(Disclaimer: You
might not want to cite this in your bibliography for an economics paper. So for that reason, just feel free to just
steal any or all of this without any credit whatsoever…you’re welcome)
We’ll skip over all the boring stuff from ancient
civilizations up to the 1600’s, the main point is that currency in some form or
another was developed to represent a given amount of goods or materials, such
as grain or wheat, or whatever. Then man
developed coins, each coin was made out of gold or silver and was literally
worth its weight in that metal.
Then, in the 1600’s in Europe, people started saying “Ya
know, carting all these heavy ass coins is a real pain in the ass. And we gotta carry them in these faggy little
purses (Europeans in the 1600’s were very insensitive toward homosexuals,
sorry). Why don’t we store all this shit
somewhere and get paper certificates for it instead?”
And so it was. All the gold and silver went to the banks and
the government and the people didn’t care because they didn’t have to lug all
that stuff around anymore.
“Can we come redeem these notes for the gold they represent?”
the people asked the government.
“Well yeah”, said the government, “but you can also trade
them for ale and wine, so why would you?”
“Ahh…good point…can we buy weed and hookers with them?”
“Sure, why not?”
“Ahh…ok then”
And so the people were happy. And the governments started amassing
stockpiles of gold and silver. And then
the governments had to defend those stockpiles, so they had to pay Soldiers to
defend them and buy equipment for the Soldiers to use.
So…in the 18th century they just
started printing more of these certificates, paper that was not truly backed by
gold. As more currency was injected into
the economy, the value of it fell, causing inflation.
“Hey government…what the fudge is going on (18th century people never actually swore. That practice never caught on until the advent of video games)? These notes don’t buy near as much ale and
weed as they used too”
“Yeah we know. It’s
called inflation. It’s all Jimmy Carter’s
fault.”
“Jimmy Who??”
“Never mind…sorry…gotta run”
By the beginning of the 20th Century, just about
everyone was on the “gold standard”. But
for generations the people spent their whole lives trading currency for their
ale, wine, and weed, and really didn’t care what the currency represented. Governments around the world realized “hey,
screw this gold standard mularkey. Let’s
just print as much or as little money as we want, then we can manipulate the
economy!”.
Surprisingly, the US was one
of the last to abandon the gold standard, when Nixon took us off of it in 1971.
“Dude, can we still buy our Schlitz and our Night Train and
our weed?”
“Not the weed…you know better than that”
“Ahh right on…well we’re gonna do it anyway”
“Yeah Yeah we know”
And of course since the dollar really wasn’t worth anything
anymore, inflation skyrocketed in the 1970’s.
“Dude…it’s that inflation thing again…”
“We told you before…it’s Jimmy Carter’s fault”
“But he’s not even going to be president for a couple more
years”
“Doesn’t matter, still his fault”
“But beer and wine is still cool right? How about online poker?”
“It’s 1975 for crying out loud”
“Oh, all right man….peace”
And so it has gone. These
days we rarely even see those pieces of paper anymore. They have been mostly converted to numbers
stored in computers. We buy something,
swipe a card, and our number in our banks computer goes down a little and the
store’s number in their banks computer goes up a little bit. Seems pretty stable to me.