highlights from Debt The First 5000 Years 🌱

Growing up, I was tought that money arose from the need for more efficient trading due to the inefficiencies of the barter system. However, there is actually no evidence that bartering was the primary way to trade goods in older societies before they had money. In reality, gift based credit systems have been the primary way trade has been conducted in ancient societies. Bartering was mainly used to facilitate trade between enemy groups, since they could not really trust one another with credit. Money was most likely introduced as a unit of account to assist credit systems. For example, the government assigned a worth of 5 units of silver to a pound of wheat, but most people would trade using wheat instead of actual silver/money. The silver was mainly used to keep track of what people in the society owed one another.

• I found this idea super interesting that it seems more intuitive to human nature to have credit systems of “virtual” money instead of needing to pay using physical currency. A system like the one cryptocurrencies use with a virtual ledger to keep track of who owes who money could be much more intuitive than continuing to rely on fiat currency. Although there is currently an absurd amount of volatility associated with these currencies, so they aren’t a great unit of account for actual goods.

If the government created money, why would they give it to citizens just to demand it back via taxes? Anthropologists theorize that in older societies it was done to be able to sustain their large militaries. The government dispersed coins to soldiers and then demanded that ordinary citizens give the government back the coins (a tax), therefore the citizens were forced to provide food/goods for the soldiers to collect coins to pay the taxes.