A brief history of money.

A BRIEF HISTORY OF MONEY

Money, we are all familiar with it, most want more, some to the point of  excess. It has been described as the, "Root of all Evil".  Realistically, we do need a certain amount, but I would like to talk about a simple brief history of Money.

Originally, most financial transactions were a form of barter,"I'll trade you a goat for that woven shirt that one of your wives made". Or,"I am tired of goats, how about we trade for some of your sheep". This all worked out well and good, but eventually someone got the bright idea of converting wealth to some form of exchange.

There is some record of salt being a form of exchange, or round stones with holes,  but most items were quick to loose there value when someone either found a pit with enough salt to flood the market or a method to mass produce stones with holes.

Eventually they settled on gold and silver as a form of money. Early records show that, as early as 2150 BC, the Shekel and Talent were used in the middle east, These were measures of weight,  A shekel was .36 of a troy weight oz. A Talent was equal to 60 manehs and 3000 shekels. This standard of weight was used by Egypt, Babylon, Phoenicia, Greece, Persia etc.  The ratio was 15 shekel's of silver = 1 shekel of gold.  Everyone had a balance scale to do business.

Finally, as governments grew and became more sophisticated, the minting of money began. This consisted of coins which were of a standardized weight, usually embossed with the image of  the King or individual in power at the time. It made trade much simpler and  must have caused a recession in the scale business.

As is usually the case, it did allow for some skulduggery, clipping and shaving of coins was known to happen. Then Kings sometimes made the coins smaller with the same designation. This may have been the first form of Government endorsed inflation.  "Honey, were did we put that old scale?"

Interestingly, the size and weight of coins varied over the years, but the ratio of gold to silver was fairly constant from 500 BC up to the 20th Century.

Biblical  times-  12-1             Rome          12-1         Europe     0-1492        10-1

Early Greece      13-1             Early Japan  8-1                          1492-1834   15-1

Alexander          10-1             Early China  12-1        England                       16-1

The United States settled on the ratio of 15-1  The Constitution stated that all money was to be gold or silver coin.

O course, we have been talking about gold and silver coins. What about paper money?

In medieval Europe, gold and silver was the medium of exchange. When someone had a little more than needed for survival, they often placed it with a Goldsmith, who had a natural need for security in his business.  He would account for their items and give them a receipt.  The Rothschild's started out this way.  Humans sometimes being a little lazy, and not too careful about things, began to exchange the receipts for other goods and services and leave the gold with the goldsmith.  Goldsmiths, who were a little sharper than the average person of the day, soon realized that his receipts were as good as gold, and no one knew how much gold he really had stored for people. He was able to purchase Real-Estate, finance explorers to the new world and many other endeavors with his own receipts that did not represent gold in his possession. I could expound forever about how they used this power, but I will resist.

There were many known instances were these early bankers got a little too greedy, rumors circulated  that there was more receipts than gold, and a run for their gold started.  When they could not produce the gold,  he might have been found hanging somewhere.

Remember, Politicians and Governments always take note of a good idea to increase their power and wealth.

Early paper money was a receipt for a weight of gold or silver, In the USA. a silver dollar was .7734 troy oz. of silver.  20 silver dollars could be exchanged for 1 Oz. troy of gold, a $20 gold piece. This was a ratio of 15-1. I personally remember silver certificates, which were supposed to be redeemable for 1 silver dollar. Up to 1934 you could exchange a $20 bill for a $20 gold coin. The US dollar had the reputation of being, "as good as gold". The gold-silver ratio today is 72-1.

In 1914, with passage of the Federal Reserve Act,  money no longer represented an asset, but would now represent Government debt. A promise to repay by the government.

In 1934, President Franklin Roosevelt, by executive order, ordered all citizens to turn in their Gold Coins in exchange for paper $20.00 bills. Private possession, or exchange of gold was outlawed. When the government decided they had confiscated all the gold they were going to get, they raised the price of gold to $35.00 oz., this was used for trade between countries. Those wonderful paper dollars they exchanged with the citizenry just became worth 43% less than the gold coins they exchanged.  Citizens were threatened with $10,000 fines and 10 years in jail for not cooperating.  Gold ownership was again legalized in December of 1974.

Silver still circulated as coins till 1964,  when they were replaced by alloys with no intrinsic value.

So now all money that exists, has  no intrinsic value, but only the confidence that someone else will exchange goods and services for it. While there are many instances in modern history where that confidence evaporated, so far most people are still willing to accept modern currency.

Currency itself is now in the process of being replaced with electronic currency, Bitcoin, Debit and Credit cards etc.. Endless possibilities, that will make the ancient clippers, shavers and dishonest goldsmiths envious.

originally published Oct. 12, 2015

It appears we are now coming to the end of fiat currency era, that is currency without any real built in value. What will replace it is yet to be seen. Big government would of course love to have currency that is just a digital entry, that they could manipulate, block, or devalue with a click of a computer. It seems some of the world is exploring another option that would be some form of real money. There is one of those age old truths that good money will always drive out bad money. That is true as long as there is an option of good money available. I expect we will seeing the new options in the near future. 
5/8/23

We now see the plan to introduce a central bank digital currency. Indeed, a monetary unit without any intrinsic value, unable to be held personally. It will allow governments to view every transaction, determine what transactions should be allowed, confiscate all wealth with the click of a computer key and in effect give government ultimate power over the people. It will be the end of all freedom of choice in a free market. It will give government the ability to tax, inflate, confiscate and dictate what can and cannot be traded. It will create all kinds of methods to avoid this trap and will be accompanied with the penalties to enforce that this is the only alternative money.

8/24/23

We can expect the unsustainable debt and deficits of the United States, accompanied by the desire of other countries to flee the use of the dollar, to reach a crisis in the near future. It is very likely that it will soon be clear that this debt will no longer find those willing to risk this haven for their real money. We can expect schemes to rescue this situation with possibly forced investment by IRA and 401's into U.S. debt or a sudden crisis followed by the end of this current fiat money system. We expect the cure to be total control of all assets.

5/3/2024

The EU is pushing to get its CBDC launched this year. As the debt situation in most of the western world is escalating many predict some sort of reset of the financial system. It will most likely be preceded by a debt crisis and then the roll out of the promised solution.

9/27/2024