Anthropological history of money

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Imagine an anthropological history of money that traces from outright arms-length barter to trade of goods against private promissory notes to the creation of bilateral indebtedness to the centralisation of promissory instruments through private intermediaries (i.e., banks) to the standardisation of promissory instruments against abstract units of value to the creation of currencies by central government agencies.

Not sure it really matters how historically accurate it is as long as it is plausible — each stage in the evolution must stand on its own two feet as a sustainable model of sociopolitical interaction — in biological terms, it must be a viable organism in the context of its given environment. But once we've done the exercise let’s map it against the record.

Key waypoints in that transition:

Zero trust

All exchanges for equivalent value, at arm’s length with no requirements for shared values, much less ongoing obligations between the parties (beyond letting each other retreat from the exchange place with their goods without violence) will necessary expectations of further trade. This is “barter between aliens” more or less. It must be barter because any form promissory instrument or “currency” or abstract token of value implies consensus in a measurement or trust in the credit or performance of someone.

Features: bilateral, discrete, delivery versus payment, payment in kind.

Simple community of interest

Transactions between persons known to each other in a community where there is an expectation or repeated trade and a memory of past trades, such that reputation is important.

Features: bilateral, accretive, delivery on account, payment in kind.

The physical marketplace where traders of all goods gathered in a single location formative of early forms of transferrable credit. It strikes me that the need to “monetise” abstract receivables of manufactured goods to acquire more materials to manufacture more goods for sale is a key driver of an economy in its early stages.

Even today the velocity at which we can recycle receivables (or promissory instruments not only reduces our reliance on (and cost of) debt funding, but maximises the return of our receivable assets by converting them into cash that can be invested in productive capital.

As such we can explain most bank activities as optimising the funding of their lending activities. Capital is stationary if held in cash — this is like being indebted to yourself, so you slowly lose value because your capital is not engaged — moves slowly if deployed against simple interest bearing instruments (or non interest bearing ones like trade receivables) and mines best if converted into cash and reinvested.

Twa thoughts: first, the drag of physical cash is not really a problem of malign central/reserve banking creating inflation by printing money, but more a function of its disengagement from the productive economy (physical cash is an “anti asset”).

Second, the cryptocurrency maximalist view that you can therefore take capital out of the “capitalist strip-mine” in the form of bitcoin and not suffer this loss of value is mistaken.