‘Even the bitterest of enemies lusted after the same yellow metal.’
The followers of Christ and the followers of Allah killed each other by the thousands and turned prosperous cities into smouldering ruins- all for the greater glory of Christ or Allah. As the Christians gradually gained the upper hand, they marked their victories not only by destroying mosques and building churches, but also by issuing new gold and silver coins bearing the sign of the cross and thanking God for His help in combating the infidels.
Infidel – a person who has no religion or those who adhere to a religion that is not the majority.
The value of gold varied between India and The Mediterranean; gold was highly valued in The Mediterranean than in India. Merchants realised this so bought gold cheaply from India and sold it dearly in The Mediterranean. Therefore, profiting from their buy and sell trade.
However, this trade would lead to an influx of gold in The Mediterranean, thus in time the value of gold in both India and The Mediterranean would be quite similar.
Shells and cigarettes
Money was created many times in many places. Its development required no technological breakthroughs– it was a purely mental revolution.
It involved the creation of a new inter-subjective reality that exists solely in people’s shared imagination.
Money is not coins and banknotes. Money is anything that people are willing to use in order to represent systematically the value of other things for the purpose of exchanging goods and services. Money enables people to compare quickly and easily the value of different commodities ( i.e. apples, shoes and divorces), to easily exchange one thing for another, and to store wealth conveniently.
There have been many types of money. The most familiar is the coin, which is a standardised piece of imprinted metal. Yet money existed long before the invention of coinage, and cultures have prospered using other things as currency, such as shells, cattle, skins, salt, grain, beads and cloth.
Cowry shells were used as money for about 4,000 years all over Africa, South Asia, East Asia and Oceania. Taxes could still be pain in cowry shells in British Uganda in the early twentieth century.
In modern prisons cigarettes have often served as money. Even non-smoking prisoners have been willing to accept cigarettes in payment, and to calculate the value of all other goods and services in cigarettes.
Today, coins and banknotes are a rare form of money. The sum total of money in the world is about £60 trillion, yet the sum total of coins and banknotes is less than £6 trillion. More than 90 percent of all money exists only on computer servers. Most business transactions are executed by moving electronic data from one computer file to another, without any exchange of physical cash. As long as people are willing to trade goods and services in exchange for electronic data.
Everyone always wants money because everyone else also always wants money, which means you can exchange money for whatever it is you want or need. The shoemaker will always be happy to take your money, because no matter what commodity he wants or needs, he can exchange it for money.
Money is thus a universal medium of exchange that enables people to convert almost everything into almost anything else. Because money can convert, store and transport wealth easily and cheaply, it made a vital contribution to the appearance of complex commercial networks and dynamic markets.
How does money work?
Cowry shells and pound coins have value only in our common imagination. Their worth is not inherent in the chemical structure of the shells and metal, or their colour, or their shape. In other words, money isn’t a material reality — it is a psychological construct. It works by converting matter into mind. But why does it succeed?
Money is accordingly a system of mutual trust, and not just any system of mutual trust: money is the most universal and most efficient system of mutual trust ever devised.
What created this trust was a very complex and long-term network of political, social and economic relations. Why do I believe in the cowry shell or pound coin? Because my neighbours believe in them. And if my neighbours believe in them then I must believe in them. And my neighbours believe in them because I believe in them. And we all believe in them because our government believes in them and demands them in taxes.
The crucial role of trust explains why our financial systems are so tightly bound up with our political, social and ideological systems, why financial crises are often triggered by political developments, and why the stock market can rise or fall depending on the way traders feel on a particular morning.