1. 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." (http://www.webofdebt.com/excerpts/chapter-5.php)
2. Chris Cook:
"Prior to the advent of double-entry book-keeping and the concept of profit and loss in the Middle Ages, accounting typically involved the use of wooden tally sticks. Notches and marks were made on a stick, with two functions. One was as a memorandum tally or receipt evidencing a sale, and the other was as a record of an obligation – a loan tally. In both cases, the tally stick would be split down the middle with the longer portion (the ‘stock’) being given to the counter-party of a transaction and the shorter portion (counter-stock or foil) kept by the originator.
For over 600 years from the early 12th Century and even before, UK sovereigns were accustomed to raising funds to fight wars and for other sovereign expenditure by obtaining money, goods and services from their subjects as an advance on their tax liabilities. The subject would receive a loan tally in exchange, which represented a pre-payment of tax due.
It could be handed back (hence ‘Tax Return’) in lieu of more conventional money at any point in the future when they came to pay their taxes. This is different from a debt, which normally comes with a date on which it must be paid back. And naturally these Medieval taxpayers did not give the sovereign £10′s worth of value in exchange for a £10 prepayment of tax but received a discount for their trouble. The phrase ‘rate of return’ literally means the rate over time at which the stock could be returned to the issuer, enabling the initial discount to be realised.
In 1694, the Bank of England stepped in. Originally a private company, it was founded to create money backed by its gold holdings that could be exchanged for Treasury pledges over future taxes. In contrast to the old tally stick system, these pledges, known as ‘gilt-edged’ stock, or gilts, came with redemption dates and paid a fixed rate of interest.
These changed characteristics of a fixed date and rate of return made the pledges resemble debts. However, the difference is that these pledges are ownership claims created by an individual over his own income, whereas a debt claim is created by one individual over another individual’s income. The correct analogy is to think of gilt-edged stock as akin to interest-bearing shares or equity bought by investors in UK Incorporated, with a redemption date." (https://blogs.ucl.ac.uk/resilience/2013/03/11/the-myth-of-debt/)