Spear-fishing, potholing, free climbing, potatoes.

All used to be high-risk activities, back before we used money.

Potatoes were particularly risky – growing them was bad enough, what with blight and crop failure and storms and floods. But once they were out of the ground, the fun and games really began.

Because they don’t last long, potatoes – you need to find someone quite quickly who wants a potato.

And the guy who wants your potato…….well, he needs to have something you want in exchange.

And if he is a madcap risk-taker like you, he might have some carrots – they’ll be gently decomposing even as you haggle over them.

In short, you and he have perhaps a week to track each other down and agree to swap some potatoes for some carrots – you can see why marketplaces were so important back before money. No-one wants to be bartering potatoes door-to-door.

An urgent manhunt for someone who has carrots and wants potatoes.

At some point, someone thought “This is bloody stupid – why don’t I swap my potatoes for something that lasts a bit longer that I can then swap LATER for something I need. What about a cow – they last ages and you can eat them.”

And so cows started to be used as money – you could swap your slowly rotting potatoes for something a bit more……..durable, and then days or weeks or even months later the cow was still good to be swapped for some nice carrots.

Emergency Manhunts are over – if you hang on to the cow long enough you’ll eventually bump into someone who wants to eat its knackers and has carrots. Or something else you want.

And then someone thought…………..hang on. It would be better if I could find something that lasted basically forever, and then I could swap it for stuff whenever I wanted.

What about a lump of metal – I’ll use that as an intermediary?

Potatoes to metal to carrots.

Now you can relax – the metal lasts forever.

Pretty heavy though – you can’t cart it around all day. And you don’t want to leave it at home, in case someone nicks it.

You could leave it with someone big and strong, who is heavily-armed. He could look after it for you, for a small fee.

And then if he gives you a receipt for the metal you deposit with him, maybe people will just accept the receipt. And maybe the next guy will too, to save themselves the journey down to the forge – they can hand over the receipt and take possession of the metal whenever they like, right? So why bother trekking down there needlessly?

We’re onto something here – you turn your potatoes into metal, dump the metal down at the blacksmith, take his receipt and then wander around the market with a piece of paper that you can swap for some carrots once you find them.

Hang on. What if your receipt buys you a tonne of carrots but you only want a few kilos?

You’ll need a few receipts – large and small…………denominations.

Oops, we’ve got ourselves a currency.

And now we’re in trouble.

After a while, the blacksmith realises that people never really come to claim the metal -they just endlessly use the receipts.

So he sells the metal. Perhaps to someone who just wants a receipt with which he can wander around the market looking for carrots.

It’s fine – the blacksmith can buy the metal back if anyone comes to claim it.

Soon there were two receipts for every lump of metal down at the forge. And then three. And then four.

Fractional reserve banking had begun.

The reserve (the lump of metal) is now only a fraction of the receipts issued – there are four people who think they own that lump of metal, and as long as none of them ever try to cash in their receipts and claim it, all will be well.

But if two of them turn up to claim it……………oops. One of them will get the metal, and the other gets told to wait a week or two. Or seven years. By a massive bloke with a sword.

We are in this situation today.

Except it’s not a blacksmith with a sword any more, it’s an oily bastard with a private army.

And there’s a LOT of receipts now – there are now about 120 for every lump of metal. And no-one really knows where the metal is any more.

Still, as long as we are all happy using these receipts…

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