Before money: In the beginning was debt

We all tell the same story. Before money, people bartered: a hen for three sacks of wheat.

Then barter became too complicated, and someone invented money to simplify things. It is logical. And it is probably wrong.

This story is found in Adam Smith, in seventeen seventy-six. It is elegant. It has never been observed.

Anthropologists have looked everywhere. No known society has worked mainly through barter between neighbours.

Barter exists, of course. But mostly between strangers, or when a currency has vanished. Not as a basic system.

Yet the problem of barter is very real. Take ten different goods in a village.

Without a common unit, you need to know the exchange rate for each pair. Ten goods, forty-five rates.

One hundred goods: four thousand nine hundred and fifty rates. With a unit of account, one hundred prices are enough.

So how did villages manage? They did not barter. They kept notes. You owe me, I owe you.

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Between neighbours, people give credit. You give today, you will receive later. Debt comes first.

The oldest evidence comes from Mesopotamia. Clay tablets, engraved more than five thousand years ago.

What do humanity's very first writings tell? Not poems. Mostly accounts.

Rations of barley, heads of cattle, sums owed to the temple or the palace.

Writing was born, in large part, to keep accounts. To know who owed what to whom.

And the unit of account already existed: a weight of silver, or a measure of barley. Without any coin circulating.

But debts have a flaw: they grow. One bad harvest, and whole families became slaves to their creditors.

So, nearly four thousand years ago, kings of Babylon sometimes proclaimed the cancellation of debts.

The tablets were broken. Families were freed. And the economy started again.

The Bible keeps a trace of it: the jubilee. Every fifty years, debts were to be forgiven and land returned.

Here is the twist: money was not born to replace barter. It was born to measure debts.

And that is still true today. The money in your account is a debt your bank owes you.

Remember it: behind every euro, there is a promise. And the whole history of money is the history of those promises.