Making Money The Old-Fashioned Way Or What
You're reading a blog post titled "Making Money The Old-Fashioned Way or What?" It's obvious, but you have to understand how old-fashioned economies work. There are two types of economies: 1) barter, and 2) cash.
What is bartering? In this type of economy all parties involved in the exchange must have something that the other party wants. So for example, I want you to repair my car for free and you want a new stereo system. In this case, we can trade services with each other so we both get what we need/want and no money changes hands. Barters are often necessary when one party doesn't have money (e.g. when you spend all your money on groceries and the only "cash" you have is a $20 bill you got for your birthday that day).
This type of economy is so artful because both parties "prove" that the other party has something that he wants, without having to invest any real resources. The two things aren't exchanged at all. For example, in this economy your stereo system could be something a lot of people really want and don't have (money), and my old sedan is also something a lot of people really want (money). You could say we trade: "I know you're short on cash but I'm short on cash too. I have this old rusted-out sedan that I don't use and only costs $200. You have a box stereo system that someone gave you that cost you $200, too. So here's the deal: You fix my rusted-out sedan for free, I give you a brand new stereo system worth $700 and we both walk away with exactly what we want. I don't have to give you my stereo and you don't have to give me my car. I leave with a stereo, you leave with a car, we both save $400. Win-win!" See how that works?
Bartering has its downsides, too: First off, it can require a lot of work to find someone who is willing to do a service for you without asking any money in return. It's also time-consuming to try and negotiate a trade when both parties are short on money. A barter economy is much more flexible, you can swap services or items whenever you have the time to do so.
There are disadvantages of having a cash-based economy as well. A cash-based economy requires that all parties involved in the exchange keep track of each others' money and how much they've saved. It takes time to find out how much the other party has in reserve; it also takes time to try and negotiate a trade at all rather than just handing over something for free when you run out of "money." Cash-based economies are also prone to economic volatility, inflation, and deflation. First off, these are just things that happen from time to time. Second, they can give people the wrong impression about how useful money is. For instance, if you're poor and suddenly you have more money than you've ever had before (all because certain people are running up prices temporarily) then it's easy for people to think that money is a good thing and tell themselves "This is why we should have more money." That's exactly what happened in the United States in 2008 when there was an economic crisis and lots of people were unemployed. Suddenly lots of people thought, "I need more money" and so they were willing to take on extra work with very little pay. They started to think "I need money, but if I take this on, and it sucks, then at least I'll have some money." They forgot that they could still get what they want without having much money at all.
You'd think people would learn quickly that having lots of money is no advantage. But economists who study "inflationary" economies haven't really figured out why the United States has an economy based primarily on inflation. In advanced economies like Canada and the United Kingdom (even the former Soviet Union) there are very few stores that accept only cash. They use debit cards, checks, and credit cards for most transactions (with cash being used for small purchases). And even when credit cards were invented in the United States, there was a big public outcry against them because people didn't trust them.
So why does America have this tradition? I think it's because our economy is so good at producing new inventions that people want and that can be used to increase cash reserves (e.g. credit cards, debit cards and checks). It also has an amazing financial industry that helps people make money and get loans (also increasing cash reserves).
Conclusion: That's what I think about the economy. The title of my blog post is a little misleading, because I don't really want anyone to think that we're going back to the way things used to be. I'm not saying we should go back to bartering or cash-based economies; I'm just saying that they are two different types of economies. One works well when there are lots of people and lots of things (e.g. an economy with lots of new inventions) and it requires less work than the other type (when there are few people and few things).