What was historically intended to be a very practical way to exchange what you have for what you need, by creating a medium or go-between, so that your exchange or transaction wouldn’t be held up by what the person or business you wanted something from, wanted in return, has become all about the value of that medium itself.
For a very long time, there was a very distinct set of rules in place that meant the assumed value of money as a medium was underpinned by the value of the gold that the government – or in the UK, The Bank of England, held in its vaults.
This monetary system was known as The Gold Standard.
Over time, Bank Notes and coins became promissory notes, never actually holding the value they represented themselves, but bearing ‘the promise’ that if you were to produce the money you had in your pocket, the Chief Cashier of the BoE would ‘pay the bearer on demand’. (If you have a banknote on you, take it out and have a read of the details on it!)
Money, or rather the value of money has always been played with by ‘those in the know’. But in recent centuries, the way that the real value of money was manipulated with tools such as leverage – where typically a central bank like the BoE was allowed to print perhaps three times (3x) the monetary value of the gold it held.
The more adventurous those playing with the money system became, the more freedom they wanted so that they could do even more. After all, right from the very start, it was those who knew the so-called ‘secrets’ of money, that would always end up with more and more of the stuff.
In the history of money, the most influential or pivotal moment that led to where we are today came in 1971, when the US financial system rejected and removed the anchoring that The Gold Standard provided, and the current trajectory based on the FIAT Money system was born.