Brief History of Money

Brief History of MoneyHow much do you know about money? Money is a beautiful thing. Mostly because it isn’t even real. Its a belief. Its a faith. It could even be considered a religion.

Since the creation of the idea of money, it has existed through generations and cultures around the world. It has evolved, spread and become ingrained in society… much like some religions.

I love money, and you should too! Money is not the root of all evil. If you think that, then you will never have any. Or if you get money, you won’t have it long.

If you give bad people money, they will be bad people, but with money. If you give good people money, they will be good people, and have money. Money is not bad. Money is freedom.

How is money freedom? Well, what is the price of your free time? How much do you sell your time for? Do you work 40 hours per week? Do you trade 5 days of work for 2 days of freedom?

Is this a good return? How much do you make? In terms of time you are on the losing end: Selling 5 days and getting 2 days in return.

While the amount of money you receive will vary , the simple fact is that the answer is money. You sell your time for money, and you probably don’t even know why.

Because your parents told you to? Society? Our educational system?

Again, don’t get mad at money. I like money, a lot! So I ask again, how much do you know about money?

I present to you, an essay: A Brief History Of Money



The history of the development of the human society from the hunter-gatherer societies to the modern worldwide global community, is highly intertwined with development of money.

What is money and what is debt? Moreover, how can paper have so much control over our lives?

Money could be anything from livestock to sacks of grain or sea-shells, precious metals, gyms…etc. that can be considered by the general populace to have value and can be exchanged for goods or services.

Aristotle, in Politics I, argues that money has inherently two natures: a means of exchange and a means to an end.  Although he deliberately ignores explaining the second nature, his work on money is most important since he was one of the first to document the development of money and its rise to power in modern society.

The essence of his analysis lies in the fact that value of money is directly related to the trust and value given to it by the people who exchange them; and that fact has never changed across the centuries.


The Barter System:

The hunter gatherer societies of ancient man could be a model of what closely resembles a ‘communist utopia’. Every member of the tribe did the particular task that was assigned to him and the wealth of the tribe was combined and distributed equally (with more going to the chief or best warriors of course.)

It was believed by several historians, philosophers, economists; including Aristotle Adam Smith in his book “Wealth of Nations”, that as the tasks of society became more specialized, a system of bartering was developed. The barter system essentially involved an exchange of goods or services with other goods or services.

The system involved, for example, a grain farmer in need of purchasing fruits. He  exchanges his grains for fruit with the fruit farmer. However, the barter system was fundamentally flawed due to the coincidence of wants.

If, for example, you produce cheese and you need grains, you can only trade with the grain farmer if he wants cheese. Another problem with the barter system is the inability to break the currency fairly. This was particularly a problem for people who traded in livestock. Trading a cow for a kilogram of grains is unfair, but killing the cow to cut into pieces for fair trade might sound reasonable but also devalues the remaining cow. It is from these predicaments that Aristotle and Adam Smith assumed that need of money existed and hence evolved.

The problem with this theory; argues anthropologist David Graeber in his book “Debt the First: 5000 Years”, is that it lies more on personal experience rather than fact. The barter system never died out and today people still use it, even in advanced societies.

Graeber, therefore, claims that ancient societies used to trade on a trust based debt system and gift economies. The system was based on societies that were small enough so everyone knew each other and potential consequences so chances of someone defaulting become low. He argues that in a society like this, if you wan


The Rise Of Money:Brief History of Money

The Fertile Crescent

The Fertile Crescent is a region of land stretching from Asia Minor through the Middle East and into Egypt. The Fertile Crescent was host to humanities earliest civilizations. These included the likes of the Egyptians, Babylonians, Sumerians and Phoenicians.

In their early stages, none of these civilizations had a currency in a form we understand today, but they did have a centralized government with taxes and they often traded with each other.

The earliest records of currency usage was traced back to livestock and livestock products like manure, then eventually grains and other plantation were used.

In 4000 BC, the Egyptians are known to have used gold bars as a standard of value. This is important as it set a specific standard when traders went to exchange good. For example, if 100 pounds of manure was worth one gold bar, and 150 pounds of seed was worth one gold bar, then traders could determine that 100 pounds of manure was worth 150 pounds of seed.

Mesopotamia followed the same path and later created the ‘Shekel’, which was a standard set by silver bars.  This same concept was eventually implemented by Great Britain with the British Pound; where 1 pound valued 1 pound mass of silver.

The Mesopotamians, however, were also among the first to use clay tablets as a form of payment and debt collection. Clay tablets were used to keep records of debts between trading interactions.


In 600 BC,King Alyattes of Lydia (now part of Northern Turkey) was the first to ever establish a gold minted currency. The coin was minted with a naturally occurring alloy of gold and silver known as electrum. The coins were engraved with symbols of animals such as owls and snakes, which denoted the value of the coin and what  it could purchase.

This allowed trade to flourish in the region and was soon adopted by neighboring empires. However, due to its growing wealth,  Lydia drew the ire of the Persians and eventually fell to the Persian Empire.


Although they were not the first empire to develop a currency, China’s secluded location meant that most of its developments were of its own innovation.

Around 1100 BC, metal weapons and daggers were miniaturized and being used as currency. Over time, they were rounded, for obvious reasons, and a hole was added in the center so they can be tied together using strings. Eventually, merchants in China started to create ‘debt papers’. Because these ‘debt papers’ were so well documented and supported by the people, these papers eventually became a currency themselves.

As the Chinese organized military grew in numbers and strength, requiring payment through coinage became very inconvenient. The paper currency idea seemed intriguing to the Chinese Government Officials and was eventually instituted.

In 1200 AD, Marco Polo visited China and saw transactions with paper money first hand. Impressed, he was first to bring the idea back to Europe.


The first currency to develop in Africa was cowry shells and it remained the  dominant source for centuries. In fact, Mozambique was still using cowry shells as currency during the colonial times, even with precious metals and gems available.


The use of gold coins was transferred from Lydia to the Roman Empire around 500 BC. Before that, metals such as copper and its alloys, particularly bronze and before that obsidian, were being used as currency.

The introduction of gold coins was particularly useful for fueling the colonial desires and conquests of the Roman Empire. Soldiers were now being paid in gold, instead of bronze and plunder.

Since gold is a rare metal, when governments faced shortages they often chose invasion of other nations, or colonizing less developed nations for plunder and to enslave populations to mine for more gold.


IOU and Debts:

An IOU, which is the prequel to bank notes, surfaced in times where gold and precious metals used to make coinage was scarce. It was customary then for merchants with safes to store the gold and issue a paper with the value of the gold owed to that person.

Since it was easier to divide the value of paper by issuing new paper than it was to smelt down the gold into smaller denominations, IOUs or ‘debt paper’ rose greatly in popularity.

IOUs became incredibly popular after the foundation of the first official government banks in Ptolemaic Egypt. They were used to make daily payments and most wealthy people kept their savings in the bank. Archeologists have discovered records of these transactions occurring on a daily basis!

Brief History of MoneyDevelopment of Banking:

The fall of the Western Roman Empire in the 9th century gave rise to the Italian City-States that survived. Living on the remnants of their previous glory, the Italian City-States remained an important center for trade in Europe.

The word bank is actually derived from the Italian word “ banca” which means ‘table’, which the money lenders used in order to conduct their business. During this time, Europe, following Christian Doctrine, banned Christians from usury. or the implementation of interest on loans.

However, Jews were exempt from this law, not being Christian and all, and they were the only ones capable of loaning money with interest. They were not viewed upon positively by Christians, but were the only sources of financing since even the most generous of Christians didnt want to lend money to someone with no upside and all down side. Shakespeare’s “Merchant of Venice”, touches on this negative view towards Jews and money lenders.

During this time, several currencies were being used throughout Europe and their value was being calculated based on their gold and silver content. Additionally, this  usually changed based on the current state of the issuing government. Lastly, the Roman Numeral system was being used by many , further complicating most of the calculations required for money conversion and interest calculations.

Liber Abaci

In 1202, Fibonacci, also known as Leonardo of Pisa, published his book “The Liber Abaci”, or “The Book of Calculation”. This offered the first solution to many of the European currency issues. The book was meant to demonstrate the superiority of the Hindu-Arabic numerals, to the conventional Roman numerals. It also included several concepts of interest and debt calculations, money conversions and many other concepts that will be later incorporated in modern banking. This coincided with the return of Marco Polo advocating for the use of paper money.

The Medici

The Medici were a prominent family in the Italian City State of Florence. There were several prominent members, but the most important Giovanni di Bicci de’ Medici (c. 1360 – February 20/28, 1429). Giovanni set the foundation for modern banks.

Since usury was still illegal for Christians, and the current money-lender industry  had a business model that was highly prone to customers defaulting on their debt, Giovanni reinvented the business. He proposed that he will run a currency exchange business where a small fee would be paid as a percentage of the total transaction which wouldn’t be considered usury.

He also proposed the use of his vaults as storage for deposits from wealthy kings and the Pope. He could then use these money deposits to finance other money transactions as well as return an interest fee to the depositor for using his.

These ideas revolutionized banking in Europe and subsequently made the family incredibly powerful and prominent. The Medici banking network extended throughout all the city states and was highly reliable.  Eventually, it collapsed due to high risk debts where the debtor defaulted. Nonetheless, the business model remains as ghost within modern business models.

Inflation and The Spanish Empire:

In the mid-15th century, the Spanish colonial empire discovered a literal mountain of silver in Bolivia. Using slaves acquired from the indigenous populations of nearby regions, the Spanish empire was capable of producing 160,000 tons of silver between the 16th and the 18th centuries.

This sudden influx of silver gave the Spanish empire extraordinary wealth and turned their country’s currency into a de facto currency in the world. So much so, that the Spanish- Chinese silk trade greatly enriched China with silver and caused them to reform their entire tax system, requiring their citizens to pay taxes with silver instead of what was historically used: grains and labor.

The lack of economic understanding by the Spanish government and their inability to reform taxes due to the huge influx of silver lead to a great inflation in Europe, and even reaching and impacting the Chinese empire. This inflation, coupled with the expulsion of the Jews and the Moors from Spain, eventually lead to several revolutions in the Spanish Empire and their eventual defeat by Elizabeth I of England.


Brief History of MoneyBank Notes and The Gold Standard:

Throughout history, the idea of “paper currency with a standard of value tied to gold” was continuously sought for myriad of reasons. The ease of use, the potential to travel and store wealth, and breaking down barriers of trade are just a few.

Although first used by the Chinese as a an attempt to counter their inflation problems, Bank notes soon became popularized in Europe, with much help from Marco Polo. The first bank note was used in Sweden in 1661 by a commercial bank. Following the Spanish inflation, the effectiveness of this idea grew and several other commercial banks began to adopt the concept of issuing paper currency backed by precious metals, gold or commodities.

This was essentially an advanced form of an IOU where a bank pledges to pay the value of paper to the holder in gold. What made this system more advanced than a mere IOU was that whoever was holding the paper could receive the gold, not just who the debt was issued to. This meant instead of trading gold, you could just trade the paper and any government would back its value.

Several measures had to be set where banks should have enough gold reserve to give gold to all bank note holders in case they want to withdraw their gold. However, due to investments and lending mass induced panic have several times threatened to shut down the system as people lost faith in the paper and attempted to withdraw the gold.

In the 1900s the United States also adopted the gold standard. The value of the dollar was tied to gold, meaning at any time you could trade your dollars in for actual gold.

After World War 1, most of the countries had to abandon the gold standard due to the economic depression. This was the result of owing more money than gold reserves. The United States, instead, devalued its money by slightly decreasing the value of the dollar vs. gold. This meant that it now too more money to by the same amount of gold before the war.

Eventually, the gold standard  in the United States was also dropped during the Vietnam War in the 1970s when President Nixon ordered the Federal Reserve to abandon in order to induce a temporary inflation to support the war costs. The intent was to return to the gold standard following the completion of the war.
(For more on how this one decision changed your money for ever, read: What Would You Do With One Million Dollars?)

Fiat Currencies

Most currencies today are known as fiat money rather than commodity money. Contrary to commodity money which is usually backed by precious metals or goods, fiat money is a worthless object that is widely accepted as payment method. Worthless in the fact that other than trading it for goods and services with the belief of value, there is no other use for the currency. For example, if you couldn’t buy anything with your dollar, what could you do with it? Burn it for 30 seconds of heat possibly?

The value of the money is determined by several factors, but it is for the most part determined by the issuing authority and government that guarantees its value. Fiat currency can lose their value under several conditions such as; the populace refusing to accept it, the issuing agency fails to guarantee the value or the destruction of the government. Historically, the biggest factor remains to be the trust of the people and whether or not they believe in their governments ability to back its value.


The US DollarBrief History of Money

The history of the US dollar can be traced back to the 1690s, before the United States was officially established. The first Colony to implement paper money was Massachusetts, which used it for financing military expeditions. Soon, other colonies followed. There were British restrictions imposed on the colonies paper money and in 1775 non-British currency was banned when the American Revolution began.

The Continental Congress then introduced the continental currency which did not last long due to insufficient bank support and rampant counterfeiting. This led to the charting of the first national bank in Philadelphia, The Bank of North America, in order to aid government finances. In 1785, the dollar was to become the currency of United States.

In 1792 the Coinage Act helped organize the monetary system of the states as it introduced gold, silver and copper.  In 1861, the Greenbacks or the green paper note was introduced to finance the civil war. Several techniques such as treasury seal was used to combat counterfeiting.  In 1863, the national banking system was drafted by congress in order to allow the US Treasury to oversee the issuance of National bank notes, which in turn, made it easier for banks to distribute money and purchase US bonds.

The Federal Reserve

In 1913 The Federal Reserve Act was issued which established one central bank and organized a national banking system that could keep up the ever-changing financial needs of the States. The board issued a new Federal Reserve Note in 1914 in the form of a $10 bill.

Confederate Money

During the outbreak of the American Civil War, the confederate government in the south issued the Confederate States of America Dollar. It was one of the first perquisites of fiat money as it wasn’t backed by any assets, only simply the promise to pay those who bear it after the South wins.

The faith in the currency started to diminish as the war tilted in favor of the North. Inflation followed, and by the end of 1863 it was worth 6 gold cents and kept on declining. Now the Confederate dollar, also known as “Greyback” is a prized collectible item with many versions.

Electronic Currency:

Today, economic transactions regularly take place electronically, without the exchange of any physical currency. Digital cash in the form of bits and bytes will most likely continue to be the currency of the future.

The problem with concepts like Bitcoin, however, is that they are truly fiat currencies with absolutely no value behind them ever. There is no government willing to go to war to defend its value, and no way to store it other than electronically. This leaves it open to many security issues.



If you have made it this far, congratulations. I appreciate you. This is important stuff. You should study the history of the things you want, and I want money. You should too.

But remember, money is just an idea. And inflation is a small parasite that is constantly eating bites out of your savings unless you are continuing to grow it.

How do you grow it? Income Producing Assets.

These pay you money every month, and also increase in ‘value’ as inflation grows. If you want to build wealth, this is your path.

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Brief History of Money

Wealth Triangle

What is The Wealth Triangle?

There are only 24 hours in every day, for every person rich or poor. The definition of ‘wealth‘ varies from person to person because everyone chooses to spend their time in different ways.

Some people would like to travel the world if they could, while some would simply like to stay home with their families… if they could.

But there is only so much time in the day. And most people must sell some of that time to someone else in order to pay for life’s necessities and also luxuries of their choice.

This brings us to the Wealth Triangle.

Wealth Triangle

Wealth is merely a triangle with 3 important pillars: Time + Knowledge + Money = Wealth

Once you have achieved two of these pillars, you can use the two you have to obtain the third. When you have all three, you are wealthy.

Time + Knowledge= Money

Lets say you are fresh out of college and have no money. But you are young meaning you have a lot of time left. Use this time to increase your knowledge. Read BOOKS about money, finance and investing. Attend seminars and lectures. Find something you are passionate about and get a job in that industry. Use the money you make to buy assets that produce income and grow over time. By using the time you have, spend your days increasing your knowledge and the money will come. Time + Knowledge + Money = Wealth

Knowledge + Money= Time

Lets say you do not have as much time, but you have years of experience in an industry and hopefully savings. You should still be reading books, attending seminars and continuing your financial education. With this wealth of knowledge and money, you can now purchase time. By knowing how money really works, and how to put it to work for you so that you do not have to work, you now have the time you need to do as you please.

Time + Money= Knowledge

Who has time and money but no knowledge? Think lottery winners, or those who have recently received a large inheritance. Many people do not know how money works, or even how to keep money. Most lottery winners end up not only broke within 7 years, but also in more debt than they started in. This is not a coincidence. We are only taught how to consume, not how to invest. (See What Would You Do With A Million Dollars?)

The First Step Is Getting Started:

While everyone loves money (especially me!) the most important of these pillars is time and Knowledge. There is only so much time in the day, month years and in our lives. You can diet and exercise to try and buy more time… but that seems hard.

With knowledge, anything is possible. Knowing the right people, the right terminology, the right time, the right investment, the right price and you can achieve wealth. But like dieting and exercising it seems hard.

True Wealth is achievable by anyone. You must first define what it means to you and get started. Its much better than selling the most precious asset that you have, time. Besides, you are running out of it.


Why it is Easier to Get Rich than to Lose Weight.

Why is it Easier to Get Rich Than to Lose Weight?

Getting rich is easier than losing weight. Period.

But in order to make this point, we have to declare some ground rules. Liposuction is an easy way to lose weight (minus the pain and all), and winning the lottery may seem pretty easy to some people. So lets remove these options and clarify.

It is easier to get rich over time than it is to lose, and keep off, weight over time.

How can this be?

When it comes to getting rich, the younger you are the greater advantage you have. Time is money. But time is only money if you spend your time wisely. Video games are a poor use of time. Reading this blog is a GREAT use of your time.

So you work 8 hours a day lets say. May sound hard but you get used to it like all humans can adapt to anything given enough time. Then you take 10% of your pre-tax income and invest it into an income producing asset.

Lets say a dividend paying stock at 5%. You contribute to this every week automatically because you set up auto-withdrawal with your bank and now you don’t even notice it is gone.

In addition, your stock is paying 5% a year, while also going up in value over time because that is what good stocks do. The appreciate.

You are smart and do not look at this stock every day, or even every week. You may even forget about it from time to time.

But it doesn’t forget about you, and it keeps growing, keeps paying a dividend, and you keep adding 10% of your income to it. As you work more and get raises, bonuses and birthday checks, you keep adding 10%.

You are literally making money while you sleep.

Want to get rich faster?

Invest more of your money. Diversify your portfolio. Now that your stock has grown, sell it and buy a rental property. Or buy two! You know how because you read this blog!

After you buy a couple rental properties and your rental income exceeds your expenses, guess what? That is the Cash Flow Lifestyle and you are free to live the life you choose! (More passive income coming in than expenses going out.)

Your property managers on your new rental properties send you checks every month and you keep investing 10% into more income producing assets because by this time its an addiction, but the good kind!


So now what?


Well, most people that achieve this type of success realize how amazing life can be and want to keep living this life as long as possible.


Enter Weight Loss. Or, a Healthier Cash Flow Lifestyle.


Keep in mind I am not saying it is extremely difficult to lose weight, I am just saying it is more difficult than getting rich for the following reasons:


1. You can’t set it up on auto-pilot: Every meal you eat, you have to make smart choices.


2. You can’t lose weight while you sleep: If you are, then something might be wrong. (Think diet pills or parasites)


3. You can’t delegate weight loss: When it comes to making money, as long as you are willing to take the risk, every other aspect can be delegated. When it comes to weight loss only you can eat well and exercise.


You have to make the right choices every single day.

But Wait! There’s More!

I’ve got great news for you, though. If you first develop the discipline it takes to get and stay rich, that same discipline can be applied towards ANY future goals as well.

First figure out what it is you want. Keep this desire in your mind at all times. If you want your passive income to exceed your expenses, determine why you want this.

This will make it much easier for you to not only set your goals, but to keep them.

As your passive income increases, remember: DO NOT INCREASE YOUR EXPENSES!

This is VERY common and is why most people never achieve economic freedom. Their income goes up, so they get a new car payment. KEEP YOUR EXPENSES LOW.

However, if your main goal is to increase your passive income so you can buy a nicer car, then you will! But if your goal is to live the life you choose, which means only working because you want to and not because you have bills to pay, then keep your bills low.

In conclusion:

1. Get educated

2. Get rich (invest in income producing assets)

3. Get healthy (eat well and be active)

4. Be happy.

We live in the only country in the world that declares every individual has the unalienable right to pursue happiness, so why aren’t you?

What would you do with a million dollars?

What would you do with a million dollars?

This question is often asked to high school students by a guidance counselor, or by friends at a bar, and often the answer varies. However, if given a million dollars would you know how to make it last? How much money did you make in 2010? How much of did you keep?

Could you retire on a million dollars? Would you want to? What kind of a lifestyle could you live if given a million dollars at the age of 25. If you are immediately thinking of the objects you could buy with this money than you are definitely a product of the American educational system. We have all been taught how to consume. Some of us have been taught how to save. Very few of us have been taught how to invest.

Keep in mind that in 1971, Richard Nixon took the United States currency off the gold standard. The result was that our money turned into a currency. Like a river or ocean current, it fluctuates compared to other currencies. This makes great political sense because it allows a government to borrow money for a project, then print money to pay down the debt. When this occurs, debt becomes cheaper for everyone as there is now more money in the system.

In the past, inflation has risen about 3% a year keeping in line with about a 3% growth in US GDP. (This does not include war years which change all the economic rules). This is meant to encourage consumption. Imagine you want to buy a car. The government wants you to buy the car right now, even if you do not have the money to do so. You can finance the purchase today and have your debt become 3% cheaper a year from now; or save up for a year and pay an extra 3% a year from now due to inflation.

Another side effect of the 1971 decision is that money in the bank needs to be keeping pace with inflation just to maintain its value. Historically, the US has seen a 3% inflation rate. However, this was prior to TARP, Quantitative Easing 1, Quantitative Easing 2, Government Bailouts 2008. What interest are you earning with your money? Is your money earning more money?

You need to be pessimistic about your future. 10,000 Baby Boomers turn 65 years old every day. You and I will pay for their retirements. Can you even afford your own retirement? Social Security is bankrupt already so do not plan on retiring on that. Is a million dollars enough to retire on? Depends on the lifestyle you want to enjoy (Yes, life should be enjoyed, not just lived).

Responsible people have already started to save for their retirement. Some may have a number they want to reach in order to feel comfortable. Do you have a number? I hope that you do not. Instead you should be thinking of how much monthly income would give you the life you desire. I do not mean salary, I mean monthly income.

I graduated college in 2007 with a C average. If you asked me what I wanted to be when I grew up, all I could ever think of was to be happy. I got a good job after school. I travelled a lot. I worked a lot. I bought a lot of things. I was not happy.

I wanted to quit but two things kept me from doing so. The first was that I didn’t know what else I would do; I didn’t have a dream job. The second was that I had 4 different bosses. How do you quit with 4 different bosses? Do you have to quit 4 times and ask for 4 letters recommendations. Do you have to give 2 weeks notice 4 times? If I quit today, would I have to work for 8 more weeks?

My company was kind enough to to Up in the Air me which eradicated all the worry. Relieved right? Not really. Now I was unemployed and unhappy. Oh how I missed the days of employed and unhappy.

I then did what any young, confident and newly unemployed person does: I moved in with my parents and revised my resume. I’ll skip over all the self pity moments I had and go right to the epiphany. After sending out my resume to all the wrong places, I decided to take a very large chunk of my savings and invested into some Robert Kiyosaki Real Estate classes.

A lot of it was sales fluff, but one thing stuck with me. The concept of Cash Flow. This is similar to what Timmothy Ferriss preaches in The Four Hour Work Week and George Clason cites in The Richest Man in Babylon, but this time it made sense to me.

Cash Flow = money coming in> money going out.

Instead of looking for a new job I would hate, I began to find investments. Instead of working 40-55 hours a week for someone else, I dedicated all of my time researching ways to cash flow. Instead of accepting a job offer in San Diego, I purchased real estate in Arizona.

Lawyers, doctors, accountants and most likely your boss all have one thing in common. They get paid hourly. They sell their time for money. Yes, they get a lot of money for their time, but there are only 24 hours in every day. If they want more money they have to sell more of their time. I may spend a month working on a deal, but when I am done I get paid once a month, every month, for ever. If I want more money, I find more deals. If I want to sleep in, I sleep in. I decided my time is too valuable to me to sell it to someone else. How valuable is your time?

What would you do with a million dollars? This question expired in 1971. Instead, I ask you: What would you do if you cash flowed?