"The Government should create, issue, and circulate all the currency and credits needed to satisfy the spending power of the Government and the buying power of consumers. By the adoption of these principles, the taxpayers will be saved immense sums of interest." -Abraham Lincoln

Bartering, money, and gold.

In the beginning there was the barter system. People would trade goods and services for those of equal value. As the old saying goes, you would never pay two apples for one orange. However, there was always a problem with this barter system. How many apples equal a candle, or how many oranges for a bag of wheat? A precise unit of measurement representing value was needed.

This is where money came into the marketplace. Money was created out of the concept of being able to store your wealth and save it for a later day. The second purpose of money is to easily transfer goods and services from businesses to customers. Today, money does not function this way.

At first money consisted of precious stones, shiny rocks, and other rare items that came from the earth. This evolved into using gold as the universal standard for money. Gold has always been a rare and in demand commodity.

The first problem occurred out of this simple idea to store wealth in the form of gold when people accumulated so much wealth, or gold, that they needed a safe place to store it.

This created demand for a "gold vault keeper." Who better to provide this service than the goldsmiths?

The goldsmiths would keep the gold of others safe in their own personal vault, backed with armed security, for a nominal fee.

The goldsmith would then give the depositor a paper "receipt" showing how much gold was given to the goldsmith. At anytime anyone with a paper receipt could trade it in for its equivalent value to gold.

These paper receipts soon made their way into the marketplace, representing paper backed by gold. Instead of having to carry around heavy gold, people could now carry around their money in the compact and lightweight form of paper.

The first problem had been solved. No longer would the public have to worry about thieves stealing their gold. It could now be kept confined and safe in the goldkeepers vault, and their deposits could be withdrawn at any time.

Related Pages:

Inflation | Introduction to money | The birth of usury | Fractional reserve banking | Debt as money | How gold can manipulate inflation | There is hope | Conclusion

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