The History of Money - I

The United States and money became indelibly entwined when the dollar took on the indicia of the United States: $. In fact, worldwide the standard base currency became the U.S. dollar after World War II. Still, though, its value was tied to gold.

In the early 1970s, almost a hundred years since its inception, the United States was in economic turmoil.The value of the dollar had plummeted, and inflation was doing what it infers: going up. That made the dollar worth less gold. And Fort Knox would have been barren if dollars had been traded for bullion; there wasn’t enough gold reserve to cover the “value” of U.S. currency.

A lot of people were focused on what money meant in the 1960s and 1970s. Money meant capitalism, it meant world influence, or hegemony. And it became the philosophical schism of the for the Cold War—between a nation state devoted to communism, where all people would ideally share in each other’s riches, and a nation state whose basis was steeped in capitalism.

Money’s influence to embark on the Vietnam War, to quell the philosophy of the anti-money movement of the time, sent the world into disarray. Oil prices and other commodity prices surged. Money became less valuable. Its relative worth to gold was plummeting.

While all this was going on in the world, the banking industry was working on a concept that would forever change the monetary value system and its tie to any physical denomination.

In 1958, Bank of America issued sixty thousand credit cards to the residents of Fresno, California. These credit cards represented value—but not in the form of paper or coin. Plastic was introduced into the repertoire of physical representatives of money. This was further elaborated upon when Dee Hock, the founder of VISA, developed a system where value would become “data” in the form of electronic particles able to move around the world at the speed of light. Money had become an idea represented in digits. It was slowly losing its link to gold and physical or tangible value.

In 1971, President Richard M. Nixon cut the link. He abolished the gold standard. A new system of global exchange rates was established—and paper money around the world lost its link to a tangible asset. No more gold. No more silver. Currency would represent nothing more than devised value. Its power would be in its potential.

Now, people were in control of the value of money. By setting lending rates and gauging the growth or slow down of productivity of a nation, people could increase or decrease the value of money around the world. Indeed, by 1976 the Articles of Agreement of the International Monetary Fund had been amended to legitimize the practice of letting currencies fluctuate. Until then, fixed rates had been agreed on between nations (shortly after World War II at the Bretton Woods Conference in 1944).

With “people” now deciding what things are worth, money has become a disembodied principle of value, of worth, of purchasing power. These people who decide how much purchasing power it’s going to take to buy that cup of coffee, who set rates of exchange, who determine “value,” are economists, money managers, traders, and financial analysts.

Unlike their predecessors, the new breed of money manager doesn’t deal with paper or coin.The new breed of money manager deals with digits, numerals on a computer screen. Money is a series of representations.We read or are told what these representations mean.And, voilà, that is money, that is what money is worth. Even paper and coins are being replaced more and more by the representative plastic card. The credit currency of the past is the credit card of today.

There is less attachment to the physical “money” used to buy, sell, or value material goods. Indeed, I have gone days without using any physical money. With a debit card or a credit card, I can purchase just about anything I need. My bank account is automatically debited money for goods and services; nothing changes hands. It’s all a blip on a screen.Those blips, those digits, are what money managers oversee, analyze—and try to make sense of.

The idea of money is what has become all important. It’s the idea of having it, not particularly seeing it, that drives my Imagination, for example. He doesn’t need to see it to conceive of utilizing its purchasing power. Money, to Him, doesn’t need to be fetched, transported, and exchanged for goods or services; the purchasing power of money is communicated.

The evolution of money has transgressed the physical and has found itself anew in a global compositional equation. Money provides the ability to do certain things. It holds that proposition. It is full of “if onlys.”

Money to the Lydians meant control. It meant creating a basic system of value. It meant creating some type of comparability among goods and services. By doing that, the Lydians spun the world away from utilitarianism and toward an interpretational matrix of worth.

Money to the Romans meant power and influence. It meant imperialism through a well-financed military. Money could buy power. It could buy control. It was the capture of power and control—through disparate ideologies—that decidedly split the world into two superpowers. It was the exorbitant financing of a military that led to the downfall of the Soviet Union and its communist economy.

President Nixon’s lifting of the gold standard meant that money could stand on its own. Dee Hock’s disorderly abstract placement of value on goods and services meant money, in its tangible form, could disappear.To him, to financiers, and other professional money managers, money means a system for the exchange of value. This system, made up of blips of electronic digits, has created more wealth over the last ten years than in the course of history.

The value proposition money holds has been exploited to the tune of some seven million millionaires, five hundred billionaires, and a generally expanding world economic environment. The value of money is strong. It’s a New Economy. Just as those electron digits travel at the speed of light, so too is wealth created and lost today.The digits that represent our “value,” our “worth,” are housed by an account, identified by a number.The digits are influenced by the monetary system—and their value, our value, is thus determined.

My Imagination can’t see money anymore. He sees a blurry, gray computer screen displaying digits. But it doesn’t mean much to Him. Dollars, however, bring a flash of excitement. He sees the green and white notes—the $1 bill with the face of George Washington; the $5 bill with the face of Abraham Lincoln; the $10 bill with the face of Alexander Hamilton; the $20 bill with the face of Andrew Jackson; the $50 bill with the face of Ulysses S. Grant; and the $100 bill with the face of Benjamin Franklin. Those dollars mean something to my Imagination. They service the spirit. They hold the potential of being fulfilled.

1 EUR = 0.9463 USD, 1 USD = 105.39 JPY, 1 CHF = 0.06466 EUR, 1 GBP = 1.506 USD, 1 CAD = 0.7145 EUR, 1 JPY = 0.01 EUR, 1 CAD = 0.6758 USD

We’ve all seen this equation, posted at banks, airports, on the Internet. This currency equation is a deeply meaningful barometer of value. It defines costs, and tells you that if you spent a dollar on a cup of coffee in the United States, you’re going to have to spend one hundred and five yen for a cup of coffee in Japan. But price is a far thing from worth.And worth may be a far thing from value.

To understand what money means we have to understand worth and value: those things money is supposed to represent.

My Imagination sees a man crawling onto an oasis from the desert—sunburned, exhausted, his clothes tattered.Would he pay more for a glass of water than someone not suffering from thirst? Of course he would. Hence, the value. Hence, what it’s worth. But what would he pay with? If it’s money, then money means survival. It means the ability to live. Once the man’s thirst is quenched, the worth of water to him would decline. It would get poured into a nominal value system. That’s when things get complicated. The value of money has to be assessed. For in and of itself, money is nothing more than paper and coins.Without value, a jingle jangle, origami is about all money would be good for.

So, what exactly is money and where did it come from? Adam valued fruit, but he didn’t have to pay for it (with money that is). In the beginning, there wasn’t any money. And that should tell us something. Like all inventions, time included, money is defined by the people who made it up, concocted the idea. Money is a conception. From it, a whole value system has been created. And that’s not just economics.That value system often defines our social status, our professional lives, our leisure abilities, our relationships, and most of all our purchasing power. In other words, it defines us in a way.

So, what great ape set these definitions? Who defined money?

The word “money” stems from the Latin. It derives from the Roman goddess Moneta. Moneta is another name for Juno, the Roman goddess of heaven. She, the wife of Jupiter, is also the goddess of light, birth, women and marriage—some of those things that give meaning to life, that mint us to one another.

The Romans played an integral part in devising money and its value. However, the actual conceivers of money were the people of Lydia, an ancient city in Asia Minor, or modern day Turkey. Money was first minted there in seventh century B.C.

Lydia began to mint coins made of electrum, which is a mixture of gold and silver.The government issued these bean-shaped ingots and marked them with their weight and value in lieu of pieces of gold and silver, which had been the standard barter material because of their scarcity.

Lydia was part of the thriving society of Asia Minor at the time. There, where the first trade centers of the world evolved, discoverers and inventors created an attractive marketplace. Commerce soon exploded—and the government of Lydia minted money to control the way in which things were bought and sold.With government-minted money, they could control price and value: worth.

Governments, ever seeking control, could now exercise their influence on commerce. Needless to say, the “money” idea caught on.And before long, most of the governments of the world were issuing some semblance of coinage. But, ’round about the first century A.D., the Roman government overindulged and minted too many coins. It had needed the money to build and finance its military. Inflation occurred—and the value of money became an issue.To make up for the loss in value of one coin, people obviously had to carry more coins.

Hauling around buckets of coins wasn’t particularly convenient for the horseback, mule-riding, pedestrian society of the Middle Ages. So moneylenders and merchants began to issue promissory notes in lieu of coins. Ah, huh, another breakthrough in the creation of money. Someone was on to something, and credit currency began to be widely used as a system for buying and selling. Indeed, even today if you look at a dollar bill, you’ll see that it’s a promissory note “For All Debts Public And Private” issued by the government.

My Imagination is at it again, trying to conceive of things we haven’t experienced. He tries to envision life without money, life in situational barters. How would it change? How would it differ? We would still have to utilize skill—whatever skill we had—merely to subsist or obtain objects of value to pay for our subsistence. What would we do for trade? I don’t think there would have been a market for writers, mostly because there were no books. I would have had some very simple choices: craftsman, consul, farmer, butcher.

My place in society would then have been set. I could trade on that value. With that value, I could acquire the things or barter the things I would need to survive, like shelter. My Imagination sees: a horse, a cow, a pelt, a good spear. Those bartering objects that have utilitarian value. What a jump it is to representative value. All those barrels full of coins. The use of gold and silver as the basis for value because they were scarce in supply, creating a relatively stable value system, until that day in Rome when perhaps on a hot summer morning a man in toga and sandals pushing a wheelbarrow full of coins stops to wipe his brow in front of, say, the Colosseum and gets an idea for paper money. “A bit lighter on the back and feet,” he might have thought, looking up at Palatine Hill.

Paper money was used by private lenders and merchants for centuries until France, in the eighteenth century, formally standardized the use of government issued notes, or “paper money.”

This was quite a controversy at the time. Paper money meant governments no longer had to use gold or silver in the minting process.They could create value with a printing press, albeit they had to physically back the paper with reserves of gold.

The History of Money - II

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