'Money', being any object or record that is generally accepted as payment for goods and services and repayment of debts, is valued based on the 'conversation' around it. If we study history, we can see how this exchange conversation has transitioned through time.
Today we tend to think of money as the paper and coins in our wallets, and the pixels forming numbers on our computer screens. The current conversation around these 'objects' is what provides their value.
We know how quickly a conversation can change; how quickly confidence can be lost. As if all at once, the conversation can change.
Let's take a look at some examples through time. Tulips, Salt, Nutmeg and Cinnamon were all, at one time or another, considered to be money. They were greatly valued. However, in today's conversation, each of these previously precious and coveted commodities can be readily purchased at a shopping centre - the conversation changed.
The story here is simple - as we take you on a short journey of the money conversation through time - and point to what seems crazy to be considered valuable (with a backward lens) - we point to the great empire of the United States as the world's creator of debt - with the ability to create modern day cinnamon (IOUs, consumed by the WHOLE world).
Today, has money has gone from exotic spices to Debt?
Throughout history 'money' has taken many forms, including salt, vanilla, coffee, barley, nutmeg, rubber, oxen, diamonds, silver, gold, women, slaves. We provide some details on a few of these here.
Some have great value today, others very little. What is important is to understand that value today does not necessarily equate to value tomorrow.
One day in the early spring of 1637, a Dutch merchant named Francois Koster paid the enormous sum of 6,650 guilders for a few dozen tulip bulbs. At a time when a whole family might live for a year on perhaps 300 guilders, this was a remarkable purchase.
Less than a week after the merchant had bought the bulbs, tulip prices fell, suddenly and without warning. Within a matter of days, flowers had plummeted to only one tenth of their old values, and often considerably less. By the end of February 1637, men who had been - at least on paper - among the richest citizens in all Holland only a few days earlier had lost everything they had.
As if all at once, the conversation changed - and with it, value and people's purchasing power (real wealth).
Salt was of high value in China, Greece, the Middle East, and Africa. In the Mediterranean area, including Ancient Rome, salt was used as money.
It was an international currency: it was an important trading commodity carried by explorers. Greece, involved in a far-reaching slave trade, exchanged salt for slaves, giving rise to the expression, “not worth his salt.”
Special salt rations given to Roman soldiers were known as salarium argentum, the term from which our word “salary” is derived.
This all seems strange given it is such a low cost commodity in today’s conversation.
While nutmeg is quite affordable today, this was not always the case. In fact, throughout history nutmeg has been highly sort after and used as money.
In the 16th century, Portuguese, Spanish and Dutch were fighting for control of the Banda islands and their most sought after inhabitant - nutmeg!
Anyone holding their fortune in Nutmeg would be less than pleased by today’s conversation regarding this once highly valued spice.
Once worth fighting for, it now sits in our grocery isles.
2800 BC China - Cinnamon was so valued it was exchanged as money.
In the first century A.D., Pliny the Elder wrote of 350 grams of cinnamon as being equal in value to over five kilograms of silver, about fifteen times the value of silver per weight.
At these rates, Cinnamon today would be trading at USD$400 per ounce. It is not - the conversation changed!
In the 17th century, the Dutch seized the world's largest cinnamon supplier, the island of Ceylon, from the Portuguese, demanding outrageous quotas from the poor laboring Chalia caste. When the Dutch learned of a source of cinnamon along the coast of India, they bribed and threatened the local king to destroy it all, thus preserving their monopoly on the prized spice.
What the conversation means to you...
We need to be mindful of what we (and society) are valuing as currency and money; and how a change in conversation is set to change values.
The commodities discussed above all still exist. The Tulip didn’t change, salt didn’t change, cinnamon is still cinnamon... what changed is the conversation.
Change in Conversation = Change in Price
The conversation is always changing - with or without you.
Your choice is to listen in to the conversation, understand it, and act - or be left holding the proverbial tulip bulb.