Governmental Origin of Money

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By Ellen Brown:

(from chapter 5 of the book, Web of Debt):

"According to Stephen Zarlenga, who has traced the origins and history of money in his revealing compendium The Lost Science of Money, the use of coins as money did not originate with merchants trading in the marketplace. The first known coins were issued by governments; and their value was the value stamped on them, not the price at which the metal traded.

Zarlenga quotes Aristotle, who said:

- Money exists not by nature but by law. [It acts] as a measure [that] makes goods commensurate and equates them. . . . There must then be a unit, and that fixed by agreement.

Money was a mere fiat of the law. Fiat means “let it be done” in Latin. “Fiat money” is money that is legal tender by government decree. It is simply a “tally,” something representing units of value that can be traded in the market, a receipt for goods or services that can legally be tendered for other goods or services. In Mandarin China, where paper money was invented in the ninth century, this sort of fiat currency funded a long and prosperous empire. Fiat money was also used successfully in medieval England, but in England it was made of wood.

The English tally system originated with King Henry I, son of William the Conqueror, who took the throne in 1100 A.D. The printing press had not yet been invented, and taxes were paid directly with goods produced by the land. Under King Henry’s innovative system, payment was recorded with a piece of wood that had been notched and split in half. One half was kept by the government and the other by the recipient. To confirm payment, the two halves were matched to make sure they “tallied.” Since no stick splits in an even manner, and since the notches tallying the sums were cut right through both pieces of wood, the method was virtually foolproof against forgery. The tally system has been called the earliest form of bookkeeping.

According to historian M. T. Clanchy in From Memory to Written Record, England 1066-1307:

- Tallies were . . . a sophisticated and practical record of numbers. They were more convenient to keep and store than parchments, less complex to make, and no easier to forge.

Only a few hundred tallies survive, Clanchy writes, but millions were made. Tallies were used by the government not only as receipts for the payment of taxes but to pay soldiers for their service, farmers for their wheat, and laborers for their labor. At tax time, the treasurer accepted the tallies in payment of taxes. By the thirteenth century, the financial market for tallies was sufficiently sophisticated that they could be bought, sold, or discounted. Tallies were used by individuals and institutions to register debts, record fines, collect rents, and enter payments for services rendered. In the 1500s, King Henry VIII gave them the force of a national currency when he ordered that tallies must be used to evidence the payment of taxes. That meant everyone had to have them. In War Cycles, Peace Cycles, Richard Hoskins writes that by the end of the seventeenth century, about 14 million pounds’ worth of tally-money was in circulation.

Zarlenga cites a historian named Spufford, who said that English coinage had never exceeded half a million pounds up to that time. The tally system was thus not a minor monetary experiment, as some commentators have suggested. During most of the Middle Ages, tallies may have made up the bulk of the English money supply. The tally system was in use for more than five centuries before the usury bankers’ gold-based paper banknotes took root, helping to fund a long era of leisure and abundance that flowered into the Renaissance." (