The Gold Standard
From the bags of barley that were a pain in the ass to carry around, or seashells that sandy could collect from the seashore at unlimited supply, came the gold (or other precious metal) coin. This was an easier to carry around and rare enough object which met the new needs of a developing financial/mercantile system. It also had intrinsic value because of the desire that human beings had for it. The coin was the standard of wealth, that of which all items and services would be rated against. Additionally, people could easily trade and carry it and was impossible to flood the market with large amounts due to its scarcity. This made it value stable.
It was a great system until people realize how difficult it was to carry around large amounts of gold. Rich merchants, emperors and kings alike began to accrue large amounts of gold but found it impractical and risky to have it moving around the landscape. So they issued gold backed paper notes, which were like IOUs that could be traded back and forth for products and services and returned for their represented amount in gold. The flying money as the originators nicknamed it, was easier to carry around and more secure. The economy could still run the same way it did before and the precious metals held by these individuals with concentrations of wealth could rest easy.
Level up human civilization.
Fiat
Flash forward to about the 1970s, when it got really weird. The gold standard had been fading and seeing its last days in America and in the world. The value of the currency was no longer connected to the assigned value in gold. Fiat money was an evolution, (or devolution) in currency. It was issued by the government with it's value being tied to the intrinsic power and influence that the nation had over its people and the world. It could not be turned in for anything but a different number designation on another note. It wasn't backed by gold anymore, so you couldn't get that back. Its value, became speculative on the belief that people had in governments and the associated financial organizations which printed and regulated it. Some financial experts believe that these events were some of the most overt and large-scale robberies to have ever occurred in human history.
Level down human civilization.
To The Present
Fiat reigns supreme today. Albeit it has become ever more complicated, working with many other evolutions like the stock market, credit, bonds, futures, assets and on and on. But at the heart, it is still this concept of standardized units to be the measure of all things. Individual nations have their currencies and they are rated against other nations based on a ton of different circumstances.
Why we used currency and never looked back is because it facilitates commerce. It makes it move quicker, faster, safer and more honestly. And although some people still prefer to use the barter system, (including me on occasion), it's easier to get my coffee with a five dollar bill than to bring a chicken in and tell the barista what an egg every 25 hours in the warm months will do for her grocery bill. Trading has advantages in certain situations and without proper economic infrastructure, it is required. Though for many apparent reasons, currency reigns supreme.
Chapter Definitions
Market: A regular gathering of people for the purchase and sale of provisions, livestock, and other commodities.
Barter: Exchange (goods or services) for other goods or services without using money.
Haggle: Dispute or bargain persistently, especially over the cost of something.
Stable: When talking about currency, a standard of value which doesn't widely fluctuate in value or get reduced in value due to the high price of another commodity, such as a good or service.
Why Money Needs to Change
Nothing in this world is without flaw. And so, at any time, anything can be improved on. Sometimes the flaws are so big you can't see anything else besides it. Sometimes they are small annoyances we never give a second look to until a visionary comes along to help us see it. But as we look back we can see that all invention moves toward the inevitable and makes what was thought a luxury in the past, an obvious standard of living for the future. The world is becoming more complex as time passes. With increasingly complex problems, we need increasingly complex solutions. Let's take money under the microscope and define our major problems.
First off, for all those fiat folks who claim that cryptocurrency is a speculative bubble, guess what, everything is. You're a bubble, I'm a bubble, Apple inc. is a bubble. It's called entropy. Everything has a lifespan, whether it be a biological life form, a business or an asset. They all follow the same universal principles. The difference in their lifespans has to do with how they are organized. More efficient organization and ability to adapt leads to longer lifespans. If you eat better, you live longer, if a company invests in good employees they will succeed in the long term. Apply that infinitely to all things in the universe. Go ahead, try it, it's kind of fun. As above so below.
But to be more specific about the definition in regards to the economy, we are talking about anything whose price is much more than its true value. The bubble pops when the realization is massively adopted and people sell what they own in whatever it is. Speculative bubbles can happen anytime people get overly excited about a commodity. Like if a rumor comes out (which is untrue) giving the commodity undeserved expectations. Bitcoin is under heavy fire for being nothing but speculation. And at over ten thousand dollars, this may at least be partially true.
But nothing! And I mean nothing is more speculative than fiat money. It has no value whatsoever beyond our belief in it. That is one of the reasons we have market crashes. The fiat economy is so speculative, that banks have been able to sell speculative value for more speculative value on speculation that no one will figure it out before it's too late. Yea, digest that one. That's how the 2007 crash happen. Bad loans were bunched together and sold as bigger packages of bad loans. And eventually it all came crumbling down, because well, no one was getting paid because the money wasn't there.
In the 1920s, the crash was predicated on many things, but one of the most important was the irresponsible behavior of the banks and a moment where people lost their faith in their money. They had only to question the value of the money and it fell apart. That is of course, true of all things, even gold. The intrinsic value of anything is circumstantial, but with gold being a precious metal, it tends to hold that intrinsic value better due to its utility in our physical environment. Paper money without backing is good for starting a fire in the fireplace and sometimes as we have seen, starting a fire in the fabric of our economy.
Governments may print and issue currency, but banks can produce 'wealth' so to speak. Banks made their business loaning out money at an interest rate. And they use your savings to do so. They paid you an interest rate too. It was a bit lower than those who were borrowing and that's how they net a profit.
But then banks started doing something really terrible, which was essentially a crime then, but which is now common practice. They started loaning out more money than they had on the speculation that there wouldn't ever be enough people coming to take their money out in any given time frame. It's called fractional reserve banking and it allows large institutions the power to make money out of thin air. When you and I do it, it's called forgery and we go to jail. When they do it, it's called business and we all pay them.
In my opinion, it is a dangerous system and a fragile system in which we have very little control. Several institutions with many intelligent people work day and night to keep it stable and regulate it. But as we have seen, they haven't done a very good job. A closed system of wealth should never yield outstanding debt, let alone any debt at all. It goes against the laws of the universe. Money should be used to facilitate commerce and nothing more. We made a massive mistake when we decided to use money to make more money on the backs of the naivety and vulnerabilities of others. This is where the world economy stands at present. It is in many ways thievery lacking any real value to human civilization overall. It teaches people to care more for pieces of paper then life, love and the pursuit of happiness and purpose.
Now that I have you all riled up, it's time to talk about the many other ways that money doesn't work ethically, effectively or efficiently. By the time I am done with this chapter you shall be thoroughly repulsed by the idea of money! (If weren't already). You will want to toss those dead presidents to the wind I assure you! But wait, because there is a better way to use them, as you will see in due time.
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Author's Note
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There is plenty more to come.
Thank you so much for reading.
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