INFLATION
Just recently in June of 2025 we have all had to face the fact that our once stable dollar is today worth less than 80 cents and won’t buy you a cup of coffee. In June 2025 I paid $2.79 for a small cup of coffee at a local coffee shop. Add a jelly doughnut for another $2.29 and I spend 5 dollars on foods that may have cost about 2 dollars in 2023. This is inflation.
The GOP blames inflation on Biden Administration 2020 policies, which limited oil and gasoline supply, set rules to limit sale and production of gasoline driven autos, encouraged electric vehicles, and discouraged investment in fossil fuels. At the same time massive deficit spending by the Biden team pumped more than one trillion dollars into an economy already flush with cash. Unfortunately, the surge of fresh dollars into the economy occurred at the same time the nation was suffering from shortages of goods and (as a result of the Covid pandemic). The result was the text book predictable inflationary spiral of the early 2020s— in which too many dollars were chasing scarce goods and fuels.
In 2020 most of the nation’s citizenry had little experience of inflation. For the previous 40 years or more, inflation was so low, it had little or no significant effect on the consciousness of the polity. So most of our citizenry either had no experience of this phenomena or had long forgotten its sinister effects. Inflation simply means your dollar buys less than it did before..prices of goods and service have increase or “inflated”. A the identical coffee that cost $1.50 last year is now $2.79…you get less for your money. I
Inflation is not a recent phenomena…it has occurred through history for as long as societies have used money, (cash, moola, bucks, “readies”, denarii, geld, doubloons, etcetera) as a “medium of exchange”.
To understand inflation one must grasp what “money” is.
MONEY? WHAT IS IT?
The word “money” has an interesting origin. The Roman goddess «Moneta» was the protectress of government funds and economy in ancient Rome. Her name and that of the goddess Juno were untied in the Roman religion as both were protectors of the City. From 344 BC Roman coins of the realm were minted at the Capitoline site in the “Temple of Juno Moneta”. This ancient site was located on the crest of the Capitoline Hill in Rome, overlooking the Forum (the business area). The Temple of Juno Moneta was only a short distance from and just below the much larger Temple of Jupiter. At the mint within the Temple, Roman coins were often stamped on the obverse (head) with the image of a leader and on the reverse with an image of Juno Moneta appropriately holding a scale and cornucopia and the letters “MONETA”.. The name of the goddess Moneta and her image on the reverse of Roman coins readily became associated with the coin itself. Coins with the stamped word “Moneta” became corrupted into our English words: “money”,“monetary” and “mint”. The word “money” is thus derived from the name of a Roman goddess.
What is it and why and when did societies create money?
BARTERING
In the dark past of human history…hunter-gatherers simply moved through the landscape and fulfilled their needs for fuel, food, shelter and protection from nature by exploiting the “free for the taking” natural world before them. When resources ran out or amenable circumstances changed they simply moved on to new places.
With the advent of farming and human settlement, economic circumstances changed drastically. In this new environment, survival, need for food, clothing and shelter had to be met from within a small, circumscribed geographic region and in competition with other settled peoples.
Divergent outcomes of the individual's efforts at agriculture or husbandry must have been very common. Thus the needs of all settled agriculturalists or pastoralists were not met equally from their land or their efforts. Unlike the hunter gatherers in settled agriculture based economies there were “haves” and “have nots”
One farmer may have had a surplus of chickens (corn, hay, etc.) but he or she needed a goat or milk cow, how could this need be met? The first and likely response was to appropriate steal, purloin, what they needed. No doubt in poorly organized settled societies that was a common first choice. Today, even in modern high tech societies some continue to succumb to these perhaps “hard wired” responses. The cases of teens being attacked and strip]ped of their particularly costly and overly attractive basketball sneakers is commonly reported in the urban press. But individuals and societies soon recognized the difficulty and long term negative outcomes of such actions and tended to prevent and discourage these behaviors.
A more socially acceptable response was trade or barter. Exchanging goods for other goods or services is termed “barter" . Bartering may be describes as a process in which two individuals meet and agree “you got what I want” and “I got what you want” so let’s exchange those goods and each go on our way satisfied.
Let’s examine “Amos of Babylonia's experience in barter, arising from his needs for a cow, before there was “money”.
Amos, a Babylonian widower and chicken farmer had three young children in his care. Amos kept a large flock of chickens and laying hens, but his young children needed milk. He recognized his need for a milk cow. His first objective was to seek out someone in his village known to have an extra milk cow.
Unknown to Amos his village sheltered only four (4) farmers out of the fifty farms (4/50) which met this criterion. But of those four, only one (1) of them, Janus, (1/50) had no chickens and thus might be amenable for bartering.
The probability (P) of Amos just finding Janus for an offer of an exchange deal or “barter” (was P= P1 x P2, or 1/50 x 4/50 =4/2500 = 1/625) or probability of 1 out of 625 attempts.
After many inquiries Amos finally did make contact with Janus. Now it was necessary to discover was Janus interested in bartering his cow for chickens? And how many chickens would Amos have to “pay” up to get his milk cow?
Bartering is inefficient. Finding someone with matching needs, and then arriving at fair values of exchange are obviously time consuming and difficult to achieve. In a “barter economy” needs and circumstances can change rapidly over the often long period of time that the process takes.
A MEDIUM OF EXCHANGE
In very early historic time people sought a way to avoid the effort and time required for bartering and facilitate equal, satisfactory, exchange of goods by use of a widely accepted material, item or other medium of exchange.
In 5th century BC, the city state of Sparta, which was highly militarized, iron rods or bars called: όβελοι (obeloi) were used as a form of “money” or an exchange medium. The rust stained, bent iron ‘rebar’ rods commonly seen sticking out of concrete foundations at building sites seem to us as having absolutely no value. But in Spartan culture they were viewed as we might view a crisp new “Benjamin” in our pay envelope!
Why? Every male Spartan served as a hoplite (soldier) and to serve each man had to provide his own sword and spear. In the 5th century BC these weapons were made of iron metal. Iron was preferred over more common 5th c BC bronze.
Iron in the 5th century BC was rare. It took a great deal of effort to find a source of iron ore, to extract the ore, prepare it for smelting by grinding into a powder, then mixing the ore with charcoal—made from wood which had to be cut and burned with little air to make charcoal —and even more fire wood was needed to heat the furnace and and mixture of iron ore and charcoal to smelt (chemically reduce) the ore and into a typical small, two pound (1 kilo) bar of relatively pure iron. Each iron bar required a great deal of time and effort to create. Once a hoplite had an obeloi he then could heat it in a fire to red hot and hammer it into the weapon he needed.
As a result, in ancient Sparta, iron bars were valuable and served as a medium of exchange or Spartan “money”. The bars could be stored up at home or buried for future use. Each bar could be rated by weight as to how much effort it took to make it. Obeloi served as a medium of exchange for Spartans whose needs were local, and modest. Spartan leaders encouraged the use of iron bars as money rather than gold or silver, used by the Athenians, seen by Spartans as an affectation of a weak and affluent society.
We will find that money need have no intrinsic value to serve as a medium of exchange. To serve as such they need only to be accepted by others who see it as valuable to them.
But what about the brass, bronze, gold and silver coins stamped with the iamage of the goddess Moneta?
THE RARE METAL COIN
Typically in many nations "money" was produced by government in the form of native metals such as silver and gold. At first these metals were seen as useful as adornment or to manufacture something else. Being chemically inert (i.e. are found uncombined with other elements) attractive, malleable, easily melted and not subject to tarnishing (gold) and relatively rare added to acceptance.
Gold represents only a very small percentage of the Earth’s crustal rocks. For example gold is found in typical igneous rock at a level of about 2-5 parts per billion (ppb) by mweight, or about equal to the weight of 1/4 of a grain of sand in a ton of rock. However, under certain geological conditions, molten rocks buried at depth below the surface slowly undergo chemical and physical changes that can dissolve some minerals and concentrate them. After long periods of burial the element gold may be found concentrated in quartz veins which occur in certain deeply buried slow cooling coarse grained (plutonic) rocks, such as granite—a common rock of the earth’s continental plates.
When these deep buried rocks are raised by mountain building or exposed by long periods of erosion at the Earth’s surface they again undergo chemical changes. The minerals that formed at depth were stable there—but when exposed to air and water at the surface they are altered or “weathered”. The common silicate minerals convert into soft clays, others form red colored oxides. As the rocks undergo these physical and chemical changes at the surface breaking down solid crystalline rock into soft clays and oxides—the native inert native minerals such as gold copper and silver often remain unchanged. Gold and sometimes silver can be found in its metallic, soft malleable shiny state. While the rocks that once encased them have altered to softer elements which can wash or are blown away. As this happens at the surface they leave behind the chemically inert minerals such as copper, gold and silver. This process can leave these formerly very rare elements especially gold (and silver) which in the parent rock might have be found in parts per billion, occurring at 1000 times more concentrated in the parts per million range.
Australia is an ancient continent. In many places ancient granitic rocks are found at the surface and have been exposed to subaerial weathering for millions and in some places billions of years. The ancient red soils of Australia’s southwest “outback” have in some areas gold dust or tiny gold “nuggets” found near the surface at concentrations as much as 1000 times more concentrated than in typical crustal rocks. These “out back” areas attract gold prospectors who spend days on end in the hot sun waving a metal detector over the dusty red sands to find the occasional nugget or patch of sand sized gold particles . Today one ounce of gold can be sold for $3,353.00 dollars, or one gram (about the weight of one thimble full of water) at about $107 dollars..so finding only a few nuggets can generate a very good pay day for a lucky prospector.
In other circumstances these same weathered granitic rocks, with higher concentrations of gold and silver can become even further concentrated when they are exposed to flowing water such as in the beds of streams. In these waterborne deposits called “placer” deposits gold can be even more concentrated. The the 1840s Gold Rush of California was the result of discovery of “place gold” in California stream beds.
California streams and rivers can concentrate gold. Gold is many times heavier than the rock fragments, gravel and sand found among in stream beds. Most siliceous rocks fragments have a specific gravity (SG) of 2-3 (= 2 or 3 times the weight of an equal volume of water) while gold has a SG of 19, and Silver a SG of 10. Gold is lose to ten times more dense than the minerals and rock fragments (silt, sand and gravel) among which it is found. Flowing water can readily move rock fragments of low SG downstream while it leaves behind concentrations of high SG minerals such as gold and silver.
Gold was easily identified by its color and sheen, could be readily separated from other minerals by its extraordinary density, (by “panning” with water), could be melted at relatively low temperatures, was malleable and could be hammered out into thin sheets, or manipulated or rendered into various shapes. It was also chemically inert and thus retained its bright color, it luster and metallic sheen.
THE FIRST COINS
In the Iron Age (1200BC to 500BC) and long before coins were minted on the Capitoline Hill of Rome, the ancient kingdom of Lydia, was minting silver coins to use as a medium of exchange. Lydia was a state, located in the eastern Mediterranean in what is today the south western portion of Turkey or Anatolia. It was situated between the Black Sea and Aegean Sea, and area rich in trade routes between east and west. Placer deposits of gold and silver were discovered in the Pactolus River which flows though that kingdom and were exploited early in its history.
Gold dust and gold nuggets as well as a naturally occurring alloy of these two gold and silver known as “electrum” was collected and used as a medium of exchange as early as 1200 BC. The attractive, soft, malleable metals with the metallic sheen were easily collected from stream beds. Nuggets of gold, native silver, and electrum as gold “dust” or nuggets may have been used as a medium of exchange or “money” since it could be roughly weighed out and used as a medium of exchange.
Profits from east-west trade were excellent and gold rich Lydia became affluent and sophisticated. The infamous king Croesus (585-546BC) was the fabulously wealthy and last king of Lydia. Croesus’ wealth was based on the gold and electrum in the Pactolus River. Croesus may have been the last king of Lydia (he was defeated and deposed by the Persians) but he or his immediate predecessor was head of the first kingdom to melt placer gold (often using electrum as the metal) into coin like oval “drops” each of about equal weight. When cool, each “coin” was struck with the base of a metal bar engraved to impress on the face of the coin the image of a roaring lion. The “Lydian Lion coin”, called a “stater”, may have been the very first golds/silver alloy coin used as a medium of exchange.
Not withstanding the actual geologic source of the gold in the Pactolus River (as described above) the fabulous wealth of the Pactolus generated a mythical origin story about about avarice. Greedy King Midas of Phrygia (a kingdom to the northeast of Lydia in Anatolia) was granted his wish from Dionysius that “all he touched would turn to gold”. Midas very soon realized his “gift” was a curse when his food (inedible as gold) as well as his beloved daughter were altered into inert and non-responsive gold. When Midas appealed his plight to the Greek god Dionysius, this member of the Greek pantheon revealed that the “curse” could be washed away only by washing in the waters of the Pactolus River. Midas washed his hands in the river-water and the power of the “golden touch” left Midas and turned river sands into gold.
Coins cast in rare or valuable metals are (mostly) easily molten and readily standardized by weight, are easily portable, cast in gold or silver, they are chemically inert and do not decay or lose their luster, they can be stored and accumulated and retain their value over long periods of time. The metals can be melted down and reused for jewelry, or used for personal adornment, often to establish one’s wealth of status , and thus had wide acceptance as a medium of exchange. Both metals are malleable and easily cast or stamped with imagery or information such as their weight and value, the date, and the source of the mint. Their value was easily standardized. The advent of coinage facilitated local business as well as long distance international economic transactions. Often coins had a political function as well reminding citizens of the heads of state that minted the coins.
The Kingdom of Lydia, may have been the first to mint coins but rapidly of other ancient civilizations such as Persia, Greece, Rome and China which all eventually utilized coins as means of facilitating economic exchange.
The first gold AND silver coins were minted in Persia in two denominations —the first use of the “bimetallic standard”—which further facilitated more accurate payment by issuing coins of different values. The Persian daric coin, minted in gold, was more valuable, while its companion coin, the siglos in silver, was of lesser value. Variation in coin values facilitated more exact payments, avoiding the need to clip or alter the coins. The Persian siglos was widely used in the Middle East and its name was later corrupted by the Hebrews into “shekel” a term which is still in use today.
Many variations of coinage were historically produced in Greece and Rome. The famous Canadian silver Maple Leaf coin, and the America Silver Dollar were all in use even in the recent past when traveling in western USA, in the 1950-1960s, particularly in or around the La Vegas, Nevada, where gambling casinos used silver dollars, the US issued silver dollars (particularly the 1935 “Peace” dollars) were jingling in almost everyone’s pockets and was the common coin specie in exchange. Native Americans, such as the Navajo used the silver from these same silver dollars to melt and then cast (in a process known as “sand casting) widely admired silver and turquoise native jewelry.
UNUSUAL MONEY: WAMPUM
In the early 17th century (1624) investors of the Dutch West India Company (DWIC) began a trading colony located on the tip of Manhattan Island in North America known as: New Amsterdam (1624-1664). By the 1640s the Dutch company began a policy of encouraging immigration to expand business and protect their investment from expanding British colonies in what would later become New England. The rapid increase in population had its negative effects.
As large numbers of immigrants arrived in the lower Manhattan colony business activity surged. In New Amsterdam the formal Dutch coin or “Dutch Guilder”, as well as British pounds and Spanish doubloons were all in general use but all became very scarce. Specie (money -coins) were sent abroad to purchase essential goods and manufactured products, but arriving new colonists were poor and carried little money with them. The colony could not mint its own coins. There were not enough currency in the form coins for essential business needs and transactions of the government, or the needs of residents to purchase food, services, or shelter.
Dutch officials were aware that local Lenape tribes used ‘wampum’ or belts of blue and white beads made from local marine shells, as a medium exchange, gift giving and for adornment. Dutch fur traders knew that Mohawk and Mahican natives in northern parts of the Dutch colony would accept wampum for beaver, martin and muskrat pelts which were to them a valuable commodity and the basis for the profits of the Dutch West India Company.
In precolonial times trade was common among coastal tribes and those of the northern forested regions distant from the coast. Coastal tribes in more amenable climate zones had partly abandoned hunting big game (deer bear) for agriculture, by growing corn, squash beans and tobacco often in abundance. The coastal tribes had food but had few sources of skins for clothing, robes, leggings and footwear. A lively trade built up between northern tribes and coastal tribes trading northern animal skins for corn beans and tobacco, as well as wampum.
Wampum was costly in time and effort to produce and had a tightly circumscribed origin. It was produced in small quantities only by the local Delaware Lenape tribes who resided along the mid Atlantic coast where shellfish the material source of the beads were found.
Wampum was in demand for its beauty, rarity and for personal adornment, by more warlike northern tribes, Mahican, Mohawk and Iroquois, who received it as tribute and as a trade item. The northerners traded their more easily accessible beaver, moose, deer and bear hides (which were essential for clothing and scarce in the lands of the Atlantic coastal tribes such as the Delaware (Lenape) and Metoac (Manhassets and Shinnecock) who traded their beans, corn and tobacco as well as the locally produced wampum which was used in gift giving and perhaps to encourage a sale or to balance out an unequal exchange. Wampum was a precolonial Native American medium of exchange long before the Dutch arrived.
Mohican and Mohawks would readily accept, or often demand wampum in exchange for valuable fur pelts. As a result The Dutch West India Company monetized “wampum” beads and belts by using it to pay the northern tribes for their furs in a medium of exchange they preferred.
Wampum was made of strings of blue and white beads formed with great effort mostly from the hinge portion of the edible quahog clam (Mercenaria mercenaria). (The species name: mercenaria indicates the fact that this was the clam used as currency or specie. ) Other species of shell fish (Channeled Whelk, Busycon sp) were sometimes used as well. But production of wampum was limited geographically to Long Island where the quahog was found in great abundance and with its characistic blue interior spot.
To make wampum the quahog clam had to be laboriously dug from the bay or inlet along the Brooklyn or Manhattan shore ( and on all of Long Island). It was then cooked on a wood fire to open it. (The meats were extracted and dried or eaten on the spot). The cooled shell was shattered to remove the blue and white hinge portion of the shell. These colored parts were chipped into smaller fragments which were then rounded and smoothed with great difficulty and effort on a sandstone or other rock surface into a small (0.25 cm wide, 0.5 can long) bead form. Each bead was then placed into a small “split stick” wood “vise” and perforated by drilling with a flint or quartz-tipped drill bit, using a strung wooden bow to rotate the drill and to ultimately perforate the bead. The beads were eventually strung on a sturdy thread.
Threads to string the beads were laboriously formed from fibers extracted from the stems of wild plants such as the Dogbane or Indian Hemp (Apocynum cannabinium). Stringing of the beads on threads was also a laborious process.
As in the case of the Spartan obleoi it took a great deal of effort to produce a string of wampum beads. These production facts and difficulties kept the production of the beads low and thus their relative value high.
Since wampum (wampuopeag) was of only local origin on Long Island, its pre-colonial value as a trade item in Native American culture and especially valuable an item of “tribute” and trade for tribes of the the north or interior away from the coast
Wampum was not particularly attractive, desirable, or initially accepted by the local Dutch colonists. But native Lenape found it attractive and did value it as an ornament, as an item of tribute and as a medium of exchange. The strings of beads could be measured as to length and cut to order—some exchanges required many “fathoms” (one fathom= 6 feet) of wampum beads. The Dutch found that wampum bead strings or belts could be exchanged at a known rate for beaver and other fur pelts, which were produced by northern Native American tribes they encountered at Fort Orange (later Albany NY). These pelts were accepted as valuable by the Dutch (as well as the Dutch West India Company) so by a circuitous route of exchange—the Dutch traded metal pots, knives and blankets to LI natives and accepted wampum as payment. Then they used wampum beads to trade for fur pelts with northern tribes. The Dutch sold the furs to Europeans and purchased in exchange for more knives, pots and kettles. In this way wampum became a standard form of “money” for the colony.
PAPER MONEY
In early 18th century colonial Philadelphia, money was scarce. The British pound, the Dutch guilder, the Spanish doubloon and even wampum were all accepted in exchange, but there were simply not enough of these media of exchange to supply the needs of a rapidly growing population and a burgeoning economy. In desperation people began using squirrel pelts, Indian wampum belts and wampum beads, as well as inefficient bartering methods to meet their needs. Bartering is cumbersome and often leaves both parties unsatisfied feeling that that they were cheated and often claim injustice. In the 1740s Benjamin Franklin proposed the printing of paper money to fill the void and encourage business. Of course he was a printer by trade and his proposal to the colonial governor included his own fee for printing up the paper money. Over several decades Franklin printed up several million pounds worth of paper money for Delaware, New Jersey and Pennsylvania.
But paper money had no “intrinsic value” like silver or gold. How could it function as a medium of exchange? Franklin proposed that the colonial government use the bills to pay for their own government expenses, and with a testament printed on the paper bills that the bill would be accepted to pay taxes, fines and mortgage payments to the Pennsylvania government. This gave the paper validity as a medium of exchange…the bills were useful to anyone (most of the population) who had to pay taxes, fines, or mortgages in Pennsylvania. In short order these bills in various denominations were in common use (See: Niall Ferguson, the Ascent of Money, 2008, Penguin)
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THE STRANGE CASE OF SPANISH SILVER AND THE INFLATION IT CAUSED
