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A Brief History of Money
And why cash isn’t always king
Before the existence of cash, as far back as 6000BC, we had the barter system, and for all its limitations, it was much more understandable. Transactions were less complex, albeit not easily valued.
That’s because, for all that a person possessed, its value was determined by whether someone else wanted it and how much they were willing to give up for it.
Suppose a person had a truckload of rain boots. There would be little to no value for them in the summertime. And it’s not because the shoes have no intrinsic value, but rather the need for them is limited. You can’t effectively barter with rain boots in summer. The boots would probably have more value if they were melted down and sold as rubber.
The principles of the barter system formed the bedrock of all financial systems today. The current systems are all loosely based on fundamental economic principles: the higher the price, the lower the quantity demanded and vice versa; and, the higher the price, the higher the quantity supplied and vice versa.
Hence, the values in a barter system stem from two unique propositions. That I have what you need, and you need what I have. Then there was the next step of bargaining for how many commodities A was worth that much of commodity B.
