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First there was “Might is right”. Anyone with strength could snatch anything from anyone weaker. We evolved and came out of that with the barter system. A goat could be equal to 2 bags of wheat. A day’s labour could be worth a handful of rice. Every piece of goods could be exchanged with some other piece of goods or labour or something else. Of course, there was a clear pecking order with precious stones and metals at the very top.
This morphed into the gold system. Gold now defined wealth and it was the ultimate exchange for barter. You could carry gold when you travelled and buy a great number of goods with it. Kingdoms started hoarding gold. They started minting gold coins. Silver, bronze and iron coins followed. The monetary system was born. Soon we shifted to paper currency.
But this paper currency was pegged to gold. You could only print as much money as there was gold with the government. Governments who did not follow this rule went bankrupt and crashed. Then it was pegged to a “fraction” of the gold reserves and that fraction kept getting smaller and smaller.
When money became virtual
Finally we had the “Nixon Shock”. In 1971, the then US President Richard Nixon “Unilaterally cancelled the direct international convertibility of the United States dollar to gold”. The legacy of gold was thrown out of the window. The floating exchange ruled. In a way that’s finally when money became “virtual” and not “real”. The global financial system was ready for the online age. You didn’t need barter. You didn’t need gold. You didn’t need notes and coins.
Money could be virtually stored,...