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All About Money

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Money-it makes the world go round, doesn’t it? No one ever seems to have enough of it and we spend a good portion of our lives working for more of it. But, have you ever found yourself wondering why that is? Why do humans use money and how long have we been using it? Is money even really real or an invented, arbitrary concept? What would a world without money look like? We’ll talk all about that and more in this episode of Facts to Relax. I’m Yvonne Page Illustrates and on this channel I research interesting and random subjects and share the information I learn with you in a soothing voice while painting a relaxing picture on the screen so we can just chill out together and learn some new things in a stress-free, calm environment. So, let’s get started talking all about money now by settling down into a comfy spot, taking a deep breath in, and letting it out again slowly.

Around the world there are 180 different currencies currently in use. There are dollars, pounds, yen, and euros to name a few of the most well-known. In South Africa, you’ll find rands, in Ethiopia-birrs, and in India, rupees. The value of any country’s currency may change when you exchange it for a different currency, possibly rising or falling in value depending on where you are in the world. 

For the most part, money is made either from paper bills or metal coins, though that hasn’t always been the case, and more and more frequently now, cash is being replaced by electronic money-debit and credit cards immediately transferring funds from one bank account to another. 

But to truly understand where we are now with money, let’s go back to the beginning to where it all started. As long as humans have been around, it seems, we have learned to place value on different items and services. Before money was invented, bartering and trading was common, meaning that if you needed something-like food, you could exchange it with another person who had extra food for something that you had in your possession, like an arrowhead or animal skin. We aren’t the only ones though to appreciate a good trade, apparently. All sorts of animals, including penguins and chimpanzees have been observed in the wild trading stones and shiny objects for things like food and sex. Evidence from the Upper Paleolithic era shows that hunters would have traded tools and weapons but the problem with bartering is that one, you must have something to actually trade, two you have to find the right person to trade with-they must want what you have and be able to offer something in return that you want, and three, it can be hard to always make an equitable trade and it’s way too easy to end up on the short end of things if you’re desperate. Think of the Jack and the Beanstalk story-trading the family’s cow for a handful of beans is not exactly an equal trade, unless, of course, those beans happen to be magic and lead to a giant’s castle in the sky where there are plenty of riches to be obtained…then the tables actually flip if you think about it and the cow is the lesser valued item in the trade.

Either way, bartering eventually began to make way for other forms of primitive currency. Things like shells, beads, and precious metals began to represent value within a society and these items could then be traded for goods and services. It all came down to what a group of people agreed was worthy of trade. For example, in the Aztec Empire, chocolate was highly valued so within their community, cacao beans were the primary currency used. They were taxed, hoarded, and as good as gold in their society. In fact, you might say cacao was better than gold to them because legend has it that when Hernan Cortes came looking for gold, which they certainly had plenty of, the Aztecs offered him up cacao beans instead. Of course, we know that the Spanish conquistador was unimpressed and all sorts of awfulness ensued. Like with bartering, it was crucial that both parties agreed on the value of the currency and unfortunately, like in this instance, that wasn’t always the case.

On the other hand, as explorers began traveling around the world, they would sometimes find new items, like spices, that they didn’t have in their home countries and those things essentially became valuable and tradeable. In the Middle East, spices like nutmeg, pepper, and cinnamon were valued even more highly than gold and led to wars, the fall of empires, and discoveries of new continents. Let it be a small comfort to you to know that humans have always been as power-hungry as we are today, even before there was actual cash to be hungry for and that the rich getting richer and the poor getting poorer was a thing even when paper bills and coins weren’t.

Speaking of coins though, the first actual coins to have been found are from between 650 and 600 BC in Asia Minor, approximately 5,000 years ago! Mesopotamian shekels were stamped silver and gold coins used to pay armies in Lydia and Iona. The practice of using coins as money spread across the world-it was small, easy to carry, wouldn’t break or go bad, and was easy to control. That’s an important thing to stress so I’m going to say it again. Physical money is easy to control. It’s hard to tax people when all they have are a few chickens because really, what’s a king going to do with hundreds of extra chickens, right? But once coinage came into play it got a lot easier for government control to grow, but also, it enabled easier of movement of goods and services, and helped develop societies and allowed them to interact with other societies. Now there was a common currency that everyone: farmers, city-dwellers, hunters and gathers, nomads, etc., could all use. Money could create alliances and actually, in many cases, deterred battles and promoted more peaceful interactions between individuals and groups because of how it simplified the process of trade. What it all came down to was that everyone began to agree that gold, and to a lesser extent silver, and bronze were valuable and a good form of currency. Even if coins looked different from region to region, the fact that they contained these precious metals made them worth something.

That’s not to say everything was perfect though. Wherever there’s power to be held, and unfortunately it seems money and power will always go hand-in-hand, there’s bound to be some corruption along the way. Early coinage was no exception. In fact, the fall of Rome can be partially attributed to coin corruption. Some emperors accidentally devalued their coinage by reducing the amount of precious metals within them. At first a Roman Denarius contained 90% silver but then gradually, they began decreasing the amount of silver in each coin they made until they eventually were down to barely 5% silver, with a bronze core. This meant that they could make considerably more coins with the same amount of silver as before but that the coins themselves had a much lower value since bronze wasn’t worth as much as silver. One ruler, Caracalla, tried the opposite technique. He introduced the “double denarius” which was worth two times as much as a regular denarius. Problem was, it didn’t have double the silver, only about one and a half times as much. Consequently, as more and more coins came into circulation with lesser values, inflation occurred, people just began charging more denariuses for their goods and services, and since many people weren’t being paid more than they were when the coins were worth more, poverty grew and the only ones who benefitted at all were the rich and powerful. Sound familiar at all? I mean, maybe someday we’ll learn from our mistakes…but then again, maybe not? I don’t know. Another side effect of this was that coinage stopped being trusted worldwide for almost a millennium as no one really could grasp how to make it work well, with coins really only coming back into fashion during the Renaissance.

Now, since we’re talking about precious metals, let’s take a minute to talk about why they were determined to be so valuable and why they would become the basis for currency. If we’re being completely honest, the only thing that humans really need for survival are food and water, followed of course by materials to build safe shelters but that can be satisfied with wood, furs, stone, and other items that can be acquired in nature. It’s the things that we take for granted now-a-days that are actually the most important for us but what we want is a completely different story and it’s the want that really adds value in our minds. Essentially, what I’m saying is that precious metals are completely unnecessary in the bigger scheme of human necessity. Gold, silver, and other metals, really don’t satisfy our basic human needs. We can’t eat them and we can’t drink them. In fact, gold, which is widely considered to be the most valuable of all metals, really isn’t good for much. Practically speaking I mean. It’s too soft to build with, it’s not nearly as effective at conducting electricity as copper or silver, and pretty much anything you can do with it, you can do with other metals just as well. Yet, it’s worth so much! You know why? Because it’s pretty! And that’s what it really comes down to. It’s pretty, some powerful people in history decided they really liked how it looked, and they wanted all of it. ALL. OF. IT. And that gave it its value. Even someone who doesn’t care for gold personally wants it because of its inherent value and worth to other people and society at large.

That being said, though we may think that money is backed by gold, meaning that for every dollar, there’s an amount of gold in some national vault somewhere giving it its value, that’s not actually the case anymore. Though you wouldn’t be completely wrong in thinking this because that was the case in the past. For example, up until the early twentieth century, the United States did back its money with gold. In fact, as late as 1971, you could exchange U.S. currency for gold. But not anymore. This is because most money now is “fiat money.” Fiat is an order or official decree so essentially, all money is valued based on what the government in charge of it says its worth. That sounds absolutely bizarre, right? It is. It’s also a lot more complicated and nuanced than that but essentially, the value of money is determined by factors such as the stability of the issuing government, and the relationship between supply and demand. This gives central banks greater control over their economy because they can choose to print more or less money to impact the value of it and when managed well, this adds a degree of economic stability. Of course, none of this seems much different from the Roman denarius because if a government prints too much money, hyperinflation can occur, raising prices of goods and services to crazy and unsustainable amounts and crash the economy. An example of this recently occurred in Venezuela, and their bolivar has become practically worthless so no matter how many bolivars a person may have had before, they can’t do anything with them now. This has crashed their economy, leading to unemployment, food, power, and medication shortages, resulting in starvation, poverty, death, corruption, and huge amounts of violence. And really, this can happen to any country, at any time, if the fiat money isn’t properly managed which is why it’s important that we all have a bit of an understanding about how it all works.

But let’s circle back and talk about what paper money actually is and why it’s used in the first place. Because seriously, how can entire economies be run by little strips of paper with someone’s face on them? How could anyone argue that they have value? They’re not even as pretty as gold and you definitely can’t eat or drink paper money. Well, the answer is because everyone around the world has agreed that paper money has value and each paper bill is backed by the country’s government’s promise that it’s worth what the number that the bill says it is. It’s that simple really.

Now, of course, paper money is great because it’s so much lighter and easier to carry than coins and you can easily tell by what’s printed on the paper how much it’s worth. But the first paper money was a bit different. Originally it was more like handwritten ownership titles and IOUs. Instead of having to carry around something to trade, a person may give you a piece of paper that stated that it could be traded in for some other good, like a chicken for example. So, you had this piece of paper that was worth one chicken that you’d been given for doing some work for someone and then when you need something else you could give that piece of paper to another person in exchange for what you need and so on and so on until someone finally went back to the original issuer of the note and exchanged it for the promised chicken. It was like bartering but trading a promise rather than an actual item. Very convenient and I’m sure COMPLETELY free from corruption. The best part I think is the idea of promising one person a chicken and then having an entirely different person showing up at your door randomly at some point in the future demanding that chicken. Literally an introvert’s nightmare but fine, whatever. 

Now actual paper money as we know it originated in China in the 11th century and though Marco Polo definitely returned to Europe with stories about it in the 13th century, it was another couple hundred years before Europeans would get on board with it. They just couldn’t get over the idea that money should have some weight and substance to it to give it value. Some precious metal that paper money just doesn’t have. Eventually, however, they began to come around to the idea of easy to carry paper notes rather than having to haul sacks of heavy coins around wherever they went. 

In the United States, paper money became a necessity pretty early on because there weren’t enough coins to go around. The first national U.S. currency with “United States” printed on it appeared in 1777 a year after the country was declared independent, backed by the promise of tax revenues soon to come. New paper dollars were issued in 1861 to help fund the Civil War. The green color was chosen by Abraham Lincoln’s treasury secretary, Salmon P. Chase. They were nicknamed “greenbacks” by Union soldiers. In the early 1900s another common nickname for the bills was “kale,” and then “lettuce,” and then “cabbage” because the green color really reminded people of vegetables. I think this is as close as we’re going to come to money and food actually being equal in people’s minds.

Now, fast forward to 1996- the US government began making more secure bills to prevent counterfeiting, complete with embedded ribbons, microprinting, and color-shifting ink. Nowadays, American bills come in seven denominations: 1, 2, 5, 10, 20, 50, and 100 dollar bills. 500, 1,000, 5,000, 10,000, and $100,000 bills were also printed until 1945 and circulated until 1969, when the Federal Reserve began destroying any of those bills that were received by banks. Though there are still a few in existence floating around and it would be legal to use them, they’re more valuable as collectables than what their face values claim. To date, the people featured on all American bills have a few things in common. They’re all men, and they’re all white-but that is slated to change. In 2016 the Department of Treasury announced that it would begin to add more diversity to its bills, starting by replacing  Andrew Jackson on the $20 bill with Harriet Tubman, though the process to actually implement the change has been stalled. In the United States it’s always been a given that money features politicians, namely American presidents and founding fathers, and in fact, it’s a federal law that no living person’s face can appear on currency, but in other countries, not only do living people appear on their bills but the faces of famous artists, scientists, and reformers grace their currency.

But what about electronic currency like debit cards, bank transfers, and other methods of spending money without actually having any cash in hand? How’s that work? On the consumer side of things, it’s pretty simple. You have a bank account where you deposit money when you get paid or are gifted money and that money can be withdrawn and transferred electronically, thanks to the magic of computers. If you want to learn more about how computers work and their history, I’ll link to a video in the description below that explains more about that. Banks have routing numbers that tell which bank the money should come from and each account has a unique set of numbers or an “account number” that identifies it. But how does it all relate to cash and coins? Well basically, all money in any bank account has a paper or coin somewhere that equals the value. That’s why you can go to an ATM and take out the cash equivalent of the amount in your account pretty easily. This is not the case however, when it comes to new cryptocurrencies that you may have been hearing about a lot lately. Cryptocurrency, like Bitcoin, are not backed by a government, instead being backed by the interest of the people using it, meaning, much like the stock market, values of cryptocurrencies can fluctuate. I’m going to do a video shortly that focuses completely on cryptocurrency since it’s a pretty complicated thing to understand and deserves more of a deep dive than I could give it in this episode so if you’re watching this when it first comes out, keep a look out for an upcoming episode all about cryptocurrency. If you’re watching this after I finish that video, I’ll link to it in the description below and in the corner of the screen now.

So now, let’s get philosophical for a moment. Let’s imagine a world without money. Would it be a better place with less corruption and evil? Or would we immediately revert back into cavemen with society as we know it crumbling around us? Would we find a new form of currency to trade with and what might that be?

One extreme scenario, in a perfect world at least, may be a “gift economy” where instead of buying or trading things, people would give freely and take only what they needed. It’s how the rest of the animal kingdom works, so why couldn’t humans do it too? Well, for one, the human “greed” factor would have to be communally checked regularly and everyone would always need to be doing their fair share of work, and learn to be content with less: less technology, less processed food, less stuff. This may seem like a completely absurd concept for humans to adhere to and as a whole, it may be, but there’s apparently at least one group of people in the world already living in a gift economy. The people who live on Anuta island, which is in the South Pacific, have a population of about 300, and live almost entirely in this way. Though some of the islanders may occasionally earn some outside money and use that to bring supplies back to the island, within the community, there is no exchange of money or bartering. Everyone works together and shares both the fruits of their labor and the spoils. For instance, farming is done using crop rotation, with everyone planting some sort of crop and freely sharing both the highly prized and less desirable items. It’s hard to imagine this succeeding on a global scale but in smaller communities, it just may be possible.

What would most likely happen if we gave up money all together though, would be an initial return to bartering and new currencies in the vein of the cacao beans we saw with the Aztecs. We can already see this happen in segments of society where money isn’t readily available. In some prisons, for instance, cigarettes might be a highly prized item and can be seen as a form of currency, able to be traded between prisoners for commissary supplies and favors. Everyone, even prisoners who don’t smoke, agree on the worth of cigarettes within their community and therefore non-smokers and smokers alike see the value in having cigarettes on hand to trade with. Even in the world around us, black-market currencies may be used without us even noticing. For instance, Tide laundry detergent is sometimes accepted in the drug world as currency. Because so many people agree on the inherent value of that particular brand of laundry detergent, a drug addict who doesn’t have any money may, in some circumstances, be able to steal Tide detergent and trade it for drugs because drug dealers have laundry too and though it’s readily available in all stores, Tide can be expensive and the trouble of going and buying it may be worth the trade. Eventually though, in our theorical money-less world, it’s likely that societies and governments would rebuild currency to something similar to what we see now and we’d end up back in a very similar place sooner or later. That’s just my opinion, of course, so if you think otherwise, I invite you to share your thoughts on a world without money in the comments below!

Now, as we end this episode of Facts to Relax, I want to thank you for taking time out of your day and coloring and chilling and learning some new things with me. I invited you to subscribe to this channel if you want to come back and learn more new and random things and let me know in the comments below if there are any other particular topics you’d like me to research. In closing, I want to leave you with one final money-related fact. You know the term “Bringing Home the Bacon?” Well, this is where it came from. Since the early 20th century, the phrase “bringing home the bacon” has meant making money for the family but the phrase goes back much further than that. In the 12th century a contest was held within a congregation in the small town of Dunmow in Essex, England, where a whole side of a pig would be awarded to any man who could swear before God and the congregation that he hadn’t quarreled with his wife for a year and a day. Therefore, a man who succeeded could be said to be “bringing home the bacon” and was a highly esteemed within the community.

That’s it for now, hope to see you here again soon. Bye!