The Evolution of Money: What Money is, Who Created it and How it Works
I just bought some milk. Whole milk actually – yummy. Milk and cookies is where it’s at. When I bought it I used a green piece of paper with the face of an old white man and some numbers on it. Milk – a nutritional beast that will nourish me and complete me – is of much more literal value to me than some wrinkly green paper. So how is it that that wrinkly green paper can not only be exchanged for milk, but literally anything in the world. Food, cars, even sex. The answer is simple. The collective imagination of humans.
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The common phrase “money is the root of all evil,” is well known and something many believe. At the same time however, money is the highpoint of human tolerance. Money is the one thing in this world that crosses culture, religious beliefs, and social habits. In fact it is the only thing that doesn’t discriminate against religion, race, gender, age, or sexual orientation. Osama Bin Laden, the guy who hated what America stood for so much, still used and agreed on the idea of money – in fact his net worth was estimated to be $50 million dollars. You see even groups around the world – like the KKK that hate other people because of their religion, skin color, or whatever it is – still agree with those that they hate the most – they agree on the value of money. The question is then, how has money become the ultimate uniter of humans across the globe?
Well before money was used people traded. For example, Bob may be great at making shoes and Joanna might have an amazing plum tree farm. Maybe Joanna needs a pair of new shoes to help her pick plums in the summer heat. Joanna might trade her plums for Bob’s shoes. The problem here is that Bob has to want or need plums. Maybe he already has a deal with another plum farmer. So what now? Joanna has to figure out what Bob wants in return for a pair of new shoes. Maybe his wife is ill and needs medical attention from a doctor. So Joanna then needs to find a doctor who wants plums in return for his services. Joanna gives the doctor plums, the doctor gives Bob’s wife medical attention, and Bob makes Joanna a pair of new Nikes. You can probably already see the problem. Trading requires that the people you are trading with actually want what you are offering. At the same time in a bartering economy people have to rethink the value of what they are trading is every day. If there are only 100 different commodities being traded in a market, that means buyers and sellers need to know 4,950 different exchange rates.
Here’s where money comes in to play. Money was created all around the world at different times. Money was not some kind of technological invention, but instead a revolution of the collective mindset. When one thing was agreed upon and trusted by all members of a community as representing value that could be exchanged for any goods or services, money was invented. Money in a way became magic. With money you can convert anything into anything else. Sell your cow, and buy tuition to a school and learn. Work for a few hours and use the money given to you for your time to buy a joint so you can waste your time. If you have enough money you can even change your biological sex. How is this possible? It’s all about collective trust.
The first known form of money was used 5000 years ago in ancient Sumer and was barley. People agreed that a certain weight of barley was worth a certain amount – the most common measurement being one sila or about 1 liter. So people would head to market with barley in hand and use it to buy goods or services. Eventually this gave way to the silver shekel or 8.33 grams of silver. The shekel eventually gave way to the coin – a standardized weight of metal – usually silver or gold – with an imprint of the kingdom it came from. The coin was first developed in 640 BC by Lydians in what is now modern day Turkey and is a monetary system that we still use today.