The Problem with the Barter Theory
Our understanding of the creation of money is something that has been debated for many years.
One theory that seems to have stood the test of time is that of ‘barter’. Let’s go through an imaginary example of what a barter system may look like.
Tom the Toolmaker needs to feed his family of five, but he has run out of bread for their favourite sandwiches. He decides to visit Bruce the Baker to stock up for his meal.
Tom the Toolmaker asks Bruce the Baker for three loaves of bread. In return, Tom will give him some of his high-quality tools. Bruce is in need of some tools, so he agrees to this and the trade goes through without a hitch.
The next day Tom the Toolmaker is in need of some meat. He decides to visit Billy the Butcher.
Billy the Butcher doesn’t need any tools, but he does need clothes. To complete this trade, Tom the Toolmaker must find someone that will trade some clothes for his tools, so he can go back to Billy and get his meat.
Simple, right?
Well, no… not really. As you can imagine, this sort of system is not straightforward at all and would become very messy, very quickly.
