All starts with need for money. If population grows we inevitably need specialisation of labour. If we had to make everything ourselves the amount of people who could be sustained on this is small.
Money solves the coincidence of wants problem
Commodity value, inherent value according to us (has uses, is rare etc.). How does it scale when so much of it needed?
Paper money started as IOU’s, can be turned in for the original.
Italy city states started using them
Promissory notes
Too dangerous to carry coins around
They used banks, a seller who was given an IOU could go to a bank and cash it in for slightly less than it was worth
bank note (receipt of deposit), start of fractional reserve banking. No one was actually cash in for the coins.
Why the original bank note is created and handed out, the bank can create other bank notes on that initial deposit. So as long as the original receipts dont attempt to all cash in at once the bank can increase the money supply.
Nicholas Barbon had ideas such as the mortgage to create more money in circulation.
Economies could only grow with the size of the commodities you held
”paper money didn’t enter the world as some top down system”
centralised bank under the banner of the nation
central bank tries to keep money in circulation
wars had huge impact on global money
pegged to dollar that was pegged to gold
after bretton woods we accepted money by the medium of exhange not to value
Monetary inflation (increase in money supply) is usually the starting point for other forms of inflation
Asset price inflation often happens with low interest rates as the new money in the system gets concentrated in the upper echelons of society (does low interest rates mean money is create though, or is it ‘created’ through more bank loaning?)