Picking up were we left off with money. We discussed what is money and learned its a medium of exchange and really anything can be money. More specifically we discussed paper money and why that can lead to bad things. Perhaps worse than paper money is the banks that manipulate it, or maybe more appropriately said, the bankers that manipulate it.
Full disclosure, I do not dislike banks, or bankers, I use a bank. From what I have learned about money and what people have done with banks, and other financial institutions has taught me a thing or two, and all I can ssy is proceed with caution.
A bank seems like a good thing right? I mean without banks what would you do with all your money. The mattress that you sleep on would be stuffed with money. That’s not very comfortable and fire or theft could take it from you in a moment. So why a bank? Couldn’t we just buy a safe or a vault and store it in there?
If you wanted to start your own business and make some money, would you open a bank? Its a business right? Couldn’t you make a lot of money, there is a lot of money already stored there.
Why banks? Isn’t that the question? Where did they come from who thought of it?
In ancient times when you carried your gold around with you there needed to be a safe place to store it. That is what led to a bank, or what helped to discover it anyway.
Lets start with the Goldsmiths. It sounds interesting like a blacksmith but completely different. Back to the ancient times when a person carried their gold with them they were taking a risk and it became more and more dangerous to do so. If you didn’t have a bodyguard it was very likely that someone could come up to you, hit you from behind, and take it. In true capitalist fashion someone realized they could open a store and if they could guarantee security you might leave your gold with them and the risk would go down. Every time you needed to purchase something you would have to go to the goldsmith and ask them for the amount of gold you needed to make that purchase. All though the risk went down because you weren’t caring your entire fortune with you it was still a risk. The idea caught on and soon everyone used a goldsmith.
In comes the idea of writing a slip, the goldsmith could just give you a slip that would represent the gold that you had stored there. When you needed just a small amount the goldsmith would give you a slip and subtract that from your total. When you went to make a purchase you could hand that slip to a person, because that person used the same goldsmith too, and that person could take that slip back to the goldsmith and they would adjust the total for them. The goldsmith realized that not everyone wanted their gold at the same time, there was always plenty there.
Then comes the idea of writing more slips than the amount of gold on hand. Why not, like I said above, no one ever needed all their gold at once so it shouldn’t be a problem. As you can see this could have evolved into a bank very easily. We don’t know if the goldsmith ever charged interest, or a fee and gave out a loan but you can see how that evolved. There was a fee to keep it stored there, and that makes since because the goldsmith had to guarantee its security around the clock. As long as there has been people there have been bad people that have wanted to take something that didn’t belong to them. I can only speculate that of course the goldsmith wouldn’t have been able to give a loan and charge a fee to someone because no body back then would have thought that was ethical, legal, or moral to do. Just imagine trying to explain that. “I’m going to keep your money, while its here being stored I will give it to other people as a “loan” and make them pay me back”, you might ask what if they don’t pay it back? I would have a tough time explaining what to do. “You see other people have their money here too and if the loan doesn’t get paid back I will take from them and give to you.” You might ask what if you loan too much and everyone loses their money? Then, I the goldsmith would have to guarantee that I wouldn’t lose your money and if that did happen there would have to be some kind of bailout, like deposit insurance………………………….but then the goldsmiths would have been bankers………to be continued.
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