Whence money?

Where does money come from?

Up to even the mid-eighteen hundreds a large fraction of people in the world lived without using money! Most people managed on subsistence farming and barter. Or they were peasants or serfs or share croppers. They were fed, clothed and housed by their masters; not paid a wage. Occasional small quantities of money sometimes changed hands but people’s lives did not depend on it.

Our lives do depend on it. Excepting a very few extreme wilderness survivalist men and women we all need money to live.

That we need the material things – water, food and shelter – is understandable. But money is not an ordinary material thing! Proof: A monied (wealthy) person need possess no specie at all in his pockets nor need he have it in a vault. His ‘money’ is entirely a matter of figures in a ledger. The material thing called specie – dollar bills, euros, pound notes, yen etc. – is not the same as money. It is only one form of it; used when relatively small quantities are involved. There is no vault in the bank holding your bank account money in specie. Only the poor have their wealth in specie!

This invention – money – is the source of the world’s material well being. Without it roads and bridges and grand buildings could not have been built. We would not have cars, nor amusement parks, nor dish washing machines, nor computers nor even books to read. To enable any of these things people must be paid. Money is required. Barter won’t do.

The impact of the invention of money on human evolution is comparable to that of the invention of the wheel. So the structure, the mechanics and the nature of money is something worth understanding. I knew I didn’t understand because, asking myself simple questions, I had to confess I could not answer them.

How is it decided how much money to print? By whom is it decided? Why doesn’t the government simply print money to pay all its expenses rather than taxing the population? How, in fact, does one know how much money is in circulation if money is not merely printed specie? What, then, is money? How did money come about? What is its history?

With study I was eventually able to answer these questions. Relatively few principles suffice to do so. Only after I can explain what I’ve learned do I know I’ve understood. So I decided to make visual, for anybody to see, the animations built up in my mind from my studies.

Money is an artifact of accounting. The connection is presented using reader driven motion graphics in The Nature of Money. It ends with a motion graphic portrayal of the Federal Reserve System showing how money is issued.

Corrections and comments on the exposition would be dearly appreciated. They may be offered here.