This is an overview chapter by chapter of the main points of The History of Money by Jack Weatherford. 

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The History of Money


Money is evolving to digital.
​
​Classic Cash


"Money alone sets all the world in motion." -Publilius Syrus


1. Cannibals, Chocolate, and Cash


“The last conflict is at hand in which Civilization receives its conclusive form-the conflict between money and blood.” ~ Oswald Spengler

The Aztec performed human sacrifices regularly and would even eat their victims after.

They used Cacao seeds as currency and they could buy many different items with them in the market. The market was close to the main government building as they had strict mandates on prices punishable by death. Their where official tribute collectors that went out through the empire to bring back goods for the central administration in the highland valley of Mexico.

The empire operated primarily on the basis of tribute, the markets functioned as subsidiary parts of the political structure, and many different standardized commodities served as forms of near-money.

The Aztec empire was like virtually all other empires in the era before the spread of money. Ancient Egypt, Peru, Persia, and China all functioned as tributary systems rather than market systems.

They used cacao beans to even out trades where the trade was not exactly equal. For larger trades they used cotton cloaks. These transactions could include slaves and tribute victims.

Commodity money has the great advantage of being an item of consumption as well as a means of exchange. The Aztecs could easily grind their cacao money into chocolate paste, then beat it vigorously into a container of water to make a delicious drink that they greatly prized. Unlike paper money and cheap coins that can easily lose their face value, commodity money has a value in and of itself and thus can always be consumed no matter what the status of the market.

Throughout the world, commodities from salt to tobacco, from logs to dried fish, and from rice to cloth have been used as money at various times in history. Natives in parts of India used almonds. Guatemalans used corn; the ancient Babylonians and Assyrians used barley. Natives of the Nicobar Islands used coconuts, and the Mongolians prized bricks of tea. For people of the Philippines, Japan, Burma, and other parts of Southeast Asia, standardized measures of rice traditionally served as commodity money.

The modern word salary and the Italian, Spanish and Portuguese word salario are derived from the Latin word sal, meaning "salt" or, more precisely, from salrius, meaning "of salt".

Many tribes used live animals as a type of money. Cattle where used as currency often whenever people had them.

In modern times the importance of cattle survives into the European language in words such as pecuniary, which means "related to money" is derived from the Latin pecuniarius, meaning "wealth in cattle". The as, a Roman coin, represented a value equivalent to one-hundredth of a cow. Related English words include pecunious, an obsolete term meaning "wealthy" and the more commonly used impecunious, meaning "poor".

The word cattle is derived from the same Latin roots that gave us capital, another broader term for money.

In modern times things from cigarettes, chocolate and chewing gum have been currency.

The slang term buck for the dollar was originally from the skin of a North American Dear used as currency in the early British Colonies. Beaver pelts were used in Canada as currency.

Money never exists in a cultural or social vacuum. It is not a mere lifeless object but a social institution. To function completely as money, material cannot exist simply as an object; it requires a particular social and cultural system. Once the system is in place, many different objects can serve as money.

Of all the substances that can be used to make money, metal has more practical applications and has held its value over a longer time and a wider distance than any other. Because it is lang-lasting, it serves as a good store of value. Because it can be made into smaller and larger pieces, it serves as a good means of exchange.

Humans have always been drawn towards gold. People around the world have closely associated gold and silver with magic and divinity.




2. The Fifth Element


"Money ranks as one of the primary materials with which mankind builds the architecture of civilization" - Lewis Lapham

The oldest recorded word in European Literature is the ancient Greek word for rage at the beginning of Homer's Iliad.

The old world before money seems to have been driven by force and had no concept of money.

The term "As rich as Croesus" comes from the ancient Lydia king.

Croesus ascended to the Lydian throne in 560 B.C. to rule a kingdom that was already rich.

Something similar to money and something resembling markets can be found in Mesopotamia, China, Egypt, and many other parts of the world, but they did not actually use coins until the rise of Lydia and the subsequent minting of the first coins, between 640 and 630 B.C.

The genius of the Lydian kings can be seen in their recognition of the need for very small and easily transported ingots worth no more than a few days' labor or a small part of a farmer's harvest. By making these small ingots in a standardized size and weight, and by stamping on them an emblem that verified their worth to even the illiterate, the kings of Lydia exponentially expanded the possibilities of commercial enterprise.

The Lydians made the first coins of electrum, a naturally occurring mixture of gold and silver. They made the electrum into oval slugs several times thicker than modern coins, or about the size of the end digit of an adult's thumb. To ensure their authenticity, the king had each one stamped with the emblem of a lion's head. The stamping also flattened the lumps, beginning their transition from an oval nugget to a flat, circular coin.

By making the nuggets the same weight and thus approximately the same size, the king eliminated one of the most time-consuming steps in commerce: the need to weigh the gold each time a transaction was made.

The wealth of Croesus and his ancestors arose not from conquest but from trade. During his reign (560-546 B.C.), Croesus created new coins of pure gold and silver rather than electrum.

The variety and abundance of commercial goods quickly led to another innovation: the retail market.

The kings of Sardis set up an innovative new system in which anyone, even a stranger, with something to sell could come to a central market. Numerous small shops lined the market, and each merchant specialized in particular goods.

The market system began in the late seventh century B.C.

The commercial revolution in the city of Sardis provoked wide-spread changes throughout Lydian society. Women were allowed to choose their own husbands. Through the accumulation of coins, women became free to make their own dowries and thus had greater freedom in selecting a husband.

New services quickly entered the marketplace. Houses specializing in sexual services quickly followed the introduction of the first shops. The first known brothels were built in ancient Sardis.

Gambling soon followed, and the Lydians are credited with inventing not only coins but dice as well.

Croesus used his vast wealth to conquer almost all of the Greek cities of Asia Minor.

Croesus attacked Persia in 547-546 and his empire fell to Cyrus who then marched to the Lydian capital of Sardis.

The Lydian practice of making coins spread throughout the Mediterranean world, particularly to Lydia's closest neighbor, Greece.

The greatness of Greece came as a by-product of the monetary and mercantile revolution from Lydia, the introduction of money, modern markets, and wholesale and retail distribution.

Money is strictly a human invention in that it is itself a metaphor; it stands for something else.

Everywhere that money went it created marketplaces.

Money represents an infinitely expandable way of structuring value and social relationships.

Money created a new urban geography by giving rise to towns and cities centered on the market rather than the palace.

The exchange of goods necessitated new commercial routes over land and sea from one urban nodule to the next, thereby linking Greece and neighboring lands in a new web of commerce.

Money made possible the organization of society on a scale much greater and far more complex than either kinship or force could have achieved.

As money became the standard value for work, it was also becoming the standard of value for time itself.

Money did not make people smarter; it made them think in new ways, in numbers and their equivalencies. It made thinking far less personalized and much more abstract.

Humans have found many ways to bring order to the phenomenological flow of existence, and money is one of the most important. Money is strictly a human invention in that it is itself a metaphor; it stands for something else. It allows humans to structure life in incredibly complex ways that were not available to them before the invention of money. This metaphorical quality gives it a focal role in the organization of meaning in life. Money represents an infinitely expandable way of structuring value and social relationships - personal, political, and religious as well as commercial and economic.

Everywhere that money went it created marketplaces.



3. The Premature Death of Money


"Thy money perish with thee." - Acts 8:20

Juno Regina, the highest Roman goddess, who reigned as the queen of heaven and occupied a position much like the goddess Hera, wife of Zeus, in Greek mythology.

Juno represented the genius of womanhood and was the patroness of women, marriage, and childbirth. Juno became the patroness of the Roman state. Juno acquired another surname - Juno Moneta, from Latin monere (to warn) after geese honking around Juno's temple was said to have alerted them of Gauls secretly scaling the walls of the citadel to attack.

As patroness of the state, Juno Moneta presided over various activities of the state, including the primary activity of issuing money.

In 269 B.C., the Romans introduced a new silver coin, the denarius, which they manufactured in the temple of Juno Moneta. The coin bore the image of the goddess and her surname, Moneta. From her first name, Juno, comes the name of the month of Junonius, or June, the most auspicious month for marriage. Also from Moneta came the modern English words mint and money and, ultimately, from the Latin word meaning warning.

Cognates in other European languages also derive from moneta, including the Spanish moneda, meaning "coin". From very early classical times, money showed a close relationship to the divine and to the female. We can still see that connection in money-related words in European languages, which are frequently feminine in gender, as in the Spanish la moneda and the German die Mark and die Münze (coin).

The frequent melting and reissuing of coins kept the mints at the Temple of Juno Moneta in nearly continuous operation, whether the supply of gold and silver increased or not. The coins seem to have flowed out of the mint in a constant stream, and it is from the Latin word currere, meaning "to run" or "to flow", that the modern word currency is derived, along with other, related words such as current and courier.

Rome generally got its wealth through conquest and produced very little for its own. As long as the empire was expanding, this worked. Conquest and pillage proved capable of financing the empire for only so long.

Rome produced little, and once it had looted the lands around it, the empire developed a growing imbalance of trade as it continued to import goods from Asia. Unable to offer quality manufactured goods in return for these imported goods, Rome had to pay in gold and silver. This created a drain of bullion, causing the emperor Tiberius to complain that "our wealth is transferred to foreign and even hostile nations". In A.D. 77, Pliny the Elder complained that as much as 550 million sesterces a year went to India to pay for luxuries.

By far the highest expense of the Roman Empire arose from the financing of its huge and widely dispersed army.

Despite its declining ability to produce revenue for the state, the army continued to grow in size. Even during the third and fourth centuries, when the geographical size of the empire declined, the number of soldiers more than doubled from approximately 300,000 to 650,000. Military equipment and weapons became steadily more elaborate and expensive as the army required more horses for transportation over longer inland routes and as military tactics shifted to an increased use of mounted cavalry in place of the traditional Roman reliance on marching infantry. The new equipment and horses further increased the military budget and strained the imperial treasury.

Faced with climbing government expenses, emperors searched for new revenue and new ways to make the existing revenue stretch further. Nero began to tamper with the coinage itself. In A.D. 64, in a naive attempt to deceive the populace, Nero decreased the silver content in the coins and made both the silver and gold coins slightly smaller. By collecting the existing coins and reminting them with his portrait bust but using less silver, Nero produced a momentary surplus of silver and gold.

When pressed for yet more money, subsequent emperors followed Nero's strategy and continued the debasement of the nation's money supply. By using the available supply of silver and gold to produce more coins, the emperor had more coins to spend without raising taxes. Increasing the number of coins, however, did not actually increase the amount of money.

During his reign, Nero had reduced the silver content of the denarius to 90 percent; by the time of Marcus Aurelius, the denarius had only 75 percent silver, and by the end of the second century, Commodus had reduced the content to only 67 percent. Then when Emperor Lucius Septimius Severus raised the soldiers' pay, he was forced to reduce the silver content of the denarius to less than 50 percent. Caracalla introduced an entirely new coin called the antoninianus, or double denarius, which contained even less silver but had a face value worth two of the old denarii. By the reign of Gallienus, from 260 to 268, the antoninianus contained less than 5 percent silver. Thus over the course of two hundred years, the silver content was cut from nearly 100 percent to virtually nothing. The amount of silver previously used to mint a single denarius eventually produced 150 denarii, and as the silver content decreased, the price of goods increased in direct proportion. Wheat that had sold for one-half a denarius in the second century increased to 100 denarii a century later, a two hundred-fold increase.

From the reign of Augustus, if not before, the tax income of the empire was derived from two primary sources. The tributum capitis was a poll tax paid every year by each adult between the ages of twelve and sixty-five. The tributum soli was an annual property tax on all land, from forests to croplands, as well as on ships, slaves, animals, and other movable property. This tax seemed to equal approximately 1 percent of the total property value. The brunt of this tax burden fell much more heavily on agriculture tan on commerce, therefore encouraging commercial activity.

Most of these taxes went into the treasury of the central government located in Rome, so cities and provinces levied their own taxes to cover civic projects and salaries. Additionally, they created city and provincial taxes on goods being transferred in and out of their territory.

These two primary taxes sufficed as long as the army brought in great amounts of loot from its conquests, but they began to prove insufficient as government and military costs rose. The emperors had to impose new taxes. They increased taxes on land, with the result that farmers abandoned the less productive fields and agricultural output therefore declined. The emperors turned increasing attention to taxing commerce and inheritance, goings so far as to create a sales tax. In the quest for greater tax revenues, Tiberius ordered each man in the empire to take his wife and children with him to the community of his birth in order to make a census from which a head tax would then be made.

In the third century, the emperor ordered an indictio, a special and supposedly temporary levy to requisition oil, wine, wheat, meat, leather, and clothing for the support of the army. These levies soon became a new layer of permanent taxation, very similar to the tributes demanded in the older palace economies.

The small traders and merchants bore an increasingly larger tax burden from the oppressive chrysargyron tax on manufactured goods and retail business. Although this tax yielded relatively little for the national coffers, it did great damage to the artisans and small traders throughout the empire. The more people produced, the more taxes they paid. By the time of Diocletian, many Roman subjects were not earning enough money to pay their annual tax assessments, they were forced to sell their animals, tools, or even the land itself. Increasingly, those smaller merchants who lacked land had no alternative but to sell their own children, and sometimes even themselves, into slavery to pay their taxes. Thus more and more families were reduced to poverty.

The government growing more desperate began confiscating property from anyone deemed to be a traitor to Rome or, more accurately, to the emperor.

The entire economy focused on maintaining the government. In the Roman Empire, one did not complete the journey along the path to riches and fortune by hard work, through agriculture or commerce, or even through birth into a noble family. Rather, one completed the journey by becoming a favorite of the erratic emperors, thereby receiving appointment to high office and thus being entitled to claim or steal large sums of money.

Among the elite, the taste for luxuries grew continuously. They eschewed simple linen and woolen garments in favor of silk imported over thousands of miles and at great cost from China. They used large quantities of Arabian perfume and incense. They wore increasing amounts of gold and silver jewelry as well as amber and furs from the Baltic and other precious stones from throughout the empire, and they used more and more cosmetics from Anatolia. Money changed hands many times as these goods traveled laboriously along caravan routes to the most distant parts of the empire, but the money eventually left the Roman Empire in order to pay for the goods at their sources in China, India, Africa, and the Baltic. The desire for these luxury goods consumed ever greater resources, and it created a drain of gold and silver from Europe to Asia that was to continue almost until the nineteenth century.


Beginning in the days of the republic, before the foundation of the empire, Roman politicians found that they could often increase their power by bribing the masses with bread and circuses. In addition to the exotic free entertainments that were staged in the Colosseum, the politicians exempted free citizens of the city of Rome from taxation and gave them heavily subsidized or even free wheat, paid for by taxes and tribute seized from the hinterlands of the empire. This practice quickly became institutionalized as a public dole.

When Julius Caesar first came to power nearly one-third of the people, approximately 320,000, received free wheat on the public dole. Through skillful maneuvering, he reduced the amount by more than half, to a still substantial 150,000. After Caesar's assassination, the numbers started to climb once again, and the benefits increased.

Like people anywhere, once the tax burdens became too high in comparison to the benefits and services offered by the government, the Roman subjects found ways to evade the taxation. Commerce declined. People produced more of what they needed for themselves and traded less on the open market. While the poor suffered from heavy property taxes, the lantifundia, the great landed estates, grew greatly, particularly those that had been granted a tax-free status. The high taxes induced more peasants to abandon their land and move to the tax-free estates where they at least had a steady supply of food and the essential goods produced on the estate itself.

The great cities began to decline without sufficient commerce to keep them alive.

In 301 Diocletian issued his Edict of Prices to try and regulate the economy. This ordered a freeze on all prices and wages. In practice, however, rather than freezing prices, the edict prompted merchants and farmers to withdraw their goods from the market. Production declined.

Diocletian then ordered all male citizens to follow the occupation of their fathers.

In the last centuries of the Roman Empire, the emperors operated without a workable currency; like the ancient empires that had preceded it, Rome turned to conscription and forced labor to meet its needs. The government often would not allow its citizens to pay taxes in the debased money that it still issued; instead, officials demanded payment in goods, crops, or labor.

Diocletian could no longer rely on the open market to supply him with the sandals, armor, weapons, saddles, tents, and other goods that an army needed. He then had to create government sponsored workshops to manufacture armaments and supplies. He also had to create government sponsored transport enterprises to move the goods that were manufactured in the workshops.

Well before the end of the third century, these changes made the emperor and the government the greatest manufacturers in the empire, in addition to being the largest owner of land, mines, and quarries.

By its last decades, Rome had become another state administered economy, an empire without money and markets.


To increase his support, Diocletian ordered all citizens to worship him as a god. Then, in 303, he began the horrendous persecution of Christians that was to last for a decade. The persecution of the Christians added money to sate coffers and provided plenty of victims for the shows in the Colosseum.

Constantine, Diocletian's successor received a vision of a cross and that in this sign you shall conquer and stopped the persecution of Christians and returning their confiscated lands in the Edict of Milan. He then oversaw the Council of Nicaea to adopt what Christians believe. He still practiced paganism.

Constantine then began confiscating the wealth of well endowed pagan temples to fund the empire. He minted new coins from this and financed a new capital, Constantinople.

Burdened by heavy taxes, people invited the conquest by barbarians offering them much more freedom and eventually helping to loot Rome.

The use of money essentially ceased for another thousand years when the second sacking of Rome happened in 476 A.D. resulting in feudalism where money ceased to be used and payments were accepted in like kind only. Wheat for wheat until the Renaissance around 1350.

Constantinople under the Byzantine Empire continued to use money and a market system.




4. Knights of Commerce


"In faith there is profit" - Saikaku Ihara

Knights known as Templars, founded in Jerusalem around 1118 by Crusaders, the Military Order of the Knights of the Temple of Solomon dedicated their lives to serving the church and, specifically, to the task of liberating the Holy Land from the Infidels. The Templars later became businessmen who ran the world's greatest international banking corporation, which they operated for nearly two hundred years.

People often stored their wealth with the Templars in their castles and they became reputable in storing money as well as executing a knights will if he did not return from battle. Even kings would store their wealth or have the Templars handle their financial affairs. The Templars' castles soon became full service banks, offering many financial services to nobility.

The Templars' headquarters in Paris became one of the greatest treasure houses in Europe. To ensure scrupulous honesty, the order forbade its knights to own money themselves.

King Philip IV of France developed his own royal treasury and took the management of his kingdoms money out of the hands of the Templars. He then began a campaign aimed at taking over both the Templars' extensive properties and treasure.

King Philip like Nero debased his currency by re-minting it with less silver. Philip later tried to return the coin to the original amounts of silver but continued altering the silver content, each time hurting him in the process. Philip turned on the Jews and merchants to try and fund his excessive government.

Philip issued a round of lies to persecute the Templars and gain their wealth.

The Italian families soon setup banking institutions across Europe focused solely on making a profit. They worked and mingled within their communities serving more of the people as opposed to the Templars that catered to nobility.

The word bank comes from the way that these early money merchants did business; it is derived from the word meaning "table" or "bench", the prop that literally formed the base of the operations at the fair. From Italian the words bank, banco, and banque soon spread into the European language and throughout the world.

Moneylending in some form or other seems to have been known for as long as their had been money, but the bank became something more than a moneylending institution, because the bankers dealt not so much with gold and silver as with slips of paper representing the gold and silver.

Banking as practiced by the Templars had a great limitation in that the church forbid usury, the charging of interest on loans and getting over this was one of the biggest obstacles that the Italian families had to overcome to build their extensive banking enterprises.

The bank notes functioned as notes of exchange and therefore they were able to get around the idea of usury. These notes were also lighter and easier to transport as thieves could not cash them in if stolen. These notes also increased the amount of money in circulation as a depositors money was held and the exchange notes were issued to people essentially using the same money twice in an economy.

The Italian bankers eventually collapsed after loaning money to Edward III at the start of his hundred year war then he defaulted bankrupting most of their banks and their depositors. The banking style did ultimately rise again with the banking family Medici.

The Italian bankers pioneered checks in their day.




5. The Renaissance: New Money for Old Art


"Bankers are just like anybody else, except richer." - Ogden Nash

No city clings as tenaciously to one spot in history as does Florence, located in the Tuscan hills of Italy. Florence remains eternally the city of the Renaissance, the city of Bernini and Michelangelo, the city of the Medici and Savonarola.

Money changers have been around as long as money has. They can almost always be found near markets where merchants of different lands assemble and, in recent decades, hovering around tourist spots throughout the world.

At its height as a banking city in 1422, seventy-two "international banks" operated out of Florence. Of the money lending families there, none acquired a reputation as grand or permanently etched in the annals of history as that of the Medici family.

The merchant Giovanni di Bicci de' Medici (1360-1429) founded the family fortune in banking. From his two sons, known as Cosimo the Elder and Lorenzo the Elder, came two lines of descendants who virtually defined the Renaissance by becoming the most important bankers and merchants, the rulers of Florence, and cardinals and popes of the church. The daughters of the family married into the royal families of Europe, and two of them, Marie and Catherine, became queens of France and mothers of kings.

In 1202, Leonardo Fibonacci, also called Leonardo Pisano after his hometown of Pisa, published Liber Abaci, in which he introduced to Europe what we now refer to as Arabic numerals, even though the Arabs had themselves borrowed the numerals from India. This became the numerical standard for the Merchants of their day who had previously been using Roman numerals with the abacus.

When merchants noted an overweight or underweight item, they marked it with a plus sign or a minus sign. These signs soon became the symbols for addition and subtraction and, eventually, for positive and negative numbers.

In 1484, Nicolas Chuquet, came up with the way to group 3 0's to more easily read them. He also came up with their names as the European languages already had hundreds and thousands, he introduced myllions, byllions, tryllions, quadryllions, and son up to nonylion. Using the system of zeroes grouped by threes, on nonylion would be written, and much more easily read, as 1,000,000,000,000,000,000,000,000,000,000.

Although Chuquet used periods where we use commas today, the number represented the largest known at that time.

The rise of the money economy created a new way of thinking. As twentieth-century philosopher Georg Simmel wrote, "money by its very nature becomes the most perfect representative of a cognitive tendency in modern sciences as a whole: the reduction of qualitative determinations to quantitative ones." Money was changing the world's systems of knowledge, thinking, art, and values.

In these times a greater emphasis on man was introduced over the previous view of God.

Together with banking and the Renaissance, even the name America must be credited to the vast cultural heritage of Florence. In an odd twist of fate, the name of a Florentine explorer and braggart, Amerigo Vespucci (1451-1512), inspired the names of the two continents that constitute the New World.





6. The Golden Curse



Spanish conquered much of the Americas melting down the Inca and other natives treasures and sending them back to Spain. Later they discovered rich silver mines that produced massive quantities of silver.

The Portuguese controlled Brazil and were not too interested in it until gold was discovered. They imported African slaves to do the manual labor where the Spanish used the natives. The Spanish and Portuguese colonies in the Americas focused mainly on the production of gold and silver.

These large influxes of silver actually created inflation as with more money, more people wanted to spend and thus the prices of goods went up.

The inflow of gold and silver now allowed the average person to deal in precious metal coins whereas before, only the wealthy would use gold and silver coins to purchase goods. The baker now would buy his wheat or flower with gold and silver. The massive inflow also stimulated new economies such as real estate and insurance. This influx of money served to develop a middle class in Europe and move people into a money era. People now wanted gold and silver over commodities or services.

This new influx of gold also stimulated the triangle trade from Europe to Africa to the Americas. Gold and silver left Europe to buy slaves in Africa, which went to the Americas to buy sugar and transport gold and silver back to Europe from the Americas.




Phase II - Paper Money


Gold rules the world. - German Proverb



7. The Birth of the Dollar


"Money, not morality, is the principle of commercial nations" - Thomas Jefferson

A small Czech town started minting silver coins that became known as talers and that became dollars in english. These coins and the name spread throughout the world.

The United States started by using legal tender minted from the Spanish mines in Mexico and Peru as the British were short on coins and banned their export. When the United States was formed, it lacked silver to mint coins so the Spanish and later Mexican silver coins circulated as currency.



8. The Devil's Mint



"The trouble with paper money is that it rewards the minority that can manipulate money and makes fools of the generation that has worked and saved." - Adam Smith [George Goodman]


Printing, paper-making, and paper money all originated in China.

In 1273, Kublai Khan issued a new series of state sponsored and controlled bills. The government confiscated all gold, silver, and pearls and exchanged paper notes for them. The government dictated its value at strict punishment. All foreigners exchanged their gold, silver, and pearls and had an escort that payed for everything for them during their stay, then returned the gold etc due to them on their leave. People noted how safe the country was for merchants. The government operated a police state even sketching pictures of people to be circulated if they committed a crime.

At one end of fourteenth street in Washington, D.C., prostitutes and drug dealers brazenly ply their trade night and day. At the other end, near the White House and the bridge into Virginia, the federal government prints money night and day in the workrooms of the Bureau of Engraving and Printing, a part of the Treasury Department.

Marco Polo noted the strange customs of the Chinese in its ability to produce paper money and command its use and value throughout the empire.

In July 1661, Sweden's Stockholm Bank issued the first bank note in Europe to counter a shortage in silver currency.

John Law was a key player in the establishment of the Mississippi Company that turned out to be a giant pyramid scheme. They hired unemployed people to walk through Paris with pickaxes to uphold the illusion the company was going to rake in profits.

In 1690, the Massachusetts Bay Colony printed the first paper money in North America.

Benjamin Franklin printed some of the first paper money used in America.

The foundation of the United States of America offered the chance to put many of Franklin's ideas about paper money into practice.
The American Revolution has the distinction of being the first war to be financed with paper money.

The dangers and temptations as well as the great mystery surrounding paper money weighed heavily on the thinkers and poets of the nineteenth century.

Paper money could not be eaten such as salt or cacao beans and it could not be melted and used as could metals such as gold or silver. Paper money is only useful as money.



9. Metric Money


"Money, like number and law, is a category of thought." - Oswald Spengler

Paper, backed by gold, made possible the wide-spread use of money. Paper expanded the role of money to new markets, new applications, and new clients.

The simplification came through the gradual decimalization of money, a process that began in Russia but reached its fullest expression in the fledgling currency of the United States and later in revolutionary France.

In 1782 the U.S. superintendent of finance sent a report to President Washington and the Congress recommending that the United States adopt a decimal system of currency. The proposed decimal system would divide the dollar, or "unit," into one hundred equal parts. Thomas Jefferson recommended that the smallest part, one-hundreth of a dollar, be called a cent, from the Latin word meaning "hundred," and that a tenth of a dollar would be a dime, from the Latin meaning "tenth."

The proposed monetary system of the new country received further elaboration in the Report on the Establishment of a Mint by Alexander Hamilton. Congress adopted the basics of this system in 1785 and 1786 and finalized it in Alexander Hamilton's Coinage Act of April 2, 1792.

Most countries at this time divided their money into arbitrary units. The Spanish dollar, for example, consisted of eight reales.

Through a series of decrees in 1793, the Convention, as the national legislature of France then called itself, imposed the decimal system in weights and measures as well as coinage, carrying the decimal and metric ideas far beyond their original purpose. The radicals of the French Revolution sought to associate revolutionary democracy with decimalization.

They then turned their attention to the measurement of space. The Convention in France abolished the 90° right angle and substituted in its place the 100° right angle. The further divided each degree into one hundred minutes, giving the circle a full 400° rather than an awkward 360°.

On November 24, 1793, the Convention specified that one hundred seconds would constitute a minute, and one hundred minutes would constitute an hour. A few new clocks were made, but with the need to operate at the rate of 10,000 seconds an hour, they proved difficult to construct, to operate, and to comprehend. Under the new system, 10 hours would equal a day, and ten days would make a week, which was to be renamed a decad. Three decads would compose a month, According to their new calendar, the French would celebrate New Year's Day on September 22, the autumnal equinox, and all years would be numbered from the establishment of the French Republic on that date in 1792.

Virtually no one liked the new French day of 100,000 parts, and the French government abandoned it on 18 Germinal an III (April 7, 1795), but the months stayed in effect in France until January 1, 1806, when Napoleon abandoned Republican time completely and returned to the Gregorian calendar.

The first systematic proposal for a decimal system of weights and measures had originated far back in history with Gabriel Mouton, vicar of Saint Paul's Church in Lyons, France, in 1670. This odd idea attracted little attention at the time, but scholars tinkered with Mouton's proposal until it gradually evolved into what we now know as the metric system.


In 1783 James Watt created a set of measures that he called the philosophical pound. It was composed of ten philosophical ounces, each of which contained ten philosophical drachms (drams). His name has been applied to the unit of power that is still called the watt. He also coined the term horsepower, for a unit of power equal to 747.5 watts.

The Dewey decimal system uses decimal categorization.

Money forces humans to reduce qualitative differences to quantitative ones.




10. The Gold Bug


London and the city of London, called "the city". The city is where the ancient Roman settlement was and has held its basic structure all these years. The city is protected by armed guards that check all incoming traffic.

The Bank of England was created as a private institution to lend money to the government. Investors in the bank received stock and depositors received receipts that likely were circulated as currency. The first bank notes designated in British pounds. The bank issued bank notes in 10 and 20 pound denominations. The Bank of England guaranteed all its notes convertibility back into gold. The Bank of England eventually became nationalized printing the Queens image on their notes.

Most of the world operated on a gold standard, but a few countries, including Mexico and China, continued on a silver standard.

After the defeat of Napoleon, Britain dominated as the greatest empire in the world with the support of the world's most powerful navy.

The Bank of England became the prototype of the centralized national bank, emulated by national banks around the world.

The era from the beginning of Queen Victoria's reign until the outbreak of World War I was one of the most stable periods in monetary history to that time.

Often the interests of the Bank of England took precedence over those of the government. The bank had to play a very active role in maintaining the value of gold, and sometimes its intervention came at the cost to British citizens, who still had a stable currency but with a reduced purchasing power.

The economic boom of the nineteenth century gave the world new systems of railroads, steamships, telegraph and telephone lines, and electricity as well as architectural wonders from the Brooklyn Bridge and the Eiffel Tower to the Suez Canal.

Throughout the nineteenth and early twentieth centuries, the directors of the Bank of England resisted governmental interference in their business. When the government established a royal commission to inquire into the activities and reserves of the bank, the bankers would only respond that the reserves were "very, very considerable."

During the nineteenth century, more goods were produced for more people than ever before, and the era culminated in the Gilded Age, an era of great excess marked by conspicuous consumption.

By the end of the nineteenth century in democratic countries such as the United States and Great Britain, the newly emerging wealthy class of bankers and industrialists lived a life of privilege and luxury that probably no monarch in history had ever enjoyed.

Throughout the nineteenth century, the European governments found themselves severely limited by the gold system around them.

Unable to give away lands and make grants as earlier monarchs had done and unable to print endless amounts of money, the governments needed to find new ways to enrich themselves.

If gold was the ultimate valuable behind the currency, then to make more money, they needed more gold. This need for gold set off the greatest international scramble since the conquest of America in the sixteenth century.
The European governments sent out armies around the world in search of gold.
The armies found gold in South Africa, Australia, Siberia, and the Yukon. Even the United States became a major producer of gold in the California territory, which had recently been taken from Mexico.

The British navy ruled the oceans.

The British Empire stretched from England and Ireland to Canada, British Honduras, Guiana, and most of the Caribbean islands.
Britain controlled the western entrance to the Mediterranean Sea from its base at Gibraltar and controlled the central area of the sea from Malta.
The British base in Egypt gave them control over the Suez Canal.
South of Egypt, Britain's empire included Sudan and Nigeria as well as South Africa, Kenya, Uganda, Ghana, Gold Coast, Rhodesia, Zambia as well as all of India including Pakistan, Malaysia, Ceylon, Burma and the important ports of Aden, Singapore, and Hong Kong.
The British virtually turned the Pacific into their private pond through control of Australia, New Zealand, Tonga, Fiji, the Cook Islands, and New Hebribes.

The European governments built imperial bureaucracies and armies with which they conquered new lands and brought new subjects into their empires.

The British fought wars in Afghanistan, Hong Kong and even Zululand in South Africa to maintain their empire.

The French army fought wars of conquest from Timbuktu to Tahiti. Even the Germans, Dutch, Belgians, and Italians sent out their soldiers on campaigns of conquest in distant parts of the globe.

The Austro-Hungarian Empire pushed farther into eastern Europe and the Balkans, taking over the territory of the declining Ottoman Empire.

Russia pushed deeper into the Caucasus and Central Asia.

Japan expanded into the islands and adjacent mainland as it took control of Korea, Taiwan, and the islands off the Siberian coast.

America launched a war on its own native Indians in what can be seen as an extermination.

In the process of conquering the inhabited continents and making them into colonies, the European powers created massive standing armies, navies, and the industrial and organizational structures needed to support them.

With enormous militaries and no new lands to conquer, they fell upon one another in the First World War, the greatest bloodbath known up to that time.

With the outbreak of war, the governments of Europe had an excuse to manage their own economies, to expand internal power of government into all sectors of public life and to impose income tax such as in the United States.

Once the government had seen how easy it was to get money without the discipline of the gold standard, it was reluctant to return to the restraints of gold.

The first World War marked the end of the world currency system based on gold.

With the old monetary and economic order in ruins at the conclusion of the war, many politicians and political theorists came forward with new systems, all of which increased government power.

The communists came to power in Russia with their extreme plan for ending capitalism, destroying all markets, and having a unified economic and political system administered solely by the government in a form of international socialism.

Opposed to international socialism, the followers of Hitler imposed a system of national socialism, a name that they abbreviated to Nazism. This imposed an equally harsh governmental control over the economy, even to the point of allowing a revival of slave labor.

No longer independent and no longer presiding over an independent money supply based on gold, the Bank of England became one more administrative office of the government.





11. The Yellow Brick Road


Abraham Lincoln printed around 500 Million in Greenback paper notes to win the civil war that where promised to be redeemable at a later date for gold. The value of these notes dropped to a third of face value as new rounds of notes where printed. 15 years later people where able to redeem their notes for gold and many did not as they now felt safe in their value.

The south also printed much of their own currency and after the south lost the war, many held on to these notes hoping that one day they could redeem them for gold. This day never came.

The war severely impoverished the south and very much put them in debt to the norths bankers. This served to have much resentment in the south and they formed many political parties to try and print more money in their favor. They also introduced laws that hurt people of color and removed them from public office. Most of these laws were not overturned until the Civil Rights Act of 1964.

Few know that The Wizard of Oz was written about monetary policy. Dorthy's slippers were originally silver to help propel the introduction of a silver standard along side gold. The Wizard of Oz was short for the wizard of ounces of gold. The wicked witch enslaving the yellow people was to represent the U.S. holding the Philippines and not granting them their independence. The Tin Man represented the working class and he was oiled by a silver oil. The cowardly lion represented William Jennings Bryan. There where many more representations of current events.

The discovery of vast new deposits of gold in South Africa, Alaska, and Colorado roughly doubled the world's supply, thereby easing the currency shortage.

From the beginning of its history, the United States has been a nation built around money and commerce more than around its army, government, or ruling class.

American society rested, as had perhaps no prior society in history, on a solid basis of monetary relationships.

Gradually, in the decades after the American Civil War, the financial center shifted from the Old World to the New.






12. The Golden Playpen of Politics


"Money is the lifeblood of the nation." - Jonathan Swift

By an act of March 9, 1933, "to provide relief in the existing national emergency in banking and other purposes," Congress gave Roosevelt the power to prevent the "hoarding" of gold. By Roosevelt's executive order a month later U.S. citizens and residents could no longer redeem their dollars for gold, but externally, the United States remained on the gold standard so that other countries and foreign banks could still convert their dollars into gold as they needed.

Roosevelt also nationalized gold and made it a crime punishable by arrest and imprisonment for an American citizen to hold gold bullion or coins. Banks, financial institutions, and private citizens had three weeks in which to turn in all gold coins, bullion, and even gold certificates.

Refugees fleeing Europe to America were required to surrender all gold they brought with them. If they did not do so willingly, their gold was confiscated. Gold had effectively joined the list of controlled substances and contraband goods such as narcotics, Communist literature, and pornography, that were forbidden entry into the United States.

Those who voluntarily surrendered their gold to the Department of the Treasury received compensation of $20.67 per ounce in paper notes. One year later on January 31, 1934, the federal government devalued the paper money from $20.67 to $35 for each ounce of gold. Thus everyone who had complied with the law and exchanged gold for paper lost 41 percent of the gold's value. The change in the official price of gold increased the nominal value of the government's gold hoard and thus allowed it to issue an additional 3 billion in paper currency.


Nixon then, unable to fund the Vietnam war took the dollar off the gold standard making it no longer convertible into gold. The U.S. government then steadily devalued the dollar throughout the years and had funding for whatever project they wished to fund. They where no longer bound by gold, but could print as much as needed. The U.S. dollar became a fiat currency that is backed by nothing more than government dictation and public faith that it is redeemable for value. Many other countries who's currency was linked to the dollar has there currencies severely devalue.

In northern Kentucky sits a tightly guarded military base, Fort Knox is home to around 4,600 tons of pure gold.

Fort Knox entertains no visitors.

Gold does not rust or deteriorate, the gold sitting in Fort Knox today may have been mined hundreds or even thousands of years ago.

Likely, some of the gold sitting in Fort Knox came from the booty seized from the Aztecs of Mexico by Hernán Cortés and from the Incas of Peru by Francisco Pizarro.

The whole history of gold on earth now sits in bank vaults.

Gold is stored in bars of 1,000 ounces each. The bars need no wrapping or other protection since they do not flake or deteriorate.

A silent vault within the bedrock of lower Manhattan Island about 80 feet below street level sits a vault that stores gold for many of the governments around the world. Around 1/4 of all the mined gold on planet earth sits in this vault.

Many of us regard these hoards of gold as a kind of psychic security that backs up the dollars we carry in our pockets and purses. The gold at Fort Knox and in the Federal Reserve is believed to represent the American monetary system. Our government makes no effort to counter that notion.

The truth is, gold in Fort Knox and the Federal Reserve actually has nothing to do with the American dollar. Since President Nixon severed the tie between the dollar and gold, not one ounce of gold anywhere in the world stands behind the U.S. dollar.

Our dollar is neither a silver dollar nor a gold one. The government will not redeem a dollar bill for anything other than another dollar bill.

The dollar is simply fiat currency.

Aside from faith, nothing backs the dollar.


According to the act that set up the American currency system in 1792, anyone could bring gold or silver to the mint and have it coined as fast as possible free of charge.

The problem with a gold-based currency is that it is limited by the amount of gold in the world, and that amount fluctuates with each new find and each new development in technology.

The necessity of converting the money to gold on demand prevents the government from making too many loans or issuing too much money in order to satisfy a temporary political problem.

As long as the citizens have the right to turn their paper money into gold, they hold a vote on how the monetary system works and how much faith they have in their politicians. As soon as they loose confidence in the paper, they can convert to gold and abandon the paper.

The United States detached its money from bullion and all other commodities through President Roosevelt in 1933 and later through President Nixon in 1971.

Gold was actually made illegal to own in 1933 by President Franklin Roosevelt. This was all done in response to the run on the banks and people demanding their gold for their paper notes.

In 1934, the year after the nationalization of gold, President Roosevelt passed another law nationalizing silver in much the same way. People could keep a little for jewelry and some for commercial use but the rest had to be turned over to the Government.

Many U.S. Coins contained silver in 1934 and Roosevelt could not seize them without drastically disrupting commerce. The gov began gradually removing the silver coins from circulation and replacing them with base metals.

The Roosevelt administration confiscated 5 million ounces of gold and 3.2 billion ounces of silver.

The gold and silver confiscated from the American people is stored in Fort Knox Bullion Depository.

Americans were not allowed to own gold coins again until December 31, 1974, according to a bill signed by President Gerald Ford.

One month after D day in July 1944, the U.S held an Allied conference of economics with 44 nations in a resort hotel in New Hampshire. They decided to tie most major currencies to the U.S. dollar at $35 for an ounce of gold.

The groundwork for the World Bank and the International Monetary Fund were laid in July of 1944 at Bretton Woods, New Hampshire. This is at the same time most allied nations tied their currency to the dollar at $35 to an ounce of gold.

From February 1, 1934, until the 1960's, the central banks of the world worked to keep the U.S. dollar at $35 to an ounce of gold. With more dollars printed and inflation, this became difficult and in 1971 Nixon took us off the gold standard.

In March of 1972, the U.S. government devalued the dollar to $38 per ounce of gold and the year after to $42.22 per ounce. The Swiss government said it would no longer support the dollar with gold and many other countries did the same.

Today's American dollar is merely fiat money, backed by the order of the government and by people's faith in that order and nothing more.

The gold notes and silver certificate dollar long ago gave way to the Federal Reserve Note. The phrase "Payable to the Bearer on Demand" has been replaced by "In God We Trust".

Politicians can always conjure up good reasons to tamper with the money; they often set out to combat some great evil lurking over the horizon or avert some horrific disaster looming in our children's future.

With the financial freedom granted by the new easy money, politicians on both the Right and the Left could finance whatever pet projects they wanted.

The U.S. because of funny money had enough money to finance the ruthless regimes of friendly dictators and to invade or pay for guerrilla wars against small countries run by unfriendly dictators.

The politicians, lobbyists, and special interests had tapped into the magic formula for generating wealth from air.

The largest bill ever issued by the United States was a $100,000 gold certificate that bore the portrait of President Woodrow Wilson.

The twentieth century became the era of government-regulated currency systems around the world.




Phase III - Electronic Money


"We invented money and we use it, yet we cannot . . . understand its laws or control its actions. It has a life of its own." - Lionel Trilling


13. Wild Money and the Stealth Tax


Hyper inflation in Bolivia in the 1980's created a strange cash economy where dollars mostly in 100 Dollar Bills flowed into the country through the cocaine trade and people would immediately exchange their pesos for dollars or hard goods that had intrinsic value such as food or even a CD Player.

People were required to make purchases in the peso so people would use money exchangers outside the shops to exchange dollars for pesos and then the shop keeper would exchange the pesos they received back into dollars. These money exchangers would sometimes exchanges the same bills multiple times in one day, taking a small fee of coarse.

Governments have three primary ways of financing their expenditures: taxing, borrowing and printing more money. If the government lacks credit and anything worth taxing, the seductive alternative is to forgo taxes and debt by unilaterally printing more money. The increase in the money supply drives down the value of the money in circulation; and the drop in value forces the government to print even more money to meet its expenses.

The twentieth century brought inflation in as normal. Inflation at 10% per year will double prices in 7 years.

The US Dollar has become the main currency for those involved in drug trades.

Hyperinflation follows a similar pattern wherever it strikes. Banks stop financing mortgages. People pay as they go as the money gets cheaper.

During hyperinflation, fixed income no longer exists. People on pensions or retirement find the value of their payments reduced to only a few dollars a month.

During hyperinflation in Bolivia in 1984, the economy operated on a cash-only basis. No one accepts credit card or check because clearance takes too long. No one keeps money on deposit at the bank either. Banks make no loans.

A bill for fifty dollars could drop to only a few pennies within a week.

The most popular purchase of all in Bolivia was US Dollars as they would hold their value far better than their hyper-inflating currency.

The abundance of US Dollars in Bolivia from the Cocaine trade further weakened the peso.

Unlike worthless bills, even a small copper coin has some inherent value as metal. If all else fails it can be melted and used for some other purpose.

In the paper money era, governments found themselves in a whole new economic world. So long as they had paper, ink and printing machines, they could print as much money as they liked. And so they did.

Inflation is not unique to paper money, it also occurred when the vast amounts of gold and silver were taken from the Americas into Europe. Although, hyperinflation has never occurred when the currency is based on some metallic base such as gold, silver or copper.

Inflation need not become hyperinflation for it to be important and to provoke severe consequences. An inflation rate of 5%, money loses half of its value and therefore prices double in only 14 years.

​The dollar has undergone a nearly constant decline in value in the twentieth century when measured against gold.