the Banking System
Money is one of those things that are so common and so taken for granted that we seldom bother to ask why we want it and what it can do. We all know that money can do very important things in our own personal lives, but the more important question is: What does it do in the national economy as a whole? We need to know not only how it functions but also how it can malfunction, for the malfunctions of money have created economic disasters and even destroyed nations and empires.
Everyone seems to, want money, but there have been particular times in particular countries when no one wanted money, because they considered it worthless. In reality, it was the fact that no one would accept money that made it worthless. When you can't buy anything with money, it becomes just useless pieces of paper or useless metal disks. In France during the 1790s, a desperate government passed a law prescribing the death penalty for anyone who refused to sell in exchange for money. What all this suggests is that the mere fact that the government prints money does not mean that it will in fact function as money. We therefore need to understand how money functions, if only to avoid reaching the point where it malfunctions.
Many economies in the distant past have functioned without money, just by having people barter their products and labor with one another. But these have usually been small, simple economies, with relatively few things to trade, because most peo-