Why Does My Paper Cost 100USD?

The Scent of Money - Ch.10

Step One - Small Barter Systems

Barter systems were the original means of trading value. As hunters and gatherers, there were signs of long-range trade as certain seashells and pieces of obsidian from particular areas ended up much farther away than possible by natural processes. But this had a relatively limited role in the lives of most homo-sapiens.

Step Two - Tribal Specialization

Then there were our agricultural ancestors who started specialization. The apple-farmer would trade apples to the lawyer for help in a case. They both exchanged what they had in abundance for something they couldn’t easily get themselves. Win-win. That works until the lawyer gets tired of apples.

Now, the apple farmer needs to do a three-way deal to get apples to someone who wants them and something else to the lawyer that he wants. In this system, that cycle grows larger and larger and makes any transaction infinitely harder. 

Step Three - Money

Money solved that problem. Money was anything with an agreed-upon, trusted, universal value. It took stages to get to where we are today, where over 90% of money in circulation is just computer code. There was a long and gradual evolution of money. 

Biological Money

First, humans used wheat and other objects with biological value. Things you could eat, mostly. These would be measured in 1-liter bowls, so the price would be X number of bowls of wheat. Having standardized bowls and crops made the trade easier. People trusted these because they trusted the biological value of wheat wouldn’t change. But there was still trouble with this money because it spoiled overtime and was hard to transport in large amounts.

Cultural Money

To solve this, humans started used gold, silver and yarns - objects with cultural value. You can’t survive off of any of those but people still find them valuable. Each can be used as a signal of status. These were all much easier to transport and didn’t spoil. People trusted these monies because they trusted their cultural value wouldn’t change. There was still the issue of how to ensure the gold was real gold and how to make it easier to exchange without using a scale and literally splitting rocks. 

Coinage

To solve that, humans created marked coinage. The ruler of a land minted coins of specific metals with marks of their worth and the ruler’s seal. This made trade easier by removing the need to weigh and inspect each piece of gold, silver or otherwise. People trusted these monies because they trusted in the power of the authority that ruled them. 

Coinage also allowed empires to expand much farther than otherwise possible. It would have been impossible for Rome to expand its borders so far if they were collecting taxes in barley, wheat, yarn, seashells, gold and silver all at once. By introducing and enforcing the use of coinage in every region they took over, they standardized simple tasks. And when you’re running the world’s largest empire with no internet, cell phones or even cars, simply is the only way to do things. 

The Expansion of Coinage

Because money is a system of trust, neighboring regions not under Roman control still used Roman Denarius (coins). They could be found in use as far as in the markets of India. Soon, China began using a similar coinage system with bronze coins and gold and silver ingots. It wasn’t the same, but because they both relied on gold and silver, trade between areas under Roman control and areas under Chinese control became normal. 

Since then, the coinage in use has changed based on global power shifts, but the system has remained the same. We are in a global trade-zone. All currencies are valued in relation to one another.  

Why Do People Trust My Paper"?

Money has become paper and computer code. There is no real value in either. So why would I worry about waving a wad of American cash in a poor country across the globe? Because everyone believes that someone else believes the money is valuable. And that’s what makes the world go round. That’s why money, with all its evil, is the single greatest tool of tolerance in history. 

“Christians and muslims who could never agree on religious beliefs could nevertheless agree on a monetary belief, because whereas religion asks us to believe in something, money asks us to believe that other people believe in something” (Sapiens, 207).

Question of The Day 

If money is based on trust, do you think the growing lack of trust in government will affect the money we use? 

Your Friend,

Noah “BigNerd” Sochaczevski