From an article in H+ Magazine, Hacking the Economy, an excerpt giving a useful summary of the history of contemporary currency.
Do watch the video at bottom, it’s really worthwhile.
“The economy we live in is a rigged game, established around the time of the Renaissance in order to promote the welfare of early-chartered corporations and the monarchs who gave them license to monopolize world business. Until that time, there were many kinds of money in use simultaneously. People used centralized currency to conduct long-distance transactions, and local currency to transact on a more day-to-day basis.
Most people, in fact, never used centralized currency at all. They simply brought their season’s harvest to a grain store, then got a receipt for the amount of grain they had deposited. This receipt was currency, redeemable at the grain store for something everyone knew had real value.
But since a certain amount of grain went bad or was lost to rats, and since the grain store had some expenses, this money lost value over time. Since the money would be worth less the following year than it is worth that day, the bias of the money was towards spending and reinvestment. That’s why medieval towns built cathedrals: as a way of investing in the future with excess money from the present. They were that wealthy. Women were taller in Medieval England —— a sign of their good health and diet —— than at any time until the last two decades.
Local currencies allowed towns to create value and reinvest it in their own affairs. This was intolerable to an aristocracy already waning in power and influence. So European monarchs began to outlaw local currencies, and force everyone to use “coin of the realm.” These centralized currencies had the opposite bias. They were borrowed into existence by businesses, and then paid back to the central bank, with interest.
Like most innovations of the Colonial era, centralized currency is a way to extract value from the periphery and bring it back to the center. People’s labor no longer contributes to their own wealth, but to the lender’s. Eventually, the lending economy —— central banks and banks —— becomes bigger than the “real” economy of people doing stuff.”
Talk by Douglas at a recent Web 2.0 conference:
How the Web Ate the Economy and Why it’s Great for Everyone: