money

It’s not that hard to invent money.

Say that we run a business, let’s just say one of those neighborhood magazines that post local ads and events. A local brewery wants to run ads in our magazine, so we say, “Hey, we like beer. Instead of paying us why don’t we run your ads each month, and you can just give us a keg of beer?” From there it’s not far from saying, hey I don’t need beer every month; we only have a party every three months- let’s just create an account system. Every time we run the ads we get 100 Trade Dollars, and then every three months we can spend 300 Trade Dollars on beer. From there it’s not a stretch to say “I wish we could get a cleaning company in on this,” and pretty soon you have a real monetary system, like IMS Barter.

Let’s try a simpler example. Let’s say that you are a farmer, raising cows, and I’m a farmer raising chickens. I’d like a cow, so I say to you I will give you 300 eggs for a calf. As you like eggs, you think that sounds like a pretty good deal. “There is one catch,” I say, “I can only afford to pay you 10 eggs a week, but we can keep track of the payments and I will collect my calf at 300 eggs.” As you are a smart cow farmer you say, “How about you pay me 5 eggs a week for the next three years, and I will give you your calf today?” As I am just a poor chicken farmer I don’t realize that under this contract I will wind up paying over twice as many eggs for the calf, all I can see is that the weekly payment is half of what I was offering at the beginning. Congratulations, not only have you invented money, you have invented buying on credit.

Rai Stones

One implementation of money was the Rai stones of Yap.

By Einsamer Schütze - Own work, CC BY-SA 4.0, wikimedia

“The stones were highly valued by the Yapese and used for important ceremonial gifts. The ownership of a large stone, which would be too difficult to move, was established by its history as recorded in oral tradition rather than by its location. Appending a transfer to the oral history of the stone thus effected a change of ownership.” Yapese stone money

It seems strange to have a monetary system where nothing changes hands and in fact a person cannot even carry the money in question. But is this any different from transferring an unseen asset with a ledger? If I Venmo you $200 for dog sitting does anything occur outside of deducting the $200 from my bank ledger and transferring it to your bank ledger? How is this different than appending a transfer to the history of the stone?

If you go and spend that $200 to buy eggs at Lidl and pay with your credit card, it just moves the entry in the ledger from Visa to Lidl. At the end of the month when you pay off the card the entry changes from your account back to Visa. The Rai Stone never moves. In this case, the Rai Stone never even exists.