Section II. A Crash Course on Money, Chapters 7-8 The Barbaric Metal; Fool's Gold Summary and Analysis

Summary

During the history of money development, according to Chapter 7, trade started out with bartering commodities, cows traded for grain and so on. The ancient Greeks came up with the idea to make coins out of gold and silver, and they ensured weights and purity. This led to a stable economy, which always happened when the money had intrinsic value itself. Economies ran into trouble when paper money not backed by precious metal (fiat money) was used. This kind of money inevitably led to inflation and political upheaval.

As explained in Chapter 8, the development of paper money started out as simply receipts issued by goldsmiths who kept other people's gold coins in the goldsmiths' vaults...