Debt summary

Another common misconception about money has to do with its use. Money is actually more important socially than it is economically.

Unlike the market economies we see in industrialized societies today, many pre-industrial societies functioned as human economies.

As you might’ve guessed, there’s more than just one way that violence and money are linked.

The theory of chartalism argues that the emergence of the state is responsible for the development of money. It outlines another major reason in which violence has inspired the growth of our modern economic system: war.

Another interesting connection between money and war is one in which the prevalence of gold or silver as currency – that is, bullion – is determined by just how chaotic a society is.

Coinage developed independently yet almost simultaneously in three different places around 600 BCE to 500 BCE: on the Great Plain of northern China, in the Ganges river valley in India and in the lands surrounding the Aegean Sea.

Now that we’ve examined the origin of money as a concept, let’s see how the relationship between coinage and virtual money (including debt) played out through history.

In ancient Mesopotamia as well as in India and in China, money was an abstract concept and the state bureaucracy controlled its value.

The Axial Age, coined as such by philosopher Karl Jaspers, was indeed an axial, or pivotal, time in history.

The great thinkers Pythagoras, Buddha and Confucius all lived in this era; yet it too was filled with violence, with war among states in China and the fall of the Roman empire.

In the Middle Ages, the tenets of religion and the practices of the market merged.

In the Middle East in particular, Islamic empires consolidated their lands and led a return to virtual money, in the form of debt or credit.

You might assume that a return to bullion was inspired by the discovery of the New World and the gold found there that was brought back to Europe.

The process actually was a bit more complex, and considerably more global.

Our current monetary era can be said to have started when U.S. President Richard Nixon announced that the U.S. dollar would no longer be convertible to gold at a fixed rate.

The end of the “gold standard” ushered in a new era of virtual money. Money – seemingly no more than numbers on a screen – could be traded, invested, gained and lost.