William Bramley/The Gods of Eden/21/216

Since the farmer may find it difficult to admit that he had issued many more notes than he had chickens, he may try to save his reputation by lying, such as by saying that a fierce chicken plague had wiped out half of his flock. That will probably not prevent him from becoming very unpopular. Public faith in his notes will be destroyed. He will either have to revert back to straight barter, or else he will need to acquire someone else's notes in order to continue trading in the market.

As we can see, paper notes, or money, are rooted in actual commodities and are meant to be an expression that the creator of the notes has something valuable to trade.

In contrast to notes are coins, which functioned somewhat differently. Metals have always been considered valuable, and so pieces of metal were convenient trading tools. Metal pieces were imprinted with various designs, thereby becoming coins, and their metallic purity was guaranteed by the imprinter. Coin values were initially determined by the quantity and purity of the metal contained within the coins. Gold was a rare and popular metal, so coins made from gold were more expensive and had a higher barter value than, for instance, copper coins.

Metal coins became a popular tool of barter because they were durable and quantities could be controlled. They did create some problems, however. Realistically, people were only trading pieces of metal for other goods. This created a disproportionate emphasis on metals. The acquisition of coins and coin metals became an obsession to a great many people, and such obsessions tend to drain away energy better spent producing other valuable goods and services. The system also gave a disproportionate amount of power to those who possessed large quantities of coined metals, even though other commodities, such as food, are ultimately more valuable. The person with the coin metals could immediately acquire any good or service, but a farmer first had to go through the intermediate step of exchanging his product for a coin or coin metal before he could have the same spending flexibility.

Coin metals merged with paper notes to create the foundation of our modern monetary system in the 1600's. Those