Reviewed Date: March 22nd, 2022
Money is pure fiction; it works as long as everybody agrees. It is important how we humans made up this thing that everyone is after these days.
In the past, people used to cultivate different crops like wheat, corn, barley, and vegetables. After harvesting, people would exchange a portion of the crop (wheat) to get a portion of another crop (corn). This is called barter. As people produced their crops for survival and hunted animals for meat, they didn’t require money, but investing money solved the barter problem.
The first paper money was circulated not in the West but in China. In Sichuan, a city in China, bronze coins were scarce; instead, people used iron coins. But to buy a pound of salt, you needed a pound of iron coins. This was a problem. Chengdu had an idea: he let people leave iron coins with him; in exchange, he would give receipts. Eventually, these receipts became paper money.
Similarly, goldsmiths in England started issuing receipts for keeping gold. With receipts, people could do whatever they want. Also, these Goldsmiths gave loans to people who promised they would return the money with interest. Goldsmiths solved England’s not-enough-money problem. But paper money, which is based on gold, could fall if there is a gold shortage.
Nonetheless, paper money worked not because it was backed by gold or bronze; it worked because everyone believed paper could be money. The thing that makes money money is trust—trust that we could buy stuff tomorrow or next year.
I really liked this book. I have been meaning to read a book on the origins of money. Though it lacks depth, this book explains money in simple terms. Could have been a better book if the author delved deep into money.
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