you what? Spend money. Go, spend money, consume. Hire that new employee, go start that new business, make that investment, go on that trip, buy that car, they want you to spend because it keeps money circulating. So money goes to those who know how to circulate it. In terms of in business, go, open that new office, expand.
That's how you keep billions, and billions and billions of dollars going and that's how you create momentum in the economy. Same thing in sales; a salesperson, a closer could circulate money because they are making money move. Without them, they would not have made that sale. That sale would not be there.
The goods and services, that transaction would not take place. So money goes to those who know how to circulate it. Money secret number five and that is, money moves to those who know how to multiply it. I want you to look at the richest people in the world. Some of the richest people in the world, they are money managers, they are investors. Now, why do people throw money at them? Because they know how to multiply money. They know how to generate good returns for their investors.
It's very simple. Once you know how to multiply money, you don't have to chase money, money chases you. I remember back then, when I was a teenager, when I was asking the bank to give me a credit card, a credit card for $1000 and they wouldn't give that to me. Why?
Because back then, I didn't know how money works. I didn't know how to multiply money. They wouldn't even give me a credit card, a limit of $1000, and now the banks call me and say Mr Lok, do you need a loan? Do you want to buy a building? Do you want to expand your business? We're more than happy to give you a huge line of credit, unsecured.
Why? Because they know I know how to multiply money now. So I want you to rate yourself, comment below, based on these five secrets. Number one, do you talk about money? Number two, do you love money? Number three, do you understand money? Number four, do you know how to circulate money and number five, do you know how to multiply money?
Give yourself a rating, zero being horrible, 10 being fantastic.
That tells you exactly why you're where you are financially and what you need to do to fix it. Now, if you're like most people, you'll probably watch this video and say oh, great, that's a great idea.
I need to work on this, I need to work on how to circulate, I need to understand money, I need to do this and all that, but most people they talk about it, they don't want to do shit about it, but if you actually want to do something about it, and you want to fix this problem, click the link here or somewhere here, I can help you.
I've mentored thousands, and thousands, and thousands of people worldwide, helping them, teaching them skills that are not taught in school, giving them the high income skills so they could learn how money works, how to circulate it, how to keep it, how to then multiply it.