Part 1: The Emergence of Money with Lyn Alden - WBD703

Lyn Alden is a macroeconomist and investment strategist. In this
interview, we discuss Lyn’s amazing new book: Broken Money. This
show, the first in a series of three shows, delves into the
history of money: the concept of money as a ledger, its different
forms throughout history, as well as the properties that make a
commodity suitable for use as money.


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One of the key concepts Lyn explores is the idea of money as a
ledger, of which there are three main forms: commodity money,
governed by the specific properties of the physical commodity
being used as money; bank money, which is a ledger governed by
nation states and managed by central banks; and, open-source
money like Bitcoin, where the ledger is governed by the users,
who create and maintain the rules of the system. But how did
money develop?


Money emerged as an innovation to solve the problems of barter,
where the limitations of the double coincidence of wants and lack
of trust between traders made transactions difficult. Money
emerged as a liquid accounting system making transactions more
efficient. Different cultures used various commodities as forms
of money throughout history, including shell beads, cocoa, salt,
and furs.


Each type of commodity used as money had unique properties that
made them suitable, such as divisibility and the ability for them
to be recombined. As technology advanced, people were able to
produce more of these commodities, which led to their
devaluation. However, two commodities that were difficult to
devalue were silver and gold. These precious metals were rarer
and had a natural difficulty adjustment, making them more
suitable as money.


As important as the technology of money was the evolution of the
theory of money. Two competing theories of money emerged:
commodity theory and credit theory. Commodity theorists believed
that barter was the precursor to money. However, credit as a form
of money has been found in modern hunter-gatherer societies and
used as an effective way of circumventing the need for
commodities as money.


The current paradigm is seeing bank money and credit theory
coming under significant strain. Every system controlled by human
administrators degrades over time, with most currencies
experiencing high inflation or even hyperinflation within a human
lifetime. However, despite attempts to find alternatives like the
dollar or Bitcoin, nothing quite fills the void left by the local
currency. How money broke will be the focus of the next show.


 


Show notes:
https://www.whatbitcoindid.com/podcast/the-emergence-of-money


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