Choose from these words to fill the blanks below:

Elliotus, currencies, trust, high, Denarius, bowls, bronze, 640BC, political, China, mood, 3000, imagination, counterfeiting, wanting, besmirched, eat, other, cultural, Tunisia, tolerant, coral, sila, Muslim, ideological, barley, India, decrease, monetary, Lydia, 2500, status

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how does money work?

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why have people throughout history been willing to trade e.g. a fertile rice field for a number of           coral shells?

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why are people willing to work for 8-12 hours a day doing things they don't entirely like in order to get at the end of the month a higher number in a field in a database in their bank?

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the reason we do this is that we trust the collective                       imagination that those shells or that higher number in the database will allow us to acquire other products and services that we want

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          trust is the real raw material from which money has been minted throughout history

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when people in ancient           China traded goods for coral shells and traveled to the next province, they trusted that those coral shells could be exchanged for goods and services

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money is the most universal and efficient system of mutual trust ever devised by human beings

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how to create trust in money?

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it takes a complex network of                   political, economic and social relations to build this trust

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why do I believe in the coral shell, the gold coin, or the dollar bill? because my neighbors believe in them, why do my neighbors believe in them, because I believe in them

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the crucial role of trust in order to make money work explains why our financial systems are so tightly bound up with our political, social and                       ideological systems and why financial crises are often triggered by political developments, and why the value of the dollar can rise and fall depending on the psychological         mood of the traders, and not on the objective condition of the economy

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one way to build trust in money is to define as money something whose value does not depend on the imagination

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the first money in history was Sumerian             barley money

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appears in Ancient Sumer about         3000 BC

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about the same time and place that writing first appeared

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barley was used to exchange other goods and services

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most common measurement was one         sila, roughly one liter

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standardized           bowls which held one sila were mass-produced

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salaries were paid in silas of barely

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we have texts that say that the salary of a male laborer was 60 barley silas a month

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a woman laborer earned 40 barley silas a month

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an important manager could earn between 1200 and 5000 silas per month

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obviously people did not       eat all this barley

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it was quite an achievement for the Sumerians to build trust in barley grains

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        2500 B.C. Mesopotamia, first money with no inherent value: silver shekel

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not a coin, just a measurement of silver, about 8 grams

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a payment of 20 skelels did not mean 20 coins but 160 grams of silver

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most                 monetary terms in the Bible are give in terms of amount of silver, not in terms of coins

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eventually replaced by money that lacked inherent value (e.g. people could not eat it), but was easier to store

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silver had no inherent value: you could not eat it, and it was too soft for making tools: a sword or ax made of silver would be useless, silver swords or crowns or rings were             status symbols, i.e. luxury goods that have no actual usage

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the value of silver and gold was always purely                 cultural

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set weights of silver and afterwards gold eventually gave birth to coins

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first coins were struck around           640BC by King                 Elliotus of the kingdom of Lydia (today western Turkey)

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kind put some kind of identification mark on the coins

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the mark on the coin indicated (1) how much metal was in the coin, (2) showed who struck the coin and how backed its worth

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today's coins are descendents of these coins from           Lydia

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advantages over lumps of silver

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don't have to always weigh it

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you could never be certain about the weight

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mark on the coin increases trust in the coin, i.e. harsh punishment for                             counterfeiting

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counterfeiting money has always been considered a much more serious crime than any other act of deception or cheating because when you counterfeit money, you are not only impersonating someone else, you are impersonating the king or government, an act of subversion of the rulers

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the powers of rulers rests on the trust in money

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Roman Empire could have only been maintained with trust in the gold and silver coins

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the trust of money could cross geographical and even political borders

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in first century AD, in the markets of India, Roman coins were being used, and new coins were often based on the Roman                 Denarius, and the name Denarius became a common name, even after the Roman Empire collapse, Muslim Caliphs made money giving it the name dinar, which is still the name of currency today in Serbia,               Tunisia, Iraq and other countries around the Mediterranean

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China also developed a monetary system but a little different

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based on             bronze coins, not silver and gold

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as time went by,             Muslim merchants spread the European gold and silver coin around the world which became the standard in the modern era along with a few trusted currencies including the British Pound, the American dollar

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this creation of monetary zones (zones of trust in a common money) laid the foundation for the unification first of Afro-Asia and later on the entire world into a single economic and political sphere

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people continue to speak many different languages, obey different rules, worship different gods, but more and more people believed in the same money, first in gold and silver, and later in the pound and the dollar

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without this shared believe, global trade networks would have been impossible, e.g. how could the Europeans have traded with China if the Chinese did not believe in gold and silver, and refused to accept payment in it

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but how was this global trust in gold, silver, the pound, and the dollar accomplished?

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why didn't it happen, e.g. that the Europeans believed in gold and silver and the Chinese continued to believe in bronze and the Indians continue to use coral shells

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the very convincing answer is: once trade begins to connect to separate areas, the forces of supply and demand tends to match the prices of goods, and this applies to money as well, e.g.:

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people in           India not very interested in gold

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in the Mediterranean, value of gold was         high

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merchants would notice the huge different of the value of gold, so the would take advantage of this, buying it for low price and selling it for a high price

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the value of gold in India would also rise, and the value of gold in the Mediterranean would                 decrease

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the mere knowledge that people in the Mediterranean value gold is reason enough for people in India to start               wanting gold as well

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this is why Christian and Moslems who could not agree on religious beliefs could nevertheless agree on monetary beliefs

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while gods ask you to believe that they have value,                     currencies ask you to believe that           other people believe that they have value: you accumulate dollars not because you value them, but because you believe that other people value them. This is why currencies such as silver, gold, the British pound, and the American dollar have achieved for all practical purposes total global belief in their value, something no religion has ever been able to do. Philosophers, thinkers, prophets, and poets throughout the ages have                     besmirched money, saying it is the root of all evil or the reason for the troubles in the world, but in truth, money is the apogee of human trust. Money is the only trust system humans have created which can bridge almost any cultural gap, and which does not discriminate on the basis of religion, gender, race, age or anything else. Even those entrenched in their religions because others don't believe in the same god as they do will often have no problem believing in and using the same money, even loaning large sums of money to people who believe in other gods. In this way, the trust system that is the most                 tolerant and the most able to bring differing people together to work on common projects with common goals, is money.

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two characteristics of money

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university convertibility

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money turns almost anything into anything else

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universal trust

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has served to connect cultures throughout history and helped create the global world that we have today

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in order to have an effective monetary system, you need the support of an effective political system and some shared ethical beliefs

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you can't understand how money works without understanding its