Jos Elkink wrote an article on currencies in Cantr in issue #3 of the webzine. It set my mind in motion (by will alone, maybe?), and here are my reflections on trade (not just currencies, though that's the majority of this post). By the way, I have no education in economics, and this post is actually an attempt to get feedback on my ideas. Also, I apologize about the language. the more I write, the more I realize how stiff and formal it is.
First steps - Barter
Let's start from some sort of beginning. An enterprising person (or group, but let's assume one person for the time being) - let's call him Adam - finds a location with a valuable resource (let's say salt, just to have an example). He starts gathering it, and perhaps wants to trade with the nearby village, which has many skilled and well-armed hunters, thus having a surplus of meat and hide, both of which can be processed with salt into useful things (most notably salted meat). Let us skip forward in time - assuming that the village had a use for salt and thus wanted to buy it - and our trader has probably set up a warehouse (with stone (or wood) and iron (for the lock) from other neighbors, perhaps) Until now, he has been trading directly, selling his salt (or - let's face it - he probably has other resources) for what he needs. If Adam hasn't started hiring people yet, promising them a stable pay for helping him dig salt and transport goods, now is probably about time...
Trade gets more advanced - Bookkeeping
Now, say someone - let's call him Benny - pops into his village and wants to sell things, but not lug a load of salt away from there (perhaps he's not going directly home, or can't carry all that the trader is willing to pay). Or, just maybe, our hero (?) can't pay right now (this pretty much requires that our trader has a reputation as trustworthy). Now, our trader invents bookkeeping. Not coins, not just yet. He writes down what he owes the buyer, and tells Benny that he has done so, and will pay up when Benny is ready. Benny merrily accepts this, and goes on his way...
Getting away from verbal agreements - Letters of debt
Now, a few weeks later, with this system of bookkeeping up and running, Benny comes into the village (heck, it's definitely at least a small village by now) and asks Adam if his friend Carlos can pick the payment up later. Our trader's never seen this Carlos, so he has no way of telling if the bloke that shows up a week later and demands salt is the real thing. Or does he? Sure does! Adam marks down the amount of salt he owes Carlos, together with a password, and give Benny a note with the password (and other sundry notes, such as how much of what resource this note is worth, and who will check it in). The password ensures that the note cannot be falsified, unless Benny or Carlos are careless with the note.
(Note that you can't pick a Cantrians pockets, so ideally, either buyer or seller would have to be dead for the password to get loose, in which case it isn't really the end of the world. At least not to our trader who either is dead or gets to deliver his wares - not actually losing any more than he otherwise would have - to a murderer. All right, that is bad, but death aside, it's still relatively secure...)
Now, suppose Carlos gives the note to his friend David (in exchange for resources, perhaps) and tells him where to check it in. Well, look who just invented currency. Another upside of this is that Adam can now hire people (that he trust) to run his shop, since they don't have to know who the company has sold its wares to. Just keep that list up to date...
Spreading out...
Now, let's say Adam wants his company to have offices in other towns, with other resources. That would make selling to him more attractive, as his letters of debt can be cashed in for a wider assortment of wares. However, there is a downside. Having set up offices in two locations, there is now the problem of how to maintain the "Who we owe stuff"-list. If someone sells things to the company in one location, and later comes in at the other and expects to be supplied with wares, the company needs to keep up. Sure, this can be done in a number of ways. A courier in a vehicle can travel back and forth and update the lists, or radio can be set up at both locations, with someone sending every change at one location to the others
However, both of these (I'm sure you can think of others) require a dedicated employee (to travel, or to monitor the radio all day), and investments (so does currency, however). Also, they are not safe (imagine the possibilities for bandits listening in on the radio transmissions and robbing the people they can identify, or if the courier "falls asleep" for a long time or is killed). Also, it's a hassle. A currency would ensure that both (all, when it spreads more) company offices can be sure that their records are up to date (since the customer is holding the record in a form that cannot be forged).
Another downside of the letters is that notes can be copied, so any who get the note after the one who got it from Adam can't be sure that the previous owner isn't ripping him off. This means that the letters of debt probably will not leave the community (in my experience, this equals "geographical location") it was first given to a member of. If the letters could be sold, they would probably be worth more, which means they would be worth more to Adam, which - wait for it - means that his goods are worth more! (I admit that I'm not sure if this is true, but the other arguments still stand.) Thus, depending on available resources, one of two kinds of currency can be developed...
The beginning of the end of bookkeeping - sealed letters of debt
Adam gathers the resources necessary for sealing wax (this lies a bit into the future, since sealing wax is still rare). When people show up to buy wares from him, he hands over a sealed letter with the amount it's worth written on the outside, and with the same note as before inside (but without the password, since the seal IS the password now). If I'm not mistaken, seals can't be forged, and therefore the currency is now safe to use. Just don't open the envelope, since that makes it worthless.
Yes, this is still a hassle. Moving on to coins...
Enter the monetary system - minting coins
Coins! Not much to say about them. Adam gathers the resources to make coins, and starts minting them. Then, every coin can be cashed in for a certain amount of wares at Adam's offices. This, at the moment, is the endpoint of economy...
The future - virtual money
Maybe, sometime in the future, Cantr will develop ID cards and an Internet, where Benny can walk into Adam's office, identify himself, and buy items for the money that Carlos e-mailed to Adam that he wanted transferred from his account to Benny's. But that is in the future, if at all...
Footnotes
This analysis sort of assumes that our sample trader Adam branches out into multiple kinds of goods somewhere before "Spreading out..." and decides relative values of those goods.
Yes, all of this requires that Adam can gather a substantial amount of trust. If he turns out to be regularly unable to pay for his currency (i.e. minting too many coins/writing too many letters...) his company may never leave the "barter"-state...
Given the difficulty (At least, I think it's difficult. Go ahead and prove me wrong.) of communication between islands, currencies are unlikely to leave its island of origin (or more precisely, be worth anything at another). Possibly, those who live where ships usually land can make a small profit from exchanging currencies, charging a percentage. And if coins are spread that way, just MAYBE they can become useful on more than one island...
The size of the provider naturally limits the area the currency will spread. If Adam's company is spread all over Bonk Island, his coins will be more useful than if you have to go to his only office at Bonk Beach (southwest). Elkink has also noted this in his article.
This assumes a lone trader, starting up a company. Off the top of my head, a village starting up trade with neighboring villages would go the same way (although possibly being more trustworthy, due to not being based on one person staying alive). The difference between "company" and "government" in this case is simply that the government also imposes laws on their "employees".
This analysis ends at the midpoint between "fiat money" (not actually worth anything in itself) and "commodity money" (basically what iron is reportedly used as in some Cantr societies) that the US Dollar (when it could be cashed in for gold) was defined as in Jos Elkink's article. Once the money is in circulation, and the understanding that the coin can be cashed in anywhere, the original provider may be more or less cut out of the loop, and the currency becomes true fiat money. Notably, the minting company probably has plenty of political power as long as it controls the currency ("Do as we say or your money becomes worthless!"), so it might not want this to happen...
Whew! I think that was all. Please comment...
I just assumed that the seal on the envelope used a similar system to projects. They are started by a specific character and if you haven't assigned that character a name, you simply see "a (wo)man in [his/her] twenties..."
