The History of Money by Martin Jenkins

(New York: Candlewick Press, 2014-08-05), 64

Kid's books can be a great way to take a step back and get an overview of a subject. Money is not as simple as it might seem (see The Bitcoin Standard and The Ethics of Money Production), but important for a healthy society to understand and use well.

  • People may have started bartering—we don't know for sure.
  • Once people settled down for agriculture, they acquired lots of stuff and developed writing to keep track of it.
  • Metals (gold, silver, electrum, copper) weren't great for tools but useful to exchange rather than participating in barter.
  • Reasons for interest: compensate for risk; value is greater to borrower than lender (leverage)
  • IOUs (credit money) facilitated lending. By removing date and creditor, they could be circulated, and may have in fact been a main reason for the development of writing.
  • Coins came along around 600 BC and removed the need to weigh bullion for each exchange
    • At first coins were used for large purchases or for saving; eventually smaller or cheaper coins came along for everyday purchases
  • The earliest bankers were money changers who also looked after people's money and lent it out for interest
  • The Roman empire stopped expanding around 117 BC, and they tried to solve the shortage of money by debasing the currency, leading to hundreds of years of inflation (cf. ~Roman Civilization)
  • Spain discovered gold and silver in the Americas, sending it back to Europe, which in turn made things more expensive (caused inflation). "It's strange that sometime, as in the time of the Roman Empire, a shortage of precious metal led to inflation, while at other times, as in Spain in the seventeenth century, having a lot of it had the same effect." (36)
    • Shortage: shortage incentivizes debasement; prices in the debased currency increase such that the amount of precious metal is stable
    • Excess: excess supply of money reduces demand and therefore value relative to goods, causing prices to increase
  • Paper money started in China in 1000 (government decree) and Europe around 1100 (banks) and 1600 (governments)
  • "Money exists only because people believe in it" (42)
  • Fractional reserve banking can lead to bank runs...
  • The highest inflation measured was Hungary in July 1946 when prices doubled every 14 hours
  • "Money is a lot harder to control than [governments]—and the rest of us—like to think it is." (47)

We seem to have got into the habit of thinking about pretty much everything in terms of money...When you start thinking like that most of the time, there's a danger that you start believing that buying and selling are the only important things in life, and that anything that can't be bought and sold doesn't really count. And that also means it's easy to start believing that all you need in life is to have as much money as possible. I don't know what you think, but I don't think that is a particularly good thing. (49)

Topic: Economics



Created: 2023-07-29-Sat
Updated: 2023-08-10-Thu