Written by Jaron Pearlman   

Generally speaking no one spends a lot of time thinking about what
 their money is. Most just acquire and exchange currency in part of an 
unspoken, but well known reality that the other 
party recognizes value in it. People know inherently that bartering 
would be cumbersome to market/communal development, and as such turn to a
 symbol all can agree on- a dollar, gold, yuan, seashells, animal teeth.
This
 social decision provides the liquidity needed for real economy to begin in a
 society. It is in all literal senses the spark that ignites the heart of
 prosperous civilization. The exchange of goods and services is the life blood 
of the community- local and global. If cut off from it regions decay 
and atrophy, if given too much whole economies can rupture like a
 vein and explode.

That’s why it is so integral to the worlds future that we
 all begin to think about our money- not just use it.

The good news is mankind has been using money for a very long 
time- so there is a lot to learn from. It is widely accepted that the first
 real ‘coinage’ came from the ancient Lydians living in what is now modern day
 western Turkey, around the seventh century BC. But it is clear that human 
beings discovered the need for liquidity long before. Personal tabs,
 knots of string, pebbles, primitive stamps, were all among ancient currencies-
and gives the notion that currency usage actually predated bartering 
(though bartering is always forced to occur when a monetary system 
fails). Perhaps types of egalitarianism existed before currency, but debts were always applied to enemies and foreign tribes/countries. Keeping tabs of debt owed to a crediting party has always been 
needed for commerce- and is essentially the purpose of money.
This is crucial-
money “IS “ debt. It is a symbol of 
what one can potentially use it for- and has no inherent or intrinsic value.

As global civilizations began to stabilize two distinctly 
different types of currency formed, each taking turns dominating the ancient
 world.
One is referred to as a standardized currency. This money is
 backed by its own worth- in other words it represents a finite amount of value.
 One gold coin will always be worth one gold coin, even if the relative price of gold 
fluctuates. There is a finite amount of material to be invested/used for circulation. In some systems that claim(ed) to use standard currency,
 paper notes are issued to represent the backing commodity (gold/silver
 usually)- but this has proven easily corruptible. The representative nature 
of actions like these always ends up depreciating currency, while actual wealth is hoarded. This is
 seemingly due to human nature being unable to resist the temptation of extortion.

The other is fiat currency. This is money backed by credit- as
 potentially endless as the human imagination. One fiat note has no absolute 
worth, depending on how it is used it can be a hundred thousand dollars or half 
a cent. Fiat money is ‘elastic’ and since its worth can change dramatically its 
been proven highly volatile. To relate this to a gold coin, a piece of gold
 bought by fiat currency will not retain its worth. Its price will fluctuate at
 the whim of an imaginary fiat based market-rather than based off a finite actual backing. Therefore one gold coin won’t
 always equal a gold coin- it could be worth more or less depending on the ‘strength’ of the fiat note that bought it. In the place of a 
finite, tangible unit of currency (like gold) fiat currency can be printed/made 
in credit infinitely (like the US dollar). Though perhaps this sounds good
 it is actually quite detrimental. By making more money where there is
 essentially none the value of the currency drops, making economies 
unstable, foreign trade more difficult, and increasing national debts.

Before exploring examples of these monetary systems (and their 
relation to modern banking) an analogy is in order. As mentioned briefly 
before, there is a great comparison between economics and (of all things) the 
circulatory system. Imagine that the blood running through the arteries and 
veins in the human body is money- and the various limbs, muscles, organs, and 
anatomy are various markets. In a healthy human blood pumps at intervals,
 keeping a steady but not always even flow to the body. Good blood pressure
 assures there is always enough blood (money) to prevent the body
 from failing and fresh, oxygenated blood reaches all parts of the
 body regularly. However, if a part of the body is damaged or dysfunctional
 blood will stop flowing and clot- until the appendage is healed or atrophies 
and dies. A bad or malicious business is no different than this, and must be
 allowed to fail or risk contamination of the healthy parts of the body (in the
 form of debt/bad practices).
Going further, if there is a deficiency of blood
 or low oxygen being carried by blood cells, this is comparable to low
 amounts of currency or currency that has low value. In the case of
 fiat currency the ‘low oxygen’ money is compensated for by injecting 
more and more ‘low oxygen’ money. This continues the inherent problem with
 the body (economy) and raises blood pressure- risking a burst
 somewhere in the circulatory system. In truth its more than a risk- its an 
eventuality. This is what we see when economic bubbles inflate then burst- we
 are excited to see so much money in select places until the economic vein
 hemorrhages and blows up.

That being said lets examine both currency types.
The Byzantine Empire (or Eastern Roman Empire) is a great example
 of a nation using standardized currency. Eastern Rome developed out of the
 fall of the larger Roman Empire tetrarchy (313 AD). Constantine I managed to 
forcibly pull the remnants of the Empire back together, creating a Western 
Roman Empire (bordering Northern Europe, the Mediterranean,
 and Africa) and an Eastern One (bordering Asia Minor, Africa, the 
Mediterranean, and Fertile Crescent). Naturally the Fertile Crescent was prime 
real estate for trade, prompting the construction of a new trade center and 
Roman capital called Constantinople (modern day Istanbul).

Old Rome (before the divide in the early 300s) had fallen due to 
over inflation of its currency known as the denarii. Denarius were silver, 
and Roman currencies were all precious metal- even as the empire grew well
 beyond its limits. This created the two largest problems for many standardized
 currencies:
One is overexpansion of the economy/territories. When there isn’t
 enough currency (blood) to fill in the national economy (body) the money must 
be devalued. This means adding more coins that are worth less- all the while
 currency issuers historically have stuffed their pockets
 with tangible commodities, knowing of the impending collapse.
The other is the demand for more metals to use as currency. If the
 empire grows, and needs more sound money instead of watering down what they
 have, this leads to conquest. War is never good for any national economy
(though it may benefit privateers and international trade companies) often debasing money and always
 causing deficits. Once local precious metal mines are exhausted, many
 governments turn to harvesting other nations. This ironic fact actually drove
 the many civilizations into worse economic stress as they went to war for
 metals to use as money. Surely this isn’t/wasn’t the publicly reported
 cause for war- but it most certainly is/was a dominant factor.

Rome did both of these things and fell as a result. Learning 
from this, Constantine I chose to base Byzantine currency off a
 standard gold coin called the benzant (or solidus/nomisma). This currency
 is possibly the most stable seen in history, maintaining its worth for
 around 400 years and existing for almost 800. The worth of 
the benzant was kept using market determination of the benzants worth (not
 a central bank determination) and not having a standing army. By allowing 
markets to determine worth of a standard currency there is more accurate
 exchange of investments and commodities. Then by allowing farmers,
 merchants, and townspeople to serve as militia when needed there was little
 needless war and less wasted military budget.
Eventually the benzant was devalued around 1034AD due to
 persisting military advances from the Turks, attempting to take Constantinople.
 This required military spending that wouldn’t be economically sound without 
debasing Byzantine money. Many believe that the fall of the benzant was related
 to the negative trade deficit in the Byzantine (that is to say they imported 
more than they exported), but in reality this had no effect on the currency 
until military spending was increased. In fact, by using well structured 
tariffs East Rome flourished as a trade hub despite its lack of manufacturing (The
 USA currently has a negative trade deficit).

As the debasing got worse, taxes went up for the people, a
 standing army was created, and imported goods weren’t as affordable. After many
 years of interest groups infiltrating and extorting from the Byzantine, it
 succumbed to the Turks in the 1400s. Though by this point the benzant was long
 dead- having been replaced with coins of less and less value. The crusades as 
well played into the loss of money-value, encouraging more offensive and 
constant military efforts to control the Fertile Crescent.

All of this is eerily similar to American monetary policy.
 Precious metals were intended to be the currency for the United States. There 
is even a mention in the constitution that fiat monies are prohibited (article
1 section 10). This was heeded fairly well as US politics warded off fiat money
 for centuries. But that did not avoid the appearance of several central banks.
A central bank is used generally to provide an influx of capitol 
to governments. By pooling private funds in a private bank that lends
 money to governments the economy is boosted- but at a price for the people. The
 money must be paid back to the central bank for its lending (with interest
 usually) and is footed by the taxpayers. Central banks work very closely with national
 treasuries; often somewhat removed from the rest of the political arena. This leaves
 a lot of room for questionable business practices.

Despite opposition from Thomas Jefferson and James Madison,
 Alexander Hamilton (Secretary of Treasury) successfully created the First Bank
 of America in 1791. His goal was to establish overseas credit for the newly
 formed USA and help nullify the fiat currency used to finance the
 Revolutionary War called the continental. This bank was not allowed to issue
 credit above its own feasible capitol and adhered to the standard currency. By taking the reigns of money-worth and using private collateral the FBA successfully helped guide the fledgling US into monetary stability. The
 charter for the FBA expired in 1811 and it was dissolved.

Following the War of 1812 with the UK, the United States government 
was forced again into having a central bank to resolve war debts. There is
 considerable evidence that the war itself was put into motion by private 
European bankers who aimed to dismantle sound money in the US, and install
 their own national bank with fiat money. From 1816 to 1836 the Second Bank of
 America provided capitol for the national economy to recover. It eventually was
 liquidated in the 1840s after its charter had expired.
Both of these institutions abided by a standard, where they
 couldn’t create money that didn’t exist, but assigned value to currency rather 
than letting the market do it naturally. By asserting strategy to currency worth it can be guided- for better or worse.
Towards the end of the Civil War paper money was issued en masse
 for the first time in American history. This was partially to help recover war
 losses- but was a harbinger of something much more severe. By making money into
 paper, the groundwork was laid to extort the real value of USA currency.
 Suddenly more money could be printed without the assurance of physical backing
(gold), paving the way for eventual depreciation of US money.

Then came the complete loss of American sovereignty. In 1913 a
 group of private banking investors met on Jekyll Island of the coast of Georgia 
to arrange the third central bank of America- the Federal Reserve. The Fed came 
to power just in time for World War 1, prompting the creation of more money at
 a lesser monetary value. This is where central banking becomes dangerous. By 
issuing more dollars in exchange for debt from the government inflation of
 currency was used to finance war once again, and the standard monies used began
 to no longer represent the amount of USA assets. The Fed was lending more money 
than it had in its reserves/possession, ensuring that IF everyone were to ask
 for their paper shares in gold there wouldn’t be enough.
Also if international debts were called the only collateral for the governments debts would be its citizens and their labor.

This is exactly what happened after World War 1 driving up a
 deficit and leading into the Great Depression. President Roosevelt had to
 discontinue public ownership of gold as a result of fearful Americans 
(wisely) hoarding amongst a devaluing dollar. As World War Two
 and Vietnam commenced the Fed did the same thing. Eventually the gold
 standard was so far removed from anything realistic, it (then called the 
Bretton Woods System) was abandoned in 1971 under President Nixon. Suddenly
 dollars were not redeemable to gold (or anything) in any way.
Fiat currency became the new dollar, and the Federal Reserve ran 
rampant with the newfound infinite debt it could accrue. Its notable that since 
the creation of a central bank made solely by private investors with no real
 government oversight the USA has been plagued with destructive boom/burst 
markets and fairly constant war and military spending. The ability to spend
 beyond standardized limits promotes endless borrowing, conquests, and bailouts 
of bad businesses. All debts are added to a national deficit, that is essentially 
a tab for taxpayers. This mentality has led to trade wars in the guise of
 security/humanitarian aid, multiple market crashes (including 2008), and 
irresponsible spending/borrowing by the Federal government and the
 American people. There is no Federal Reserve charter, and only the USA congress can repeal the Federal Reserve Act.

Obviously standard and fiat currencies both have drawbacks. In the
 case of the Byzantine, who knows how long its currency could’ve been stable if 
it were not under constant siege. It seems war is a tool of economy, used to 
the chagrin or benefit of those who issue and value currencies. Perhaps the
 motives of the Turk leaders were to sour Byzantine money and monopolize 
trade in the Fertile Crescent with their own currency. Perhaps the 
motive of the Federal Reserve Act drafters was to take financial control
 of the USA and drive it into debt peonage- much like the formerly private Bank of England 
in the UK (or the German Reichsbank). Currently the USA fiat dollar is the 
world reserve currency- an increasingly unstable choice.

What can be learned from our money is this: Economists and
 bankers don’t want the population to understand finance. Currency controls 
life quality, it controls war, it controls industry, and it controls the 
individual. Having privateers or even government in total control is foolish, 
and historically destructive. To reform this and avoid the mistakes of the
 past, the average person must be educated and engaged in their 
currency- and know who controls it and why.