The Island of Babylon has fallen, fallen.

Money is a matter of trust. Any Money; Dollars, Yen, Yuan, Rubles, Euros, Drachmas, Shekels, whatever…. All are a trust mechanism where you trade these units of money for your labors, and then trust that whatever unit of money you trade your labors for, will then hold the value long enough for you to redeem it for your personal needs (whatever those needs might be). This is where our current troubles begin.

Let us simplify the issue: Let us say that 200 of us people live on an Island, 40 families of 5 folks each, and it is a nice island, a big island and it has water, trees, fruits, roots, vegetables and animals. It is an island and as so there are beaches and plenty of fish to catch. The big problem is that each of the 40 families must build huts for shelter, gather fruits, roots and vegetables for food, hunt for, or domesticate animals for food, tan animal skins for clothing, make canoes for fishing and fish the ocean for fish and other bounty.

Each of the 40 families really find this tedious because some families like to build huts, some families like to pick fruit, some families like to dig roots, some families like to grow vegetables, some families like to hunt animals, some families like to raise animals, some families like to carry water, some families like to build canoes, some families like to fish and gather bounty from the sea. Each family “professes” a different liking for what they want to do and we have “Professions,” or trades.

I say “Trades” because that is what the families have to do now to get what they need… trade their professed skills for that “product” of other families’ products. Now it is a situation where I can build you a really bitchin’ hut (I’m a Hut Builder) and you offer a few pigs and some foul (because you are a Hunter of animals). But Huts are a big deal, and I need more than just meat, so I tell you to trade some more of your meat with the fruit picker, root digger, fisher, water carrier, etcetera… and bring me the whole mess to “pay” for your new hut. You say; Wow, that’s a great lot of work! Why don’t I just give you more pigs and fouls and you go get all that other stuff?

Then the family that is basically the laziest family on the island overhears your deal with the hunter comes to you and says: Hey, rather than you, the hut builder, fucking with getting all your needs, or you the hunter, trading your stuff for everything that the hut builder wants, why don’t we all agree to use an item here on the island to represent your hut building value, the value of a canoe, your hunted game’s value, and picked fruit value and the value of a fish, or a root, or a vegetable and the value of some water or the value of tanned animal skins for clothing. Hey great idea dude, maybe you aren’t so lazy after-all.

So all 40 families come together and agree that abalone shells of at least eight inches in length will represent one day’ worth of labor at whatever your professed labor is. Since abalone grow at a slow rate, and that there are harvested only so many 8 inch long abalone shells per year, these 8 inch abalone shells will then hold the Labor Value as intended. OK Then, eight inch abalone shells are now money equal to one day’s worth of labor for all profession be it fishing, hunting, farming, gathering, canoe building, water carrying or hut building.

But what about that lazy family that proposed the exchange rate of one days labor for an abalone shell? What about their wages? One day of tallying up abalone shells and figuring what each other family owes to the monetary system of labor equivalent value, what is that worth? Like I said; “This is where our current troubles begin.”

This lazy family starts by saying that since they solved the problem of “trade’ that they need a little somethin’-somthin’ for their efforts, hell the accounting alone is a whole lot of work, and they have to certify the 8 inch length of all abalone shells used for trading, hell, we have to talk to your families each and every day to keep track of all these abalone shells changing hands…. Our labors on your behalf should have a name… Let’s call it the first bank of abalone!

Now, everything is going along fine for a season or two… all of the islanders are liking the system and the exchange rates. But the lazy family, the Bank of Abalone isn’t really feeling that they are making what they should. Even thought they produce nothing of value, they feel that since they are central to each and every transaction that takes place on the island, that they are the “real” force behind the trades, the commerce, of their island “economy,” that they are just a little more important than each individual trade. So they devise a scheme to “profit” by their activities…

At first, they think that maybe they should ask for a small portion of each trade as their wage…to amount for 1 days worth of their labor. This works OK for a while, but they are really only getting a small amount per their day/wage for the total daily traffic. Not enough in their eyes for what they do… Hell, they are the whole reason commerce on the island exists, they are the masterminds of commerce at all. They deserve better. Don’t they?

So they lazy family has a secret meeting and decides that rather than asking the other families to give a little on each trade to them, instead, they will start accepting abalone shells that are smaller. They offer a buy out to the family that dives for abalone shells so that they still dive, but only provides the dived for shells to the Bank of Abalone. Then it is on…

The bank of abalone now accepts 7.5 inch shells as being 8 inches in length. This is easy as they are the only family who is charged with measuring the abalone shells. The other families take their word for it. 7.5 inch abalone shells are more plentiful than 8 inch shells by like 10% 7.5 inch shells allow the lazy island family to make 11% on each trade now. Wow, great for the lazy family, great for the island bankers.

So 6 months go by and the banker family has grown since they have a lot of time on their hands and life is profitable… babies are born 6 more months go by and even more bankers are born, more mouths to feed… so the banker (lazy) family decides that 7 inch shells will do well in place of the 7.5 inch shells they took in trade before. Who will notice, since they control the abalone divers and measure the shells?

Six more months go by and the bank of abalone decides that 6.5 inch shells are better for their purposes and profits, so 6.5 inch shells become the stock in trade. 6.5 inch abalone shells are so much more available and the money supply grows exponentially. The bank of abalone is doing so well that they buy out the hut builders and canoe makers. The hut builders and canoe makers still do their profession, and trade that for abalone shells, but the profit goes to the bank of abalone.

Six more months go by and the bank of abalone decides that 6 inch shells are better for their purposes and profits, so 6 inch shells become the stock in trade. The bank of abalone is now making so many shells that they buy out the hunters and fishers… The hunters and fishers still do their profession, and trade that for abalone shells, but the profit goes to the bank of abalone.

Eventually, the Bank of Abalone wind up owning all of the production on the island. The Islanders figure it out and decide to sail away to somewhere else except there is a problem… The bankers own all the canoes made on the island and raise the price of canoes to a point where none of the islanders can afford them to escape and sail away.

Now, if you want to eat, or even have a hut to sleep in, you had better get to work at your “profession” or you starve or freeze, even thou you live on a nice island with plenty….

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