This video transcript elucidates the non-physical nature of modern money, asserting that it is essentially a record of governmental debt rather than a tangible asset. It emphasizes that currency is not backed by precious metals like gold and derives its value from a government's power to levy taxes, creating a demand for its own legal tender. The explanation further details how money creation and payment occur digitally, through banks adjusting balances on computer systems, underscoring that this system functions based on collective agreement, law, and established practice rather than intrinsic worth.