A Brief History of Money

by | Jan 2, 2014 | Economics, Permaculture/Homesteading, Why Permaculture | 0 comments

Inflation

Let’s talk about that oh so sexy topic; Economics! A while ago, humans figured out that they could all enjoy richer lives by exchanging their goods with one another, and leverage their unique skills and tools. “You’re really good at making shoes, I can’t even tie a shoe! But I can raise turkeys. What do you say I give you a big fat turkey for a pair of your lace-free shoes?” Later they found it convenient to use one common item of exchange which represents a known value; two grams of gold is worth a days work. Why does gold have value? You can’t eat it. It doesn’t really, it’s just a pretty stone, so it’s simply social convention which creates an agreement of value. Then, as people amassed gold they wanted to protect it from thieves so they hired guards for their vaults, and now banks were born. You know those little tickets you get when you check you coat or skis in somewhere? That’s basically what paper money was originally, an IOU from the bank. Then people began trading these IOUs because it was easier. 

Fast forward a few hundred years. “In 1792, the US Congess passed the Mint and Coinage Act. It authorized the Federal Government’s use of the “Bank of the United States” to hold its reserves, as well as establish a fixed ratio of gold to the U.S. dollar.” (Wikipedia) Because the US Dollar was one of the few gold backed currencies, it became the reserve currency for many other countries. But in “1976 the government officially changed the definition of the dollar; references to gold were removed from statutes. From this point, the international monetary system was made of pure fiat money.” The IOUs that the banks gave out, no longer had to correspond to anything in their vaults. They were just supposed to have value in and of themselves. Some clever people figured out how to basically conjure money out of thin air without everyone else getting pissed off through complex financial instruments such as derivatives, and fractional reserve baking. Hardly anyone really understood how it worked, but it seemed to make them money so they didn’t question it. This situation, compounded by the “quantitative easing” which just printed a bunch more money out of thin air to fill the holes in an attempt to save the banks, debased the value of the dollar. Finally all the fancy numbers they were keeping just stopped working and, with our ever-forgetful ways, no one quite knew why. Instead of fixing the underlying structural issues, they would create stop-gap solutions to tide the system over till the next crisis. And this is where we stand today. The money we use daily, and save to secure our future is basically a big pyramid scheme that’s falling apart. This has happened to a number of other currencies throughout history, just never to the main reserve currency. So, as with 0il, it’s vital that we use this resource while it lasts to rebuild our infrastructure to be less dependent on the money economy.

 The money we use daily, and save to secure our future is basically a big pyramid scheme that’s falling apart.
 

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