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Origins of Money and Interest: Palatial Credit, Not Barter

  • Michael HudsonEmail author
Living reference work entry

Abstract

Neolithic and Bronze Age economies operated mainly on credit. Because of the time gap between planting and harvesting, few payments were made at the time of purchase. When Babylonians went to the local alehouse, they did not pay by carrying grain around in their pockets. They ran up a tab to be settled at harvest time on the threshing floor. The ale women who ran these “pubs” would then pay most of this grain to the palace for consignments advanced to them during the crop year. These payments were financial in character, not on-the-spot barter-type exchange. As a means of payment, the early use of monetized grain and silver was mainly to settle such debts. This monetization was not physical; it was administrative and fiscal. The paradigmatic payments involved the palace or temples, which regulated the weights, measures, and purity standards necessary for money to be accepted. Their accountants that developed money as an administrative tool for forward planning and resource allocation, and for transactions with the rest of the economy to collect land rent and assign values to trade consignments, which were paid in silver at the end of each seafaring or caravan cycle.

Keywords

Palatial economies Debt Grain and silver monetization 

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Copyright information

© Michael Hudson 2019

Authors and Affiliations

  1. 1.University of Missouri-Kansas CityKansas CityUSA
  2. 2.Levy Economics Institute of Bard CollegeNew YorkUSA
  3. 3.Institute for Long-term Economic TrendsPeking UniversityBeijingChina

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