Money

Money, according to Engels and Marx, was an instrument of capitalist exploitation, replacing all human relationships with callous cash. Marx later wrote in Das Kapital that money commoditised

labour in order to satisfy the capitalist class's lust for accumulation. The demise of capitalism was forecast with communism eclipsed long before that prediction could happen.

Money must be available, affordable, durable, portable and reliable. The earliest known coins date from 600 BC - image at left - and were found at Ephesus near Izmir in modern Turkey. Precious metals were scarce, Europe plundered them by waging war on the Muslim world this was the purpose of the Crusades. Spain's conquest of the New World provided Europe with a monetary stimulus, the Spanish 'piece of eight', based on the German thaler (hence the dollar) became the world's first global currency, expanding European trade with Asia. Spain faced a resource curse, the value of precious metal is no absolute. Money is worth only what someone is willing to give you for it. Monetary expansion increases prices.

The American Civil War, the Rothschilds' ability to finance Wellington to defeat Napoleon led to the Rothschilds' withholding finance from the Southern States, instead the Confederate Secretary of State recruited Britain to the South's cause. Their underlying security, cotton, soared in price and kept the South in the war despite military defeats. Finance ruled this war, unfortunately new sources of cotton in India, China and Egypt spelt ruin for the South. The financial dominance of the Rothschilds, Barings and Gladstones ended with WW1 - fiscal and monetary catastrophe. High inflation the 5 stages:- War led to a shortage of goods; leading to short term borrowing from the central bank; this turned debt into cash, so, expanding the money supply; this causes public expectation of inflation to shift with demand for cash balances; with prices of goods to rise.

Scottish John Law a professional gambler interfered with the French economy insisting on a public note issuing bank in 1716, the Banque Général. French trade was expected to revive. Trade with Louisiana was overseen by Law. The Mississippi Company, with New Orleans the capital in a sweltering, insect infested swamp, no paradise, yellow fever killed 80% of settlers. Inflation due to increased note circulation led to Law's tinkering with the exchange rate of banknotes in terms of gold and silver. The Mississippi Bubble, burst in 1720, Law fled France. Royal bankruptcy affected King Louis XV and XVI until royal bankruptcy precipitated revolution.

Between1865 and 1914 British investors put £74 million into Chinese securities. This was a lot for an impoverished China. Britain ruled Hong Kong as a crown colony and controlled the entire Imperial Maritime Customs, yet could not interdict

China's wars with Japan 1894-5, the Boxer rebellion, 1900, and the revolution that over threw the Qing dynasty, 1911. The Japanese invasion in 1941 and the return of Hong Kong to China in 1997 ensured steep declines in the value of Chinese bonds and stocks. The rise of China, the more rapid rise of hedge funds, has been one of the biggest changes in the global economy since WW2. 450 million rich Chinese, are leaving 850 million Chinese in abject poverty, so that China will never be the premier economic power in terms of GDP.

Modern times find us comfortable with paper money with coins made from junk metal. Today electronic transfers of money from employer to our bank account does not physically materialise. This virtual money today dominates what economists call the money supply.

The stock market crash of 1929, with everyone trading stocks without discipline had to end badly. Stocks did not recover until 1954. The Asian financial crisis of 1997, the collapse of the Russian financial system August 1998. Stock markets plunged, Long Term Risks lost $550 million, total losses $1.8 billion. Money's ascent never smooth, bubbles and bursts, manias and panics, shocks and crashes. We are doomed to be fooled by randomness and surprised by black swans. The failure of an internet bank in the US 2023 led directly to the takeover of Credit Suisse by United Bank of Switzerland, entirely unprecedented. Inflation drives up the cost of living, yet again, recession threatens. The prospect of BRIC- Brazil, Russia, India and China creating an alternative trading block to the dollar economy could threaten modern capitalism.

Too many people with too little regulation give capitalism a bad name. Money is safer under your mattress.

Redundancy is the worst aspect of capitalism.

Source: Money, a Financial History of the World, Niall Ferguson, Penguin 2009