Part 1 of 2
Back in c.350 BC Aristotle wrote on the nature of money in his political philosophy works called Politics. In book 1:9 he considered that every object had two uses, the first being the original purpose for what the object was designed, and the second possibility to conceive of the object as an item to sell or barter.
By Aristotle's time gold and silver coins were already in circulation. Minting coins began about 200 years earlier in Lydia (modern day Turkey) and by his time the practice had spread through Persia and Ancient Greece. Gold and silver coins are the most famous example of the transition from agricultural currencies like wheat and cows, to the currencies that we are familiar with today.
The other day I picked up a seashell while walking on the shore of Karosta, Liepaja. Some compare the place to post-apocalyptic abandoned cities like near Chernobyl. Karosta was created by the Russian Tsar as a closed and autonomous community and base for the Russian navy. It was later expanded by the Soviets as a self-contained city and in 1990 still had a population of about 25 thousand residents, not including the notorious Karosta Soviet Prison. Today the population is less than 6 thousand and most of the buildings are abandoned and in ruins. The only 3 businesses open were a grocery store, a small bank, and a gas station.
Karosta is a great example of failed empires and with failed empires come failed currencies. If you were living here through the collapse any money you had in local currency suddenly became just about as valuable as my seashell.
I'm not accusing seashells of having no value. The world's oldest and longest used currency was actually the seashell. The cowrie seashell was used as currency for over 3 thousand, possibly over 4 thousand years and on at least 4 continents. Cowrie seashells were so widely traded and used for so long that their image even forms the Chinese pictograph for money itself. As recently as the early 1900s you could still pay your taxes in places around Central and West Africa with cowrie seashells.
Today sadly the seashell is no longer currency. And as retarded as trading seashells may seem, who can say that our current monetary system is far better.
It was said that the cowrie seashell, due to it's unique properties was impossible to counterfeit convincingly. Ironically that didn't stop the Chinese from trying. Around 1000 BC when the seashell supply ran low the Chinese tried to replicate cowrie shells out of copper and bronze, in effect creating the first metal money. This underlies the modern concept that the representation of money plus faith, equals real money.
Again about 2 thousand years later it was the Chinese who were the first to print paper money, preceding Europe by 500 or so years. While today's American bills say "In God We Trust", written on the Chinese paper money was "All counterfeiters will be decapitated." The result for China was hyperinflation.
In the end it wasn't counterfeiting that destroyed the system, it was government abuse itself. Medieval Chinese historian Ma Twan-lin was later quoted saying, "paper should never be money but only employed as a representative sign of value existing in metals or produce."
Well said but well forgotten.
Today we live in an age of indebted nations that are bankrupt even by their own admissions. Within these nations all across the world we have central banks who are given the power to create money at their own will, from nothing. Money that is backed by nothing but faith. With faith comes hope, which can be the weakest and most dangerous emotion of all.