Why I think the fiat money system is useless – PART 1 (How it all began)

The fiat money system came as a solution to the so called ‘problems’ of the gold standard. 

We, at the time, thought we are now too cool for neo classical economics and started to vouch for classical economics (smh as if it raised us). But wait whoa! What am I talking about?

I’m talking about money.

Let me start off with a brief history of money. So we get on the same page.

Let’s get into our imaginary time travel pod and let’s take a sneak peak of the past.

By definition, money is a generally accepted medium of exchange. We started this medium of exchange by bartering.

Bartering is a direct trade of goods and services - I'll give you a stone axe if you help me kill a mammoth - but such arrangements take time.

You have to find someone who thinks an axe is a fair trade for having to face the 12-foot tusks on a beast that doesn't take kindly to being hunted. If that didn't work, you would have to alter the deal until someone agreed to the terms. One of the great achievements of money was increasing the speed at which business, whether mammoth slaying or monument building, could be done.

Slowly, a type of prehistoric currency involving easily traded goods like animal skins, salt and weapons developed over the centuries. These traded goods served as the medium of exchange even though the unit values were still negotiable. This system of barter and trade spread across the world, and it still survives today on some parts of the globe.

In Politics Book 1:9 (c.350 B.C.) the Greek philosopher Aristotle contemplated on the nature of money. He considered that every object has two uses, the first being the original purpose for which the object was designed and the second possibility is to conceive of the object as an item to sell or barter. The assignment of monetary value to an otherwise insignificant object such as a coin or promissory note arises as people and their trading associate evolve a psychological capacity to place trust in each other and in external authority within barter exchange.

So let’s fast forward a bit- we ended up having notes (paper and/or coins) that represented the amount of gold one had in their reserves. Surely we all understand why walking around with gold in our pockets was the human version of “Warning! –Abnormal load!!!”

Part two will be a brief breakdown of the gold standard. Just because I can- let me define it here….

#dissapearsLikeBatman