04 November 2009

A Microcosm on the Rise of a Monetary System

When I was younger I came to believe that money was, indeed, the root of all evil. I started thinking about this when reading the Hitchhikers Guide to the Galaxy, where Douglas Adams describes humans as, among other things, concerning themselves with little green pieces of paper. I thought that we did spend too much time worried about how much money we had, how much money we were paid, what things cost, where we were going to get more money &c. I also wondered where money came from and what was it's true value. Why is a one dollar bill worth a dollar? Things like that.
Like I said, I was young, idealistic and pretty ignorant. After this I briefly moved on to anarchism (properly understood) and things of this nature.
Shortly after these mental forays I left college and started working for real--or at least kind of for real, I worked in catering and restaurants, living with my parents and drinking most of my take. But I did become far more interested in acquiring those little green pieces of paper and far less interested in the inherent evil and the why and wherefores of its existence.

I meet the girl of my dreams, we move in together, get married, I get my act together, get real jobs, we have kids, buy a home, &c &c &c.

Well, I left college and never finished my degree and this started to bother me. So I started taking some preliminary classes at the local community college before matriculating at a nearby four-year school with a reputable and flexible "Accelerated Degree" program for working individuals. In the course of my studies I have taken first-year economics courses which have been invaluable. On top of these I've started doing some reading and research on my own and thoroughly enjoy studying the field of economics--which may explain why I wrote nothing on the field for the first few years I wrote here and have written more on it of late.

Anyway, this is for too much information as way of introduction. I recently heard a recording of a lecture given by Murray Rothbard on Money and Prices (aptly named "Money & Prices from a CD of lectures called Economics 101). In this particular lecture, while discussing the rise of money, starting with barter trade and its drawbacks, Professor Rothbard mentions a story I had heard before but thought apocryphal. It concerns the case of British POWs held by the Germans in World War II. Not having a medium of exchange for goods available to them, the soldiers started to use cigarettes as currency. The article, written by one of the prisoners and the most anthologised article in economics, is here.

It does a great job of showing how a monetary system can arise, how inflation and deflation occur and the problem of trying to influence the supply and demand of resources by outside forces.

Also, I picked up The Ascent of Money by Niall Ferguson which I look forward to reading.

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