Not too long ago, my perception of money was cash.

In my view, if you went to a bank and deposited a dollar, at the end of the day, the dollar would be placed neatly next to a stack of gold bricks, in a vault deep beneath the bank. In this imagining, if you sent a wire, the dollar (or another like it) would be aboard an armored car to the other bank, or a armored plane if you paid more for same day.

This mostly wrong. But I suspect the banking and payments, and money generally, are a mystery to most people. Like:

What does Visa do? What does Mastercard do? Why are they different?
Or: How does a dollar get around, if not by armored car?
Or even: Wait, you’re telling me there’s no vault of gold bricks?

To answer these questions, and more, I invite the reader to close their eyes and imagine a time before money, to see how we can invent these systems from scratch.

You are Boog.

You have recently invented Agriculture. On paper (not yet invented), settling down near your food is a devious scheme, but you were far busier than expected and eating oats all day has not felt great.

So, you go to Grob, your hunter buddy, to get some wooly mammoth.

“For Rock-god’s sake!” cries Grob. “This is the sixth time this rock-week. What’s in it for me?”

And so, you agree to exchange 3 bowls of oatmeal for a delicious mammoth-steak, and thus Commerce is born (Altruism begins its endless demise).

Things are going well. Your oat fields grow large and bounteous. Others settle down near you for oats, and you exchange oats for Goods and Services. Eventually, enough people settle down, inventing Civilization.

Problems quickly emerge.

You are sick and tired of oats. You are happy to trade vast sums of oats for modern indulgences like Clothing, Bronze, and Stone Tablets. But oats have become so commonplace that the oat-rate for these luxuries has reached the hundreds of bushels (this is called Inflation). This is too much for you to carry around, and far too many oats for anyone to eat at once.

You devise another devious schemes: instead of exchanging oats directly, you write down how many oats you owe to who in a ledger. This way people can redeem their oats in smaller quantities, and you don’t need to carry anything around.

The system is pretty good. So good, that people start coming to you to ask you to move their numerical-oats from their oat-account to another when trading with others. It works so well that everything is priced in oats, even as fewer and fewer people are redeeming their numerical-oats for physical-oats.

This is called the “Money of Account”.

To make this easier so you don’t need to be involved in every transaction, you design an oat-redemption-token made of pocketable circles of Bronze. “This is a COIN – Contains Oats In Numbers,” you say, holding up a Bronze circle. “You can use this as a Unit of Exchange. Now please stop bothering me.”

This is called “Cash”.

Okay, we’ve been having too much fun here. Let’s break down what we’ve uncovered:

Money can be a number, like the “money of account”.
Money can be a thing, like cash, or oats.

And in fact, a number is much more portable than a thing.

Next time: banks.