The Greatest Story Ever Told

What is money?

I found myself asking this question watching my husband check the price of his Dogecoin over the weekend. His phone became a 24-hour casino game, complete with red or green flashing lights and 20%+ moves each day. Across the country, millions of young-ish men were playing the same video game, trying to make a quick buck.

Dogecoin is a cryptocurrency that began as a joke, a tongue in cheek response to Bitcoin. But what began as a joke, and may very well end in tears, produced some very real gains for gamblers last week.

A medium of exchange.

A store of value.

An asset or property of value.

Those are the definitions of money I learned in my first capital markets course in college.

A few years ago, I read Sapiens by Yuval Noah Harari. Harari describes humans (aka homo sapiens) as being different from other animals in one very distinct way. We have the ability to create, tell, and remember stories. This ability set sapiens on a path to dominating the Earth and developing large, complex societies. Without stories, we could not collaborate in groups larger than 150-200 humans. Religions, cultures, and even countries are stories. We live in the United States of America because as citizens, we know the story, and we believe it. In this way, I am not referring to stories as fiction. These stories are very real.

Money is also a story. The first form of money was a barter system. A hunter might trade some meat for a farmer’s seeds. As cities grew larger and more complex, the barter system became inefficient. Perhaps the cobbler doesn’t need a gallon of milk from my cow. How might I entice him to make me some shoes? So humans created currency. Gold was an abundant and malleable metal that could easily be forged into coins, which were easy to carry around and trade. But the glue that bound these monetary systems together was belief in a common story; that the coins had a specific value.

Eventually paper currency was added to the system of coins. Humans assigned value to worthless pieces of paper, and everyone bought in to the story. Then banks began to hold deposits and offer loans. Corporations allowed many people to own stock in a company, pooling their money to build something larger than they could ever build alone. Companies could also borrow, and investors purchased bonds. Governments borrowed as well, financing wars, infrastructure, social programs, and deficit spending during economic recessions. Some companies and countries borrowed too much and defaulted. Some corporations went bankrupt, and investors lost their equity. But all along the way, life on Earth became a lot easier for humans.

In the late 20th century, humans dropped the gold standard, and the story of money got even better. No longer limited by the amount of physical gold bars stored in underground vaults, currencies began to trade freely in open (or sometimes pegged) markets. Developed nations created social safety nets; including retirement income and health care. Asset values, both real and intangible, increased substantially. There were bumps along the road, like a Global Financial Crisis in 2008-2009. But the pie continues to grow, lifting millions out of poverty around the world.

I remember the first time I heard about Bitcoin. It was spring 2012, and I thought the concept was completely insane. How could there be value created from ‘mining’ digits on a computer? Then again, how did paper currency derive value? The value lies in our collective belief and agreement in that value. Which makes Bitcoin no less crazy than any form of money before it, and possibly even less given its fixed supply and lack of centralized control.

We may be well on our way to the next chapter of money, the greatest story ever told.



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