Money and Wealth by Mark Andre Alexander

Author:Mark Andre Alexander [Alexander, Mark Andre]
Language: eng
Format: epub
ISBN: 9781937597146
Publisher: The School of Pythagoras
Published: 2014-02-28T05:00:00+00:00

People don’t like carrying heavy coins everywhere they go.

Today the word currency is used mainly to mean money. To avoid confusion, we will use the word money for coins (gold and silver) and currency for paper notes.

Let’s talk about a new innovation that happens resulting from trade between the people of Gold Island and Silver Island.

The people of Gold Island and Silver Island begin trading. Both have created the same system of money, using gold and silver coins of similar value.

The main difference is that Gold Island money is stamped with the words “Gold Island” and Silver Island money is stamped with the words “Silver Island.”

Iron Island bandits don’t care about trade and coins, except for those that they can steal.

Both Gold Island and Silver Island accept the other island’s money because the weight is the same for the same kind of coin.

Both islands benefit from trade. The people of Gold Island make the best fishing poles and slingshots. They have skill sets that the people of Silver Island don’t have.

The people of Silver Island also create all kinds of different tools, silks, crafts, and other goods that the people of Gold Island can’t produce.

Since both economies have grown strong, a lot of gold and silver coins get used. Some people are getting very rich. And gold and silver coins are heavy to carry.

So one of the good persons on Silver Island comes up with a new idea.

Why not become a goldsmith?

A goldsmith is someone who stores gold for travelers and merchants and charges a small storage fee.

The idea catches on and someone on Gold Island starts a goldsmithing business as well. Goldsmiths store gold and silver coins, have hired security to prevent the Iron Island bandits from stealing it, and charge people a small storage fee.

In place of the coins, the goldsmith gives the traveler or merchant an official slip of paper that reads something like this:

“Tor has on deposit with the Silver Island Goldsmith 20 ounces in gold and 65 ounces in silver. Payable on demand.”

Each note is signed both by the goldsmith and by the traveler. The goldsmith keeps a record of all transactions.

The paper is an IOU note for the gold and silver coins that are stored.

The traveler can now go to market and wander around town without carrying all that weight in coins.

And the traveler does not have to worry that a bandit from Iron Island (or one of the less honest people from Silver Island) will rob him or her of those coins.

After a while, the goldsmith on Gold Island has an idea. Each paper IOU note is specifically created for each person.

What if the IOU notes had a more general design that is not specific to the person?

The IOU note might read something like this:

“Will pay to the bearer 20 ounces in gold, payable on demand at the Silver Island Goldsmith.”

What if the goldsmith created different values for different notes?

There would be a whole set of IOU notes. And the people could trade IOU notes with each other.

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