[ambient music] (host) When did we start So if the best things in life are free, then I'm not living my best life, because a lot of the things that I love require money.

Or maybe I should rephrase that: A lot of the basic necessities that I need to survive, like clothing, food, clean water, shelter, and transportation now require money to purchase them, because we've established societies that rely on the exchange of cold, hard cash for basic goods and services.

But love and friendship are still mostly free, and if not, then I'm going about it all wrong.

And while this doesn't exactly trip off the tip of the tongue, that did get me wondering, when do we start using money?

I mean, we're all worried about increasing our incomes and squeezing the most out of every dollar while we pinch our pennies, but don't you think the whole idea is kind of weird?

I mean, we take arbitrary objects like silver, gold, paper and ink and imbue them with associated values based on what economists and governments tell us those objects are worth.

We let people pay us with them, we buy real-world necessities like houses with them, and if you're really old school, you still get paper checks, which are essentially big old IOUs that we cash in for other kinds of paper later on called "money," or just a bunch of numbers recorded in online bank accounts.

So, when did we start using money, and why?

This week, I'm bringing you six fast facts about moolah, scratch, dinero, mad money, ducats, dolla dolla...

Okay, you get the picture.

Let's move on.

So, fact one: Gold became currency because of chemistry.

Outside of providing plot lines for heist movies like "Ocean 77" or whichever one they're up to now, and a name for the 49ers, gold has also played a big role in the development of currency worldwide.

Early uses of gold as currency stretch back thousands of years, starting in around 640s BC in Lydia, which is current-day Turkey.

But before I get carried away about how turkey goes great with bread, lettuce, and cheddar, there are some pretty practical reasons why this shiny metal became used in coins and early currency.

That's because gold's choice as a currency has less to do with finances and more to do with chemistry, at least according to chemistry professor Sanat K. Kumar's article in "The New York Times."

First, gold is pretty malleable and can be alloyed with baser metals.

That means that early gold coins could be mixed with less precious metals to make coins, and that the value of those coins was determined by the weight of the gold.

This weight was verified by some sort of authoritative body, like a government, who made the coins and controlled the distribution of them to prevent counterfeiting.

Second, Kumar notes that gold has an easily defined composition but is relatively immutable, meaning that it's not easily changed, and it can be easily purified into another form so that it could be used as an asset.

It also has a melting point that's low enough that early civilizations can melt it and mold it into coins and other currencies without too much issue.

But perhaps most important of all is that gold is scarce, but not too scarce, which means that there's enough of it to make money while not being so common that it has no value at all.

Because we have to admit, Scrooge McDuck diving into a safe filled with copper pennies just wouldn't be as exciting.

Fact two: Simple barter economies probably never existed.

So, it's often commonly touted that the earliest societies relied on a one-to-one barter system that went something like this: You need a goat but you only have cows; your next-door neighbor Jehosaphat has a surplus of goats but is getting tired of goat milk in his coffee and looking to upgrade to a cow.

You give Jehosaphat a cow, he gives you one of his many goats, and it's a done deal.

But economists aren't too certain that this long-held belief could be true.

Ilana Strauss's article for "The Atlantic" puts us right in the center of this chicken and egg question: Which came first, bartering or money?

Some anthropologists, sociologists, and economists argue that there isn't enough evidence to support the idea that simple one-to-one trade systems have ever been the standard, simply because it isn't really that efficient, because you would always have to have something in hand that the person you wanted to trade with also wanted.

Instead, what existed were forms of bartering that required less work or operated in place of money when folks were low on coins.

There were also complex systems of trading between groups of people, but the metaphor of advanced societies that use money emerging out of crude one-to-one barter systems that was used in Adam Smith's "The Wealth of Nations" wasn't entirely accurate.

Instead, what existed were more complex forms of bartering that took place between two large groups as well as between individuals.

For example, some Iroquois Native American nations would communally collect all of their goods and have them divided by a female council.

The Incan empire, which was the largest and richest empire in South America prior to the arrival of the Spanish, didn't rely on money at all, despite having massive repositories of gold and silver at their disposal, they established a system known as mit'a, which, starting at age 15, all males provided service to the state by building roads and buildings in exchange for all the necessities of life, like food, water, clothing, housing, and tools.

They use gold and silver primarily for religious ceremonies.

Other systems include exchanging goods in the absence of readily available money, such as after the fall of the Roman Empire, after battles, or in gift economies when folks would readily pass goods throughout their community with the understanding that they could get what they needed at a future point in time.

Fact three: Before credit cards, credit was tracked with wooden sticks.

Before we were all answering, "With paper or plastic?"

the phrase would have been, "Will you be paying with metal or wood?"

Because before the Diners' Club put the first credit card on the scene in 1950, followed by American Express in 1958, there was a little thing known as the medieval tally stick.

Low on gold coins?

Need a quick fix but short on silver?

No worries, because the tally stick is here to solve all of your money problems.

An account of the debt would be carved into the stick, either using notches to indicate the amount owed or by engraving the amount owed on either side of the stick.

Then the stick would be sliced in half lengthwise, with the debtor taking one half, known as the foil, and the creditor keeping the other half, called the stock.

Because the willow tree, the stick of choice, has very distinctive grains, the two halves would only fit together with each other, guaranteeing that the exchange was legit.

And if you needed something else while you were waiting for your money back, then a creditor could trade his half of the stick to someone else, who would then collect the original debt from the debtor.

Pretty simple.

Fact four: The Civil War created paper money in the U.S.

So, governments and regulatory bodies were controlling the flow of gold coins as well as silver money for centuries.

And in his 2011 report, "Brief History of the Gold Standard in the United States," Craig K. Elwell outlines how this worked.

A true gold standard is a system where actual gold is exchanged for goods and services.

But gold standard also refers to an economic system that uses other kinds of money, including paper bills, that are supposed to be backed by a certain quantity of gold.

In its earliest days, the U.S. had a bimetallic system backed by gold and silver, starting with the first Coinage Act, passed in 1792.

The U.S. originally even declared that foreign currency, notably British Spanish, Portuguese, and French gold coins, were also considered legal tender in the early U.S. until 1797.

But when the price of gold and silver fluctuated, this shifted the value of U.S. coins, so for the first 40 years, silver coins, which were cheaper, were the primary money used for domestic transactions, while gold coins were used for purchases abroad.

But paper money started to replace gold and silver coins as legal tender during the Civil War.

Although there were types of paper bills being used prior to the implementation of government-printed paper money, like bills of exchange, treasury notes, and private bank notes, these weren't considered money in and of themselves, because they had to be cashed in for gold or silver at a later date.

But with the Civil War raging through the country, a war that was largely based on the Southern states that seceded trying to maintain the economic system of racial slavery, the federal government issued the first paper money, known colloquially as "greenbacks," in 1862.

This was a significant shift, since these were the first bills in the U.S. which were printed without the promise of being cashed in for gold or silver later on.

Although this helped to alleviate some of the cashflow problems, it also led to temporary inflation, since the old saying that "money doesn't grow on trees" is actually true.

Fact five: The gold standard may have made the Great Depression worse.

From 1879 to 1933, there continued to be a gold standard or legal tender that was in theory backed by gold, and that's until the Great Depression caused a series of bank failures from 1930 to 1933, and struggling banks, plus the relatively newly created Federal Reserve system, weren't able to meet desperate customers' needs for cash.

Elwell notes this failure was due in part, and possibly largely, to the gold standard.

For the Fed to generate enough cash to meet the public's changed demand for it, it would have had to create much more money and to lower interest rates.

Lower interest rates, however, would have sped up the export of gold from the country, as investors looked abroad for higher returns.

Creating more paper money, moreover, would have created doubts about the ability of the United States to remain on gold.

The greater these doubts, the greater the incentive to export gold, reducing gold reserves and making it harder to maintain the dollar at its legal gold value.

Hence, to keep the economy from collapsing, the Fed needed a policy of expansion.

To stay on the gold standard, it needed one of contraction.

Until 1933, it largely went with the latter.

So, that was the end of the true gold standard, although, to this day, there are always great urban legends floating around online about people making plans to raid Fort Knox for gold, so dream big, all of you internet conspiracy theorists.

Fact six: Paper currency is great at storing germs.

So, we all know the urban legend that every dollar that passes through our hands probably has trace amounts of cocaine on it, and this one has a little bit of truth to it, since a very limited sample of ten $1 dollar bills found that eight of them did actually contain a little bit of the drug on their surface.

But the name "greenbacks" may be more accurate than we originally thought, since money is also doing a pretty decent job of holding onto the creepy crawly things from our palms as well, and that's because U.S. money's cotton and linen blend is pretty good at trapping germs beneath its soft surface, and some of those germs can include E. coli, microbes from your mouth, viruses, and DNA, maybe because money typically circulates for years, passing through thousands of hands.

But according to an article by Abigail Abrams at time.com, they aren't great at transmitting diseases, only carrying them, because their surfaces can easily trap all sorts of gross stuff, but they are rarely in the right conditions, like moisture and temperature, to help those germs grow.

So, the best solution is to scrub your hands after touching your cash or to find an excuse to look at someone and say, "I don't want your dirty money!"

So, how does it all add up?

From sticks to paper to bartering to precious metals, it looks like there's been more kinds of money throughout history than you can shake a stick at.

Pause for laughter.

Okay.

And as Nile Ferguson points out in his book, "The Ascent of Money," times when financial systems experience huge shifts are usually the result of changes in society.

And now we live in a world where more and more of our transactions don't involve paper money or coins at all but are relegated entirely online, leading to new ways to spend, save, and make money using all sorts of apps and digital assets.

But this isn't a teaser for a video on cryptocurrency.

Seriously, I'm unlikely to ever do an episode on cryptocurrency.

So, what do you think?

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