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Claim checks (sic) on society

January 23, 2013

Alas, after 30 years of being a chartered accountant, fifteen years of being a partner in a major accountancy firm, and after a life of being interested in economics and business, I still don't know the answer to the question 'what is money'.

Of course, at many levels I do, and my recent blog on the amount of money in the world is probably along the right lines. However, terms like 'money supply', 'GDP', and the niceties elude me. To understand something, I think you have to be able to explain it clearly to someone else, to an inquisitive child, to another adult, or to your dog.

An excuse for putting a photo of Charlie on my blog

(Excuse for putting a picture of my dog, Charlie, on my blog)

The best definition of money I have ever come across is from Warren Buffett. It is the one I think is very useful for getting an understanding of economics. Money, he says, are 'claim checks on society'. The ability to call upon others to give you goods or services at some future date. So my savings or pension funds will one day be cheques I can cash to call upon for food, heat, pleasure, leisure, care. I hope society cashes my cheques, and those of all others; but the hope of being paid is really what money is.

[Warren's quote is shown below:

I don't have a problem with guilt about money. The way I see it is that my money represents

an enormous number of claim checks on society. It is like I have these little pieces of paper

that I can turn into consumption. If I wanted to, I could hire 10,000 people to do nothing but

paint my picture every day for the rest of my life. And the GNP would go up. But the utility of

the product would be zilch, and I would be keeping those 10,000 people from doing AIDS

research, or teaching, or nursing. I don't do that though. I don't use very many of those claim

checks. There's nothing material I want very much. And I'm going to give virtually all of those

claim checks to charity when my wife and I die.

Warren Buffett]


From → Economics

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