What Makes a Buck a Buck?

The paper isn't worth much. The ink isn't worth much. In fact, dollar bills cost just 5.7 cents each to make. So why is this fancy piece of printed paper worth anything more?

You can t eat a dollar bill or wear it. You can't listen to it or play with it. Yet, we all want dollars and spend most of our lives trying to earn some. But besides making a cute paper elephant with one, what can you do with a dollar bill?

Dollar bills are really good for only one thing: buying stuff. But that's an important thing. Those green pieces of paper are worth having because everyone knows that you can trade them for whatever you want. Dollar bills are money. And we all need money to live. Whether you call it dollars, moolah, bread, dough, or bucks, money is what makes the world go round. There would be no buildings if builders hadn't been paid money to build them. There would be no food in your fridge if the grocery store hadn't received money for it. Money pays people to transplant hearts and write songs. It's why people go to work every day.

But why these green pieces of paper? Why don't we use something for money that you could eat or wear or play with? Well, people have tried that.

Got Change for a Cow?

Take cows, for instance. In some ancient cultures, cows were a kind of money. People paid for the things they needed with cows, and measured how rich they were by the number of cows they owned. Cows are useful-they can be eaten and they give milk. So people wanted cows. If you had a cow, you could be pretty sure that you could trade it for other things you might need-like cloth or wheat or cooking pots.

Problem is, cows are somewhat inconvenient, especially if you want to do a lot of buying and selling. You can't put a cow in your pocket and carry it to the market. And cows are darn hard to make change for. What's more, while you might try to get rich by saving up your cows, they won't last forever. Cows die. Dollar bills don't. No, cows are great if you want milk, but they make lousy money.

What? You Don't Take Cowries?

Around the Pacific and the Indian oceans, people used small snail shells called cowrie shells to buy stuff. They liked these shells for their beauty (the shells made nice jewelry). Enough people were willing to accept cowrie shells in exchange for other things that they became a kind of money. Unlike cows, cowries were easy to carry around. You could store them up and they wouldn't die or get sick. They were also sturdy and hard to break or fake. So they were used for money in lots of different places for a long time.

But not everywhere. Some places never used them. If you wanted to use cowries to buy something in one of those places, it didn't work. No deal. To people there, cowries may have been pretty shells, but they weren't money.

One Lump or Two?

So what would make good money? Well, what was money mainly used for? It was for trading-for buying and selling. So, the more people who would trade things for it, the better. The money needed to be easy to carry and use. And it had to be tough. Money that broke or wore out (or died like cows) wouldn't be worth much anymore.

Metal fit the bill perfectly. And, of all the metals, gold and silver have always been most sought after. Both are beautiful, and neither will rust or decay. Gold is more prized because it is even rarer than silver, and it doesn't tarnish. No surprise then that people almost everywhere agreed that gold and silver made good money.

Another quality made gold and silver appealing: they can be turned into coins. Sure, you could haul around lumps or bricks of gold, but when you wanted to buy something, those lumps needed to be weighed to find out what they were worth. Coins solved that problem, and unlike cowries or cows, they could be created and controlled by the king or government.

Good as Gold?

But while gold and silver made pretty good money, they turned out to be almost as inconvenient as cows. It was dangerous and difficult for merchants and traders to carry around large quantities of gold and silver. A pocket of gold and silver coins could be heavy, and people with pouches or chests full of the precious metals risked being robbed. What to do?

Well, why not leave your heavy metal coins with a goldsmith or merchant for safekeeping? He could then write up a piece of paper stating the amount of gold and silver he was holding for you. It would be so much easier to carry that paper around to stand for your wealth. When you wanted to make a big trade, you could give the paper to your trading partner, indicating that he now owned the gold. This was such a good solution that, eventually, people organized banks and began to issue bank notes to individuals who deposited coins or gold with them. These notes stood for the deposited gold : and silver and could be spent in their place. The paper was, indeed, "good as gold," and paper money was born.

What's a Dollar Really Worth?

But the story doesn't end there. While U.S. dollar bills and other paper money once stood for gold and silver, today they no longer do. You can't take your dollar bill to the bank and exchange it for a dollar's worth of gold. So why is a dollar bill worth something?