This article delves into the nature and origins of a medium of exchange for society. It begins with the ideas widely taught in schools across G7 nations in 2020. Next, a mythical view that was held in many pockets of Europe for many centuries is presented. Finally, a look into ancient civilisations and how they may have used currency. As reading through this paper, consider not only the ideas at play, but also the tribes or ethnicities and social histories of the cultures at each time. The origin of money in one culture, for one group of people, is not necessarily the origin for all. The task of understanding ‘origin’ is therefore related to the governing structure of the world today. It is this origin of money that is most useful for us to trace, given this is the world we today live in.
Educational Institutions of the G7 – The free-will free-market hypothesis:
The idea widely taught at schools is a free-market individual-human pragmatic origin and nature of money. Whether that was gold or fiat currency, the teaching of the nature and origin is the same. The teaching goes like this1:
In the early stages of trade, when productive individuals were only slowly awakening to the benefits of exchange, they considered only what was of benefit to themselves. A trade would occur when both parties considered themself to be in a better position post-trade. Trade at this point was difficult and limited. Say that a fishing-net was wanting to be exchanged for clothes, food and wooden implements. All items were held by different individuals. All individuals were at different locations and each had their own self-interest in each trade. A trade here may not occur, as the seller of the net feels worse off by any single trade. This impediment to trade was insurmountable, had a solution not eventuated.
The seller, led naturally and without compulsion, would buy more marketable and saleable goods with his first trade. This would bring him closer to his ultimate objective both quicker and more completely. As each productive individual, without any agreement, without legislative compulsion and even without regard to the public interest, was led by this economic self-interest, a phenomenon occurred. A certain number of goods became acceptable to everyone and thus capable of being given in exchange for any commodity. Mankind found a medium of exchange!
The textbooks may continue that many commodities were tried as these intermediary commodities: shells, gold, silver, other metals, grain and many more aside. In time, five traits eventuated that were deemed ideal for these medium of exchange commodities. The commodity should be:
5. Scarce – which is associated with a ‘Store of Value’ and ‘Stable’
Thus, we have money, currency, coinage, the Australian Dollar, a medium of exchange, terms usually classed as interchangeable by today’s educational institutions, developing naturally in a free market amongst self-interested humans desiring individual betterment. By corollary, it is taught that money belongs to people. That it is used by government, which itself is naturally occurring, by the association of free-willed individuals, and is necessary in order for a society to better themselves. That our government workers are public workers; elected by and employed by the people at large, and funded by the people at large via taxation. In my experience to-date, this would be the understanding of someone coming out of school, university, and even up to and including PhD students on financial topics.
Mythical Origins of Money – God gave us money and to God money belongs:
Humans in societies around the world offered sacrifices to the gods. The state of mind of the persons making the sacrifices can be understood. Consider today, when you have a major problem in front of you and you know not what to do, when there is something unknown or unreachable in front of you. What do you do? Some realise they must create a vacuum of sorts, deprive themselves of something, stop thinking or stop doing, and that then unknown forces lying dormant in them will grow and overcome the issue. Religions around the world teach this trick, this path to accurate understanding. The sacrifice had the same objective. It gave up something from the environment of the human, creating that vacuum, perhaps even a feeling of having appeased the higher realm, in order to obtain something from the gods2.
This was a long-term dialogue, and a gradual gaining of knowledge resulted. The ritual was often administered by a class who specialised in the sacrifices as well as in communicating the gained knowledge back to their fellow human beings. This class, by necessity of the specialisation and focus, were not often involved in the production of goods. They survived by donations from others. One part of these donations was made available to the world of the gods by ritual, with the objectives as detailed above, and one part would serve as sustenance for the priests and their surrounding staff. In one view of history, this is the foundation of the formation of societies. This exchange between God and Man, that is, the knowledge that these priests obtained in their ritual, meditation and overarching viewpoint on societies, flowed through into the relationships between men, and later between tribes of men.
Some more ancient civilisations and their temple compounds will be looked at in Part 2 of this article. It is sufficient to say here that these compounds became stores of material wealth: livestock, grain and plants, minerals and metals, furniture and implements. It is on these stores that the temple was able to issue tokens to their donors, for the precise purpose of providing a ‘liquid’ to the marketplace that would allow trade to occur. These tokens belonged to the temple, ultimately to God, and people knew this to be the case. Once the desired trade of goods had been accomplished by the people in the marketplace, these tokens would return to the temple. The tokens were ‘dropped into’ and ‘removed from’ the market as trade demanded. The purpose of the token was to provide liquidity, along with a temporary store of value to move between trades, in order to facilitate otherwise impossible trades. There was no purpose to hold onto these tokens and they would be returned to the temple. Thus, by the societies sacrifices, God had gifted knowledge that would allow mankind to more ably express and obtain their requirements2.
The Form of the Token:
What form did these tokens take? At first these were lumps of metal, nothing more. Most often Gold, Silver or Copper. Gold and Silver were already viewed as the domain of the Gods3. Borrowing them from the temple and returning them to the temple was entirely natural. The metal was a gift from the Gods, now used to facilitate the trade between Men. And, praise be to God, Men had been sufficiently devout to be gifted this knowledge along with the ability to put the knowledge to use.
For perspective on this last paragraph I will leave European thought and travel back to Ancient Egypt. The Earth was governed by the Sun god and his partner was the Moon god3. The equal of the Heavens above on Earth below was Gold and Silver, Sun and Moon. That is, the governing bodies above had their equivalent below. The association went much further than this, yet it is not the purpose of this article to delve to the depths of ancient religions or of alchemy.
Two differing views as to the origins of money have been presented. One could argue that they are intricately linked. Did secular man develop money to solve a free-market issue? Did a managing structure develop money to solve an issue in society? Was the market in those days controlled and managed, or was the temple an extension of the free association of men? That is, that the priests played their role, including their specialisation of labour, in the development of society. To what extent was God involved?
These ideas are explored further in Part 2 by a look at specific periods in our past.
- Principles of Economics, by Carl Menger, 1881. Although, pick up any standard issue textbook today and these sentiments remain. These ideas were developed during the renaissance period, when historical and theoretical origins parted ways. The ‘modern man’ of Europe sought to overlay his views onto the man of history.
- Money, Gold, Conscience, by Gerard Klockenbring, 1974.
- The Dawn of Civilisation: Egypt and Chaldea, by Professor Sir Gaston Maspero, 1894.