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By Taylor Tepper
March 3, 2016

Why does our money even have value?

Our money has value because we say it does. That’s really it.

This might be a little abstract, but a dollar bill is just a useless piece of green paper in your wallet unless everyone else believes that it’s worth a dollar.

Green pieces of paper aren’t like chunks of silver or gold — you can’t boil them down to make anything of value. Cash means something because we as a civilization agreed that it does. That’s why I feel comfortable taking money as compensation for my work at Money Magazine, rather than gold or timber or something else. I know that my landlord or dry cleaner or favorite restaurant will take the cash that my company gives me in exchange for rent, clean clothes and food.

But remember, money is a good just like anything else. And goods are subject to the laws of supply and demand. If you have a lot of widgets and no one actually wants a widget, then those widgets will be worthless.

The same is true of our money. If there’s too much cash out there, that cash will be used to buy things and then prices on goods – like a four-star meal – will rise quickly and each dollar won’t have that much value. That’s inflation. The opposite – deflation – is just as nasty.

So why does your money have value? Because everyone says it does.

Advertiser Disclosure

The purpose of this disclosure is to explain how we make money without charging you for our content.

Our mission is to help people at any stage of life make smart financial decisions through research, reporting, reviews, recommendations, and tools.

Earning your trust is essential to our success, and we believe transparency is critical to creating that trust. To that end, you should know that many or all of the companies featured here are partners who advertise with us.

Our content is free because our partners pay us a referral fee if you click on links or call any of the phone numbers on our site. If you choose to interact with the content on our site, we will likely receive compensation. If you don't, we will not be compensated. Ultimately the choice is yours.

Opinions are our own and our editors and staff writers are instructed to maintain editorial integrity, but compensation along with in-depth research will determine where, how, and in what order they appear on the page.

To find out more about our editorial process and how we make money, click here.

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