Money and Value – A Journey Through Time

“Money is not peace of mind. Money is not happiness. Money is, at its essence, that measure of a man’s choices.”

This is a quote taken from the antihero of the Netflix show ‘Ozark’, a story about a financial advisor and his family’s spiralling immersion into the world of crime. Whilst the unlawful nature by which money is gained or used in this show is in no way to be taken as exemplary, it is no question that, indeed, money is a measure of a man’s choices. Wealth is a result of one’s decisions in life, or the decisions of those that precede you. And, at its essence, the value of one’s wealth is determined by the choices of the monetary authority by which one yields to.

What is meant by this is that money has little intrinsic value without a government and central bank making an economic decision on what can be used as money; that some ‘thing’ is lawfully worth this much, which can then buy you this much of something else.

What gives money its value? How has money changed over time? What does the future of money look like? These are the questions that are worth exploring, to not only appreciate the trials and tribulations that have taken place to reach the monetary system we have reached today, but to also speculate on the sort of medium that could well become the money of the future, and shape the centuries to come.

Source: Olaus Magnus

Commodity Money

Money has always simply been a term to describe an item that can be used as payment for something of perceived value. As such, the theory is that forms of payment were not really ‘money’ at all, but were the goods and resources that were physically traded for the mutual benefit of buyer and seller, known as ‘bartering’. In a barter economy, transactions involve the direct exchange of the goods or services in question, without an intermediary medium of exchange such as cash. The trading of goods and services has withstood time and, according to pioneering economist Adam Smith, bartering precedes economic civilisation, as a financial system is unnecessary for a barter economy to exist. The only requirement is two or more parties with a ‘coincidence of wants’, where one party needs what another party owns, vice versa, and are hence willing to make the trade. However, there remains debate on the empirical evidence for the prevalence of a barter economy, and such methods of trade were only found in instances of low-scale communities or situations of extremity.

It didn’t take long for the inefficacies of this quid pro quo system to be replaced by other ways to transact. As agriculture became more prevalent, crop and livestock such as cattle and sheep also became mediums of transaction. Cowry shells, or the shells of molluscs, were also used as currency, and remain to this day as the most prominently used currency for the longest period in history. Most commonly, precious metals such as gold, silver, and platinum, began to play a significant role in begetting the early signs of a financial system, and gave rise to many important monetary benchmarks, such as bimetallism and the classical gold or silver standard.

Source: BoyceWire

Precious metal commodities, such as gold and silver, are both advantageous for their resistance to inflation since they are relatively durable and scarce resources that cannot be freely created or manufactured. Hence, neither a central body nor government can have a total monopoly or regulatory power over their existence. Furthermore, thanks to a longstanding status quo, commodities are considered to have fundamental value in their usability and tendency to appreciate over time, especially as ornaments, jewellery, or intermediate goods to produce other valuable items.

However, commodities possess high transportation costs, and metals can still be tainted or damaged if inappropriately handled. Gold and silver currencies can also be subject to debasing, which describes the manipulation of the intrinsic value of a currency by reducing its composition of precious metals, such as the quantity of silver in the ancient Roman denarius; a legitimate, short-sighted monetary practice at the time to satisfy the financing requirements under the Empire.

Source: Business Insider

Evidently, in an expanding, globalising economy, commodity money seems to lose its favourability as a sustainable monetary medium. This is not only because of the limitations of commodities discussed above, but because of the increasing complexity of transactions and the coincidence of wants. In a barter economy or one of skeletal market infrastructure, trading the physical goods and services themselves is a feasible system. However, once we begin to introduce international trade, multinational businesses, and a countless pool of material and abstract products and services, the exchange of goods and commodities suddenly becomes a lot less efficient.

Rather than two immediate goods that could be traded directly, there had to be something else, a third-party, external medium of exchange that buyers and sellers equally value.

Fiat Currency

Enter modern-day fiat currency. With applications stretching back as far as 10th Century China, it is difficult to deny the structural importance of fiat currency to the current state of the world.

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The Australian Dollar, Swiss Franc, or the South African Rand are just a handful among over 180 fiat currencies used in the world right now. Unlike commodities, fiat currency has zero intrinsic value, but is defined by government regulation to possess a fixed level of worth. These paper bills and coins are given legal tender, which is a court recognition that declares the currency as a satisfactory medium of exchange in the issuing economy. This status essentially defines an affidavit that by using this money, you as the user or consumer are placing full trust and confidence in the government and its financial system.

Fiat currency was introduced to solve the problems that commodities posed. Easy to transport and control, fiat bestows upon governments and institutions the responsibility and power to regulate the prices of goods and services, and hence inflation. Central banks have the authority to release or ‘print’ money into the country’s monetary supply by buying government securities, such as Treasury bills, or by making loans to commercial banks. This control gives fiat currency its stability, purchasing power, and enables economic activity and stimuli [4].

However, the near-term price stability and policy-driven settings for inflation suppresses the basic fact that fiat currencies have been losing their value for the last century. This is a consequence of expansionary monetary policies via the conduit of low interest rates and quantitative easing. In fact, a study of 775 fiat currencies in history around the world reportedly discovered that there have been no fiat currencies that have held or risen in value over the long term, and that over three-quarters of attempts at fiat currencies have either failed or been replaced, for reasons such as hyperinflation, monetary restructuring, or eco-political disruption [5].

Source: ModestPie

Even the most prominently backed currency, the US Dollar, cannot escape the clutches of time decay and devaluation. For the past one hundred years, the US Dollar has cheapened in buying power; thanks to inflation, an item that costs $1 in the year 1913 would now take almost $27 to purchase the very same. In the UK, a single British Pound would now be equivalent to £119, meaning that whatever costed you £1 then, the prices are over 100 times higher now for the same exact good.

Source: Elements

Of course, whilst this does mean your cash savings are losing value every year, the depreciation of wealth is not purely due to the nature of fiat. Inflation is caused by rising prices from the basic dynamics of demand and supply. Naturally, the United States in 1913 had less than a third of the population in the country today, and so production costs must always remain toe-to-toe with the surging demand for goods and services, resulting in the constant uptrend of the Consumer Price Index over the past one hundred years. Economic and institutional decisions also play a significant part in the strength of one’s domestic financial system. For instance, the Australian Dollar has seen relatively little to no noticeable hyperinflation since its establishment in 1966, thanks to a modestly conservative approach to monetary policy.

On the contrary, the Hungarian pengő only lasted twenty years. World War II ravaged the country’s industrial production capacity, with most of its capital either being seized or destroyed by militant Germany or Russia. The government were forced to print copious amounts of Hungarian pengők in 1945. Consequently, the currency experienced a daily absolute inflationary change of 207.19%. Yes, per day. In fact, the prices of goods would literally double every 15 hours. It was only until a year later that Hungary found a stabilising solution; by abandoning the pengő and introducing the Hungarian forint.

The Hungarian pengő is just one of many currency regimes over time that have faced a liberal number of challenges. With all being said and done, how can we solve these challenges?


The solution to these problems has been proposed through the advent of cryptocurrency such as Bitcoin. Out of the Global Financial Crisis in 2008, the world came to a stark realisation that the vines of political and financial corruption were more twisted than one had foreseen. Collusive practices, policies that exacerbate inequality, and deliberate institutional shortcuts and bailouts posed as major concerns to the public eye.

Bitcoin was created considering this, and was founded upon the deflationary value in scarcity and utility as a storage of investment value, much like gold. The significant differences lie in Bitcoin’s digital, decentralised nature, and its fixed creation schedule. With a capped supply of 21 million coins that is yet to be in full circulation until the year 2140, the cryptocurrency cannot be diluted or debased, nor can it be destroyed, corrupted, or manipulated by a single institutional body in the way that fiat is. The blockchain technology that supports cryptocurrency also poses as a major solution to removing the need for middlemen banking institutions. All transactions are direct, publicly accountable, and traceable on a decentralised ledger, such as Etherscan, the public blockchain explorer for the Ethereum network, the second-largest cryptocurrency by market capitalisation.

Source: Etherscan

The additional issue that cryptocurrencies attempt to solve is the omission of foreign exchange fees that result from cross-border transactions and remittance. Currencies are regrettably constrained by legal tender and geographical restrictions. Have you ever returned from a vacation overseas and had a heap of spare change that has become unusable? Cryptocurrencies like Bitcoin can remove such outcomes, being wholly borderless by nature, and can hedge against the wave of fees that chip away at the money being sent from country to country. This also poses as a significant advantage for the 2 billion people that have little to no banking access or infrastructure due to geopolitical and economic strains. Countries like El Salvador, Nigeria and the Philippines have found strong use cases for cryptocurrency as both an efficient means of exchange and a hedge against rampant inflation [6].

However, what makes cryptocurrency so appealing to its users is that it is ‘programmable money’, which has produced not only a wide range of applications today, but also realised uses for money that were never though technologically possible, now and into the foreseeable future.

Source: Ivan on Tech Academy

Yet even this breakthrough idea has its drawbacks. Cybersecurity remains a challenge, as the cryptocurrency space remains rampant with scams and hacks. Furthermore, the current lack in regulation continues to act as a barrier to mass adoption, and until governments stand clear and accept the disruption to their enjoyment of monetary control, that barrier remains high and formidable.

What’s Next?

If anything, the future of fiat currency is harsh. Whilst there is little belief that the fiat system will be replaced, the world of physical banknotes and gold coins is continuing to dwindle. The introduction of digital payment systems, debit cards, and neobanking is increasing the trajectory towards a cashless society, with cash accounting for less than 27% of consumer payments in Australia [7]. Central Bank Digital Currencies, or CBDCs, have also appeared on the proposal board, coming from a direct inspiration of Bitcoin. The Chinese digital RMB is the first CBDC issued for public testing in April this year, and has been met by both international reluctance and beguilement.

Whether one believes in the virtues of cryptocurrency, fiat, or gold and silver, it is a difficult task finding a flawless financial system that can do good to all members of society. Can there ever be a perfect currency? Could it be a perfected form of fiat currency? Bitcoin or another emerging cryptocurrency? Could it be time, or energy?

Perhaps, in an imperfect world, the perfect currency doesn’t exist. However, as various movements and schools of thought continue to compete in human history to claim such a title, we may just be finding ourselves stepping closer and closer to its discovery.


[1] The History of Money. (1996). Retrieved from

[2] Commodity Backed Money vs Fiat Money. Pros & Cons (A Deep Analysis). (2019). Retrieved from

[3] Li, K. (2018). The History of Money & the Future of Bitcoin and the Cryptocurrency Economy | Hacker Noon. Retrieved from

[4] Quignon, L. (2019). Money creation: how does it work?. Retrieved from

[5] Walker, F. (2020). The End of Fiat Currency and a New Transfer of Wealth. Retrieved from

[6] What problems do cryptocurrencies solve? Here’s Six. (2019). Retrieved from

[7] Cash | Australian Payments Network. (2020). Retrieved from