Money Today And Tomorrow

     Good evening, and welcome to the Money Programme. Tonight on the money programme, we’re going to look at money–lots of it, on film and in the studio. Some of it in nice piles, Others in lovely clanky bits of loose change. Some of it neatly counted into fat little hundreds…delicate fivers stuffed into bulging wallets…nice, crisp, clean checks…pert pieces of copper coinage thrust deep into trouser pockets. Romantic foreign money rolling against the thigh with rough familiarity. Beautiful wayward curlicued bank notes…filigree copper-plating cheek by jowl with tumbling hexagonal-milled edges, rubbing gently against the terse leather of beautifully balanced bank books!
     I’m sorry. But I love money…all money. I’ve always wanted money to handle, to touch. The smell of the rain-washed florin…the lure of the lira…the glitter and the glory of the guinea! The romance of the ruble, the feel of the franc, the heel of the deutschemark, the cold antiseptic sting of the Swiss franc, and the sunburned splendor of the Australian dollar!

     [ Monty Python, of course.]

     All right, so the above is a little excessive even for your Curmudgeon. But yes, today we’re going to talk about money: where it’s been, where it is now, and where it’s going. Perhaps that last clause should be “where it might be going,” for there are several possible futures for money, and not even a Certified Galactic Intellect can say with assurance which one will greet us with the sun.

1.1 Why money?

     Why, in the abstract, do we have and use money? Is it because going to the mall with two chickens and a bushel of seed corn is just too cumbersome? Is it a lack of confidence in Electronic Funds Transfer (EFT) and the digital records maintained by the banking system? Or is it that without it we’d have nothing to make our wallets bulge, as contemporary fashion and the dynamics of the mating dance dictate?

     Yes to all three, as we move through that most elusive and intangible of all assets, time.

1.2 How money?

     Money came into existence as a superior form of barter. A medium of exchange that was widely accepted made it possible for the farrier to buy shoes for his wife without having to find that one particular cobbler whose horse needed shoeing. To some extent, that motivation remains in force today. Rather than search interminably for a Michael Kors outlet that would accept four hours of her accountancy services in exchange for a pair of python-and-copper high-heeled sandals in size 10, the C.S.O. prefers to carry a debit card that can transfer a fraction of her vast electronic wealth over to the vendor a few miles away in Lake Grove.

     But of course, the medium of exchange in question must be acceptable to both parties in the exchange. So the evolution of money took some time. And by the way – and this deserves large font:

Governments were not involved.

1.3 Who money?

     Money was the consequence of what the late Friedrich Hayek called spontaneous order. Ordinary people “invented” money over the course of the centuries. They tried a potential medium of exchange, found not quite right, and put it aside for another. At first what made a particular commodity unsuitable was usually that not enough merchants would accept it, but that was eventually overcome by the general desire for something superior to “raw” barter that would facilitate trade.

1.4 What money?

     Many commodities have enjoyed a spell as the prevailing medium of exchange in a society:

  1. Big, crudely carved wheels of rock;
  2. Seed corn;
  3. Animal pelts and skins;
  4. Tobacco;
  5. Potable alcohol;
  6. Various metals.

     Each of these things had some characteristic that made it acceptable, for a time, to the society that employed it. Note that all but one of the items above possess a utility unrelated to its use as a medium of exchange. (Don’t ask your Curmudgeon about the big, crudely carved wheels of rock. He wasn’t there, and neither was anyone else he knows.) However, all but one of them lacked some quality that would have made it perfect for the application:

  1. Durability over time;
  2. Durability in trade;
  3. Divisibility without loss of value;
  4. Acceptance over long distances;
  5. Ability to store indefinitely large amounts of value.

     We can see in this the significance of the original definition of money as “a medium of exchange and a store of value.” Though it might make a widely accepted medium of exchange, a commodity that lacks durability over time or in trade would function poorly as a store of value. Thus the “organic” and “alcoholic” moneys, which are prone to steady deterioration even under the best of circumstances, gave way to the metallic moneys and their far greater durability.

1.5 When and where money?

     The acceptability of a particular money commodity varied with our ability to travel great distances in tolerably brief periods of time. Moreover, as advances in travel technology made it possible for dramatically different societies to trade with one another, differences in local technology and culture loomed large. An industrial society that had adopted gold and silver as its money would have trouble, at first, getting a hunter-gatherer society to accept gold or silver coins in exchange for their local produce or resources. That hunter-gatherer society would have to be persuaded that those coins could thereafter be used to purchase the products of the industrial society.

     Regard in this connection the wary way American Indians approached the coins of the European settlers. In the main, the Amerinds of the Seventeenth and Eighteenth Centuries did not use money, and initially preferred direct barter with the European colonists. It took a while for that to change. This was also the case as European traders of those times approached the tribes of Africa. Not only did those tribes not use money; their attitude toward property itself was at odds with European conceptions.


     Money today is an elusive quantity that’s largely been severed from its roots. Earlier moneys were commodities or proxies for them. They were redeemable in a way in which contemporary moneys are not. The holder of a money proxy could demand its equivalent in the prescribed amount of the agreed-upon backing commodity. He could not be refused without severe consequences for the redeeming institution. Contemporary moneys are quite different, which goes to the heart of our current troubles.

     Ludwig von Mises, that incomparable scholar of money and credit, was among the first to call moneys of our current sort fiat moneys. That is, they are “money” because an authoritative institution – a government – says of them that “This is money and you must accept it.” That institution controls the supply of money and has absolute authority over everything about it. This has been the case over the whole of the Western world since the early Twentieth Century.

     Despite this radical redefinition of money, which strips from it all notions about its utility apart from in trade, people continue to use it as a medium of exchange and a store of value. This is essentially an exercise of faith: faith that the dollars we possess today will still be tradable for the goods we need or want tomorrow. But as has been made plain by inflation throughout the three centuries behind us – the inevitable consequence of permitting a government to control the supply of the prevailing money – that faith can be shaken.


     Thus we come to the questions on a great many minds at the moment: What will the money of tomorrow be? Will the transition from today’s money be smooth or convulsive – perhaps even catastrophic? What process will cause its emergence?

     Few writers have dared to delve into these questions, but then, there’s a reason your Curmudgeon has the lectern this morning.

2.1 Digital moneys.

     Unless you’ve spent the last decade in a coma, you’re surely aware of the phenomenon called Bitcoin and the frenzies it’s experienced. Bitcoin arose as did the original moneys: it was an invention of the private sector. No government had anything to do with it, though several have tried to arrogate authority over it, and no doubt several more will do so presently.

     Bitcoin and its more recent competitors arose because of declining faith in government fiat moneys. The developers have made use of the worldwide acceptance of the Internet and electronic funds transfer to introduce the idea. Note that without the Internet and EFT, Bitcoin would be impossible. By corollary, should the Internet become massively unreliable, Bitcoin will lose its following.

     Note that at this time, unless a merchant says explicitly that he accepts Bitcoin in exchange for his wares, Bitcoin must be converted into the locally prevailing medium of exchange. But then, that’s the case for all other widely accepted moneys today. That having been said: Is digital money the money of tomorrow? The answer is relatively simple: Possibly, if tomorrow is an awful lot like today. Should there be any great upheaval, digital moneys will not gain wide acceptance as the prevailing medium of exchange.

2.2 Government moneys.

     Current government moneys are in trouble, owing to the accelerating rapacity of governments. The American dollar is the best example. It’s founded on “the full faith and credit” of the federal government of these United States. But that faith has been failing steadily, owing to massive federal borrowing and its consequence: massive inflations of the money supply that have caused the dollar to lose value. In this regard most of the other governments of the world are doing the same thing.

     Thus, a digital government money would not improve on the current scheme. Indeed, it would be worse, for it would enhance the government’s ability to intrude into the privacy of earners, borrowers, lenders, and spenders. No transaction conducted in a Central Bank Digital Currency (CBDC) would be private. Moreover, the government could veto any transaction of which it disapproves. The recent contretemps over credit-card-backing companies’ trial balloon about tracking their cards’ use to purchase firearms are a mild precursor.

2.3 Original commodity moneys.

     In the event of a less than catastrophic loss of faith in the dollar, a return to the commodity moneys of yesteryear, particularly gold, silver, and copper, would be plausible if not probable. Silver especially would be ripe for a comeback, as it has always been the preferred “hand to hand” money of Americans. Copper would become the small change of the new standard. Gold, while almost universally valued, is too dense a store of value for most transactions. Consider that at the current exchange rate between gold and dollars – approximately $2000 per Troy ounce of gold – fifteen ounces of gold would purchase the majority of new cars.

     Perhaps a currency — that is, a paper promissory note that stands as a proxy for the backing money commodity – would emerge that’s backed by gold or silver. Whatever the backing commodity, the essential qualification of the currency would be redeemability. Whatever institution might issue the new currency would be required to redeem any of its notes upon demand. Without that guarantee, the note would not be accepted widely enough to matter.

2.4 New commodity moneys.

     Here we come to the consequences of a convulsive collapse of the dollar. In the event of such a collapse, and of the chaos it would wreak upon markets everywhere, trade as we know it would collapse as well. Our current markets, fed with goods and services by supply chains that cross continents and oceans, would vanish. If new markets were to arise, they would be founded on barter. But barter is always easiest if there’s some commodity that most will accept as a store of value.

     Yes, some would accept the money metals. However, other commodities would rise in importance, possibly eclipsing the metals by dint of their greater utility in a chaotic environment. The one that’s most probable (and most often discussed) is ammunition: cartridges for the most commonly owned guns. Others, such as fuel chemicals or toilet paper, might take second place behind ammo, again because nearly everyone would find them desirable and conventional “retail” channels for them would no longer function reliably.

2.5 A hybrid scenario.

     The possibility of greatest interest at this time is one in which general faith in the dollar continues to decline, but short of a complete collapse. In such a scenario, the federal government would continue to maintain that “the dollar is the sole legal tender,” for its ability to maintain its authority is based in large part on the dollar, its acceptability, and its ability to purchase goods and services in dollars. Some would say that where we stand today is not far from such a situation.

     This scenario is of the sort that gives rise to widespread nationalizations of major industries and corporations. Society tends to fission into “dollars only” and “anything but dollars” camps. Where any particular individual (or institution) finds himself would depend upon the nature and quantity of the customers for his product or service. As a rule, in such situations widely valued skills tend to be more negotiable than anything else, including dollars and precious metals.

     The preparationist community has laid some emphasis on acquiring such skills, refining them to a high degree of quality and reliability, and making them known to persons of like mind. The man who can and will fix your small engines in exchange for an agreed supply of fresh eggs would be much esteemed in a situation of this sort. There might be other sorts of trade in widely valued commodities as well.


     The future of money is an inexhaustible subject. Just as the evolution of money, its seizure by governments, and the consequences for private persons are a valuable study, the possible paths forward are worthy of general speculation. No one can foresee much of the future. Speculations, including the very wildest and most fanciful, are always worth considering. Mackey Chandler’s April series contains a number of such speculations, and will probably address even more possibilities as the space-based societies of Home and Luna extend their reach into the galaxy. How plausible they are, your Curmudgeon cannot say.

     Of one thing we can be sure: governments will not spontaneously mend their ways. They will not bind themselves to a genuine budget they cannot overspend. They will not tolerate superior forms of money that put them at a disadvantage. What they cannot suppress, they will do their best to control. They will not agree to pay their debts in anything but fiat currencies, which they will then inflate as much as necessary to relieve them of the burden thereof. Anyone who reposes unbounded confidence in the “full faith and credit” of the federal government – an institution whose sole instruments are force, fraud, and intimidation – will come home from the confessional poorer and sadder…though hopefully wiser.

     Verbum sat sapienti.