After an hour of standing in the queue, I got it. A coloured slip of paper. Mahatma Gandhi grinned purplishly from it. The Rupee symbol and the number ‘2000’ featured prominently. This was one of those things which people would die for. If not for one, many might, for a stack of them.
On Gandhi’s right side, a sentence is written in a minuscule hand in two languages, Hindi and English:
“I promise to pay the bearer the sum of two thousand rupees.”
A curious statement. Isn’t this paper supposed to be two thousand rupees?
I looked at the old five rupee coin that was in my pocket. It had a serrated edge, and all around the periphery, there was a pattern of fine lines. All old coins had these. The new ones did not have it. It had become redundant.
It had become redundant centuries ago. It was a relic of the times when coins were made of gold or silver, and had intrinsic value. It was put there to prevent someone from grinding off and collecting the metal from the edge.
The sentence was also a fossil. But maybe not. It basically denotes that it is a promissory note that evolved from a receipt. A receipt for gold.
Forgive me- I have a tendency to start from two lakh(200000) years ago. That is because we started that early. You and me. Anatomically modern humans appeared on the scene then. Small groups of upright apes that moved in groups and fought with one another. Flaked stone knives litter the fossil horizon. But nothing else.
No arrows, spears, traps, or composite weapons. No cave art or paintings. No beads and ornaments- for tens of thousands of years.
That is why fifty thousand BC is an interesting period. All of them appear. Why?
No one knows. A detailed enquiry is not the intention of this small note. But one thing is clear. After that period, there were inter-tribal trade and specialization. Something clicked, in our brains that convinced us that in addition to fighting, we can benefit from other groups and tribes.
We can play non-zero sum, and not only the zero sum game of war and killing. The killings would continue, but in between, we could negotiate peace, and in the meantime, exchange articles. Fishermen dried and stored their catch. They could give it to the mountain people for goat hides.
One could become a phenomenal bow and arrow maker. You can spend all your life, perfecting your art, if there is a wide market beyond your tribe for your skill. As systems grew more complex, barter was not enough. What if your fish is fresh and you have to give it now, but the goat hide will be ready only next month? Credit is messy. Calculating relative value is also problematic.
The story of civilization is of increasing specialization enabled by trade. Trade is impossible without money.
Virtually anything can be money, if it is mutually agreed on by people. But it is far better if it has intrinsic value.
Gold is rare, takes effort to mine and process. It was the preferred medium of exchange. Weighing it every time is cumbersome. When centralised empires and cities sprang up, the governments brought out weighed coins complete with seal and serrations.
Vandals can loot it. Neighbours may kill you for it. Local rajas, landlords or rulers offered to keep it and give you a receipt. Suppose you have a receipt for one kilogram of gold. If you present it to the landlord (the original banker) he will give you back your gold and you can trade with it.
Why take it back then? Just exchange the receipt and do your trade. That is how paper currency was born.
Till 1917 all paper currencies were backed by an equal value in gold. It was fully gold backed. Later the world shifted to a partial gold-backed system where all currencies were values against a partially gold backed US dollar. From 1970s, that is also gone. Now there is nothing backing your paper money. Then what gives it its value?
It is a complex formula, but as such, it is by executive order of the government (A fiat). Ultimately, its value depends on the value of the country’s economy.
If a country goes broke, as in Zimbabwe and Iceland, or if the government revokes its promise, as it happened with our beloved 500s and 1000s, the value of paper money falls to its real value, which is:
Only eight percent of global money is now in physical form. Rest are in virtual reality, just sitting as zeroes and ones in computers around the world. It is a universally accepted story, but a story, nevertheless.
Shares, Bonds, Property etc are also money. They exist as long as property laws and state machinery exist.
Gold will remain even then. No government can demonitize gold. One can sell it anywhere in the world and get their currency in return.
The world has become an integrated exchange system. It works by cooperative agreement to adhere to certain laws and principles.
We are dependent on stories for our survival.