By Bruins Bananas
-How and why was money created?
Money is anything that is commonly accepted by a group of people in exchange for goods or services. Let’s go back and look where money originated and try to see where it could be going. Before there was a standard form of currency people would trade goods or services with other locals to get things they needed, commonly referred to as bartering. If you wanted food you would have to go to the local farmer and offer him something in exchange for what he had. This could have been anything from clothing, shoes, spices, shells, flints, salt, grains, tea, tobacco, or your time for services. The problem with this is a farmer might value shoes differently depending on if his are old or newer.
People realized they needed a better way to exchange goods and services. This led to the use of precious metals like Gold and Silver as currency. While Gold was mostly used for jewelry and as a symbol of status, Silver had many industrial and medical uses. Combine that with the fact that these metals are finite, easily divisible, durable, consistent, and convenient they quickly became a common solution for trade. Now people could easily sell their products or services for a standardized form of currency.
In 1652 Massachusetts minted the first official silver coins and followed up with paper money in 1690. While coins were made from Silver and represented actual money it was not as easy to carry in comparison to paper money which could hold more value in less space. Paper money was essentially an IOU that the Government was backing through physical metal held in Fort Knox. The Government then began allowing Banks to lend out this paper currency while continuing to back it with Gold and Silver. Eventually paper money turned into Fiat money which is, ‘In contrast to commodity-based money like gold coins or paper bills redeemable for precious metals, fiat money is backed entirely by the full faith and trust in the government that issued it. Leaving full faith in the U.S. Government while they are nearly $30 Trillion in debt is pretty interesting to think about. What would happen if a group of people widely accepted something different in exchange for goods or services?