The Ancient History of Money

Before the birth of any monetary system, people used to trade goods or services for other goods and services. This is called barter ability, an exchange system in which money is not involved and that worked well in small communities. As these communities grew in number and taxes were introduced, it became harder and harder to keep track of what, when and how was exchanged between people. As such, bartering as an exchange system was replaced by units of exchange such beads and shells, and later by standardized token money – gold and silver – to make trade easier and less complex. In 680 BC, gold and silver were minted into coins in ancient Turkey and this system expanded once it appeared in Athens, Greece, where the first democracy, free market and working tax system were born.

As time went by, however, the Greeks started debasing their money and coins. Once made of only gold and silver, the Greeks saw their coins’ value decrease as these were mixed with less valuable metals such as copper. This allowed the Greeks to create more money and pay to go to war, but it also led to the fall of this great civilization. Romans replaced the Greeks as the dominant power of their time and they took the art of currency debasement to a whole other level. Over the centuries of their rule, currency debasement allowed the Romans to pay for war, public works and social programs, which in turn led to inflation. As I wrote in a previous post:

What we commonly call money is actually fiat currency, which does not hold value in and out of itself. It only acts as a medium to transfer value from one asset to another (…) It’s a current, it has a flow. If there is a decision to print more currency, the value of that same currency will decrease or be diluted and, as a consequence, you will have much less purchasing power with the very same dollar bill you had in your pocket last week.

The same happened both in Ancient Greece and in the Roman Empire. Although fiat currencies didn’t exist at the time, the principle is the same. The greater the amount of currency circulating, the higher the prices of goods and services will rise. Roman coins became smaller and smaller to increase the amount of circulating coins and these were even clipped off as a tax when people needed to enter a government building. These clippings were then melted down and used to make more coins, also often mixed with less valuable metals. Eventually, the Romans faced the same destiny as the Greeks did: inflation came in and their empire collapsed.

This pattern has repeated itself over and over in History. Societies start with real money (gold and silver) and, later on, greed and war lead them to fake money. More fake money leads to less purchasing power and pricier goods and services. Inflation gives place to hyperinflation and the same old story repeats itself: the rich get richer and the poor get poorer, crisis after crisis. When the problem is big enough, there are usually only two options left: either currencies become backed by gold or silver once again, or they are simply destroyed and disappear. This is why I think the first step to take when considering protecting your wealth is to invest in gold and silver and you can read more about this on a previous post called Wealth Creation & Preservation: Why Go With Bullion First?.

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  1. As far as I’m aware, this story is entirely made up by economists. If you care to check, you can have a look at the anthropologist David Graeber, specifically, Debt, The First 5,000 years.

    Liked by 2 people

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