WEBVTT 00:00:01.376 --> 00:00:04.671 I just bought this ticket with money. 00:00:04.671 --> 00:00:08.383 But, you know, once upon a time this was money. 00:00:08.383 --> 00:00:10.177 And so was salt. 00:00:10.177 --> 00:00:13.680 All of these things have historically been used as money: 00:00:13.680 --> 00:00:18.685 A medium of exchange, a store of value, and a unit of account. 00:00:18.685 --> 00:00:21.063 Salt was so often used to pay employees 00:00:21.063 --> 00:00:24.066 that it even gave us the word "salary." 00:00:24.066 --> 00:00:27.361 Money is one of the most useful innovations. 00:00:27.361 --> 00:00:31.823 Because of it, a doctor can buy food without having to find a new farmer 00:00:31.823 --> 00:00:35.869 every day who happens to need heart bypass surgery. 00:00:35.869 --> 00:00:40.666 And the rise of money greatly facilitated trust, trade, growth, 00:00:40.666 --> 00:00:42.501 and the modern world. 00:00:42.501 --> 00:00:45.170 But where does money come from? 00:00:50.801 --> 00:00:54.554 Economists like Adam Smith and Carl Menger thought money emerged 00:00:54.554 --> 00:00:58.517 spontaneously to expedite exchange with strangers. 00:00:58.517 --> 00:01:04.147 Owners of less salable goods, a specialized tool, say, or heart bypass surgery, 00:01:04.147 --> 00:01:08.193 began to accept payment in more salable goods that they didn't 00:01:08.193 --> 00:01:11.822 necessarily need themselves, but which could easily be exchanged 00:01:11.822 --> 00:01:13.573 for what they wanted. 00:01:13.573 --> 00:01:17.577 Something portable and durable was preferred, and after having tried all 00:01:17.577 --> 00:01:21.164 sorts of things, it's not difficult to see why precious metals 00:01:21.164 --> 00:01:23.375 became especially popular. 00:01:23.375 --> 00:01:29.006 Some 2,600 years ago in Lydia, in what is now Turkey, did we get coinage. 00:01:29.006 --> 00:01:32.926 And that coinage was based on standardized weights and measures 00:01:32.926 --> 00:01:36.805 so that you could accept that coinage with certainty of its value: 00:01:36.805 --> 00:01:39.057 A good thing for trade. 00:01:39.057 --> 00:01:44.146 Archeological records suggest many of those coins were minted by private 00:01:44.146 --> 00:01:47.899 merchants and bankers for use in market transactions. 00:01:47.899 --> 00:01:52.738 In the 7th century, Chinese merchants, who used copper coins, thought they 00:01:52.738 --> 00:01:56.241 were too heavy, or dangerous, to carry on their business trips, 00:01:56.241 --> 00:01:59.786 and so replaced them with receipts of deposit, 00:01:59.786 --> 00:02:03.290 and suddenly they had invented paper money. 00:02:03.290 --> 00:02:07.127 Then governments began to monopolize the creation of money. 00:02:07.127 --> 00:02:11.089 They could do so because all they had to do was to print it! 00:02:11.089 --> 00:02:15.719 In the United States, until 1971, you could take your bills to the bank 00:02:15.719 --> 00:02:20.557 and exchange them for the amount of gold or silver printed on the bill. 00:02:20.557 --> 00:02:24.311 Now, governments around the world print all the money they need, 00:02:24.311 --> 00:02:27.230 without any backing, and that causes inflation. 00:02:27.230 --> 00:02:30.525 But, people still experiment. 00:02:30.525 --> 00:02:35.405 Just watch the rise of cryptocurrency, where digital assets are exchanged 00:02:35.405 --> 00:02:39.326 across the globe without reliance on a centralized government. 00:02:39.326 --> 00:02:43.663 Many of these cryptocurrencies will likely fail, just as many other forms 00:02:43.663 --> 00:02:45.457 of money historically failed. 00:02:45.457 --> 00:02:47.834 Other forms may appear in the future. 00:02:47.834 --> 00:02:53.924 Paper, gold, or crypto: Money is always a work in progress. 00:02:55.133 --> 00:02:58.553 Hey! Check out these other great videos from Free to Choose Network. 00:02:58.553 --> 00:03:02.391 And don't forget to subscribe to our channel to get updated on episodes 00:03:02.391 --> 00:03:06.061 of New and Improved with me, Johan Norberg.