19 Session

Standard story (Adam Smith)– old times, barter prevailed. But required

‘double coincidence of wants’. Inefficient

The medium of exchange required. Backup for doing a transaction.

Gold and silver used – durable, malleable, portable and rare.

Also serves as store of wealth

Salt used in Abyssinia, shells in India, dried cod in newfoundland, tobacco in Virginia, Sugar in West Indies 

Yap – enormous stones

Form of credit rather that a means of exchange

BUT anthropologists say money didn’t arise directly from barter

Thomas Smith – shells etc not used for exchange as such, but to keep track of credit accounts and clearing. Balances might be cleared with some cod, but not medium of exchange as such

Keynes & Friedman – money as a type of credit (an obligation to pay), monetary exchange as the clearing of credit accounts, and currency as tokens of underlying credit relationship

Most money now has no value as such – just a token. Most doesn’t even exist physically

IOUs that can be transferred (but no value as such) form one person to another. IOU one pencil.

An IOU becomes money if it can be passed to a third party. Money is transferrable credit.

England 12-18 C – exchequer tally. Piece of wood. Split in two (unique) – notches carved to show money paid to or from the exchequer

Creditors half called stock, debtors the foil (why bonds called stocks today). These sticks could be traded (trading in credit for purchasing).

Transferrable credit led to creation of coins. Social technology of transferrable credit. From barter to coins gradual change.

Mesopotamia (Uruk) – clay cones, balls, cylinders. Each shape represented a staple (wheat, oil, beer etc.). Ball with 6 discs inside represented IOU 6 sheep. Then you can transer these discs to aquire other things. Then passed to impressions on wet clay tablets

Argentina – corralito. No money from banks. Led to the cration of this artificial currencies. Substitute money emerged. Provinces, cities and supermarket chains issued their own IOUs – these then circulated as money. First pesos then in ‘creditos’

Brixton has ‘Brixton Pound’:  you use the brixton poun in brixton. The idea is to encourage domestic commerce.

Greece

Where central authority tells people what to make, money not nec. Incas had no money – emperor told people to grow wheat, tend llamas etc. Then govt took produce and redistributed it. Not market economy. However in market economy was in need of some sort of money

Lydia (in Turkey) had gold and silver. To show value equivalence, cut into same size chunks and stamping lion onto them. Invention of coins because when some metal has a certain value, then it is easily transferrable.

Spread into Greece. Workers didn´t have to sign for long periods of time but for a day. You could buy in any moment. Led to employers treeating employees better.

People turned up at Agora to hear speeches, talk etc. Soon ppl came along to sell things.

Workers didn’t sign on to work for landowner any more and get food and shelter in return. Became day labourers for money. Could leave if unfairly treated

China

China – used bronze coins, but very heavy, so they used pieces of paper. Backed up by the quantity of coins that exist. Goverment assumed the resposability to produce thismony to avoid counterfiting.

Paper invented 105 AD. Printing around 710 AD

995 AD merchant gave paper receipts in exchange for coins (like cloakroom tickets). These were transferrable. Anyone could claim coins with receipt.

Problems with counterfeiting – govt took over money

Before taxes collected in cloth and grain. Now in paper and coins. This way more specialization is allowed.

Less need for self sufficiency – encouraged specialisation and new activities

China

MONGOLS – 1215 Beijing captured. Market for Chinese goods now stretched across Asia.

Mongols nomads – loved paper money rather than coins (portable), easy to carry arround.

1287 Kublai Khan issued paper money that couldn’t be redeemed for silver or bronze. No longuer backed up. Something we trust as money.

Paper money now worked not because it was backed by silver or gold, but because ppl agreed it was money (fiat money – not backed by anything). Understood this could be use for exchange.

BUT Chinese leader who drove out Mongols (Hongwu Emperor – founded Ming Dynasty) didn’t like money or markets. Wanted simpler rural idealised China of past. Banned trading, moved away from money and back to tributes and redistribution. Give your products to the  state and state redistribution.

Europe

1600s England. Rich stored gold in goldsmiths’ vaults – get a claim ticket. Then the pieces of paper could be exanged. Used these like cash – transferrable. Similar to China.

Then goldsmiths started loanong this pieces of paper. I’ll give you a claim ticket without you actually putting gold in the vault, you have to give it back and you must pay interest. Goldsmiths had created money, increasing the amount of money in the market.

Similar in Sweden – used enormous copper coins. Created a bank which exchanged paper for enormous copper coins. Then started loaning

Amsterdam opened public bank (problems with so many types of international coins circulating). Bills of exchange could be settled not with coins but by modifying ledgers.

Europe

France – Regent (Duke of Orleans, pushed by John Law) obliged people to pay taxes in paper bills issued by Banque Générale. What you pay taxes in is a good definition of money. Eerybody has to pay the tax with the money that has been crated by the Banque Generale.

Law promoted Mississippi Bubble – massive share issue on future wealth from Louisiana. But no wealth found, shares crashed, Law run out of France.

US

US 1840s & 50s – anyone could get a license and print money.

Over 8000 kinds of paper money

1865 Lincoln limits money printing to national (not state) banks. Backed b governemnt bonds. Money backed by govt bonds, which limited supply

Europeans created central banks to avoid bank runs. Pople dont have confidence that bacj¡ks would give them their money banck.

Future of Money

Website called Silk Road – buy drugs with bitcoin.

Boom of D for bitcoin increases

Mean of exanche which is gonna become importan and popular.

Price in 2011 1$=1 bitcoin

Then started going up

By 2018 rose to 19,000$

Became a speculative investment

Cash is good. I hand it over and get stuff. No record of this. FreedomBut most money is transferred digitally through ledgers (bank settles accounts when you pay by card)

But cash makes crime easier- so demand here. To avoid this tipe of crime we should eliminate this tipe of high value notes.  Rogoff – get rid of large denomination bills. Big cash transactions inconvenient – bad for criminals

Very little cash used in Sweden. Financial crime when banks deviated a lot of money from is funds.