Comment by akiselev
17 days ago
> I'm not sure how much value money would have without a government to back it up.
You don't need a government backed paper currency, you need a mint making precious metal coins. History has several examples like the mints at the Potosí silver mines or those by the East India Company that enabled trade without effective governments to back them up by just providing reliable coinage that spread to many other polities.
As long as there isn't some crazy inflationary force like colonizers arriving with an unlimited supply, we can use something as simple as beads or seashells for currency quite fine. It just means more labor overhead to create that currency in the first place.
The East India Company was itself a highly effective quasi-governmental institution with a powerful military, a special relationship to a great power, and many other relationships to various kings and nobles who ran the local governments. It's not the best example for this type of phenomenon for this reason.
I think it's also the case that hard money is a different kind of phenomenon from paper money reflecting an entirely different philosophy concerning property and what it is. It reflects a natural law perspective in its most earthy and primitive form, which is that gold and silver are money because ancestors from time immemorial saw it as such due to certain intrinsic characteristics. Governments certainly regulated mints, but also marketplaces could and did regulate coinage on their own which is possible because of its physical nature. If a coin is clipped or made into a false alloy, that can be detected and corrected without state institutions.
Paper money by contrast tends to reflect more modern positivist theories of property in which property rights are deemed to exist because the state speaks those rights into existence. In the middle ages and even before, states as we know them now did not exist and could not exist, so positivism would have been absurd on its face, and its most direct application in the form of artificial currency could not be made.
> The East India Company was itself a highly effective quasi-governmental institution with a powerful military, a special relationship to a great power, and many other relationships to various kings and nobles who ran the local governments. It's not the best example for this type of phenomenon for this reason.
The EIC's first mint was operational in 1643, long before it became a quasi-state. It started to become a quasi-government more than a century later, when it started raising its first major army in the 1750s culminating in the Battle of Plassey and didn't really have the resources to fully become one until the diwani in 1765.
doesn't even have to be coins
Somalia operated on paper money valued at the cost of producing it
I don't know enough about Somalia (or what time period you're talking about) to necessarily refute this argument, but I'd examine the definition of "operate" here before accepting this as a proven system.