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Money is what enables civilization to happen and so the history of money is really the story of civilization, but told from the point of view of the kinds of money and the influence that the monetary system had on society.

This is a very brief overview.  It is based on the books in the bibliography, especially Stephen Zarlenga's "The Lost Science of Money".

America has an amazing history as far as money is concerned.  It is reasonable to say that the history of America is the battle between the people and the banks for the right and power to issue the currency.  That may seem far fetched, but when you review the history presented here you will see why it is so crucial for the bankers to keep us from thinking about what money is and how it should be issued.  As long as we are only concerned with how to spend it and how to earn it, how to borrow it and how to save and invest it, the banking secret is safe. As soon as we ask what money is and how it should it be issued, we discover that we are debt slaves to the private international banking cartel, which is the true sovereign, since it issues the money for what it wants to see happen by determining what is credit worthy.


Before America was colonized, the aboriginal people, the Indians, enjoyed a sophisticated and abundant, but technologically primitive, society and gift economy.  Because the colonists had most to do with the Iroquois Nation, I will use that history to describe how their society was governed and their version of money. Benjamin Franklin acknowledged his debt to the Iroquois for understanding the importance of the separation of powers that was the basis for the Constitution of the United States.  In the Iroquois nation the secular and spiritual leaders were the chiefs. Each clan, which was an extended family, had a chief and each tribe, which was made up of many clans, had a chief and the Nation had a chief. The chiefs were chosen by the Grandmothers (the post menopausal women) and the chief served until his death or until he was impeached by the council of grandmothers for doing something considered self-serving.  The Grandmothers were very conscious of both the ultimate authority of the chief, and their responsibility to make sure their clan or tribe or nation had the best leadership.


The chief understood his responsibility to be guiding his people to do the will of the Great Spirit, and he did this primarily through the sweat lodge ritual.  In the sweat lodge, with the temperature extremely hot, almost unbearably so, each eligible male would participate, speaking his mind, around the circle, and the Chief would listen to what each member said and discern the will of the Great Spirit speaking through the participants.  His decision was an expression of the consensus that had developed, and it was final and his leadership absolute, and this worked, was not despotic, because he listened and was perceived to have listened.


The Indians understood themselves to be the beneficiaries of Nature’s bounty, and that they had a sacred duty to respect and protect Mother Nature.  They cultivated the three sisters Corn, Beans and Squash, and hunted and fished and gathered wild foods and medicines. The women were responsible for agriculture and the men for hunting and fishing, and within the clan everything was shared according to certain customs.


Relations among the clans and the tribes was commemorated and remembered with Wampum, purple and white shells cut and strung together as flags for the big events, such as a treaty, or smaller belts, or bracelets or barrettes to commemorate and remember gifts given or important events.  Wampum, which is not money, is as close to money as the Indians had, and it illustrates an important attribute of money, namely that it is a record of something that happened between people. It is reasonable to conjecture that the Indian culture had developed about as far as a culture can without money.  The division of labor which money makes possible could not happen in Indian culture to the extent necessary for it to develop technology.


When the colonists would interact with the Indians they were both able to use wampum.  The Indians would express their gratitude for the gift of technology, for example a knife, with a wampum belt and the Colonists could use that wampum belt to pay for food from the Indians.  So one of the most common forms of money during Colonial times was wampum, which became legal tender in the colonies for many decades, until so much wampum was being manufactured that its value inflated and it became useless.


Inflation is always a result of more money being put into circulation than there are goods and services for it to accurately represent.  The control of the money supply, taking the rate of circulation into account, is always necessary for the money to maintain its value. During Colonial times there was a chronic shortage of English money, gold and silver coins, and most of the metallic money that came from England to pay for raw materials from the colonies would go right back to England to pay for the manufactured goods the Colonists wanted.  There was not enough money to facilitate the trade of the goods and services that the Colonists were capable of producing. This problem was solved in principle, and to a large extent in practice, with Colonial Scrip.


There is a wonderful story about Benjamin Franklin and the Iroquois that illustrates this.



Colonial Scrip: Principles of a Fiat Paper Currency


In the American Colonies there was a chronic shortage of gold and silver coins. However, the native people would honor the gifts the colonists gave them, such as muskets and knives, horses and domesticated animals, with wampum (shells strung together to form belts, bracelets, etc.), and the colonists could spend that wampum with the Indians for food and pelts; and so wampum also became an accepted form of money. In most of the colonies, wampum was legal tender and one could pay taxes with it. What would become money generally was up in the air until Benjamin Franklin attended an Iroquois Nation powwow when he was a young man. He was very inspired by the separation of powers he found in their governance, which was an inspiration for our republic. While he was there a brave came into the camp laden down with wampum, which he proceeded to give to the chief who distributed it to all the chiefs of the tribes and clans. The chief recognized the question Ben Franklin had and explained to him that in Indian culture wampum is not money, but is used to make flags and belts to commemorate and remember all the events and gifts that are given during the year. “Of course, there always has to be enough wampum to make all the ceremonial mementos we use to honor our gifts to each other.” Ben Franklin realized in that instant that “there always has to be enough money for all the transactions the people want to make.” He wrote a pamphlet:  On the Utility and Necessity of a Paper Currency, and became a major advocate of fiat paper money, called Colonial Scrip, and he attributed the prosperity the colonists subsequently enjoyed, to its use.


When Franklin was in England representing the colonists he was dismayed to discover the unemployment and poverty and alms houses and debtors prisons there. It was explained to him that there was a population explosion and too many people without enough work. He wrote: “There is abundance in the Colonies, and peace is reigning on every border. It is difficult, and even impossible, to find a happier and more prosperous nation on all the surface of the globe. Comfort prevails in every home. The people, in general, keep the highest moral standards, and education is widely spread… We have no poor houses in the Colonies; and if we had some, there would be nobody to put in them, since there is, in the Colonies, not a single unemployed person, neither beggars nor tramps.”


This was not the case in England, which had the Bank of England and a debt-based monetary system in place – and where debtors who could not afford to pay their debts were often thrown in jail. There was plenty of poverty in the streets of London and elsewhere. Here, Franklin explains the difference between England and her colonies:

“In the colonies, we issue our own paper money. It is called ‘Colonial Scrip.’ We issue it in proper proportion to make the goods pass easily from the producers to the consumers. In this manner, creating ourselves our own paper money, we control its purchasing power and have no interest to pay to anyone… You see, a legitimate government can both spend and lend money into circulation, while banks can only lend significant amounts of their promissory bank notes, for they can neither give away nor spend but a tiny fraction of the money the people need. Thus, when your bankers here in England place money in circulation, there is always a debt principal to be returned and usury to be paid. The result is that you have always too little credit in circulation to give the workers full employment. You do not have too many workers, you have too little money in circulation, and that which circulates, all bears the endless burden of un-payable debt and usury.”


Soon enough, however, the Bank of England had Parliament imposed restrictions on the Colonies’ issuance of Colonial Scrip. The first law was enacted in 1751, with more restrictive measures in place by 1763. Colonial Scrip became illegal tender, and the British Parliament declared that all taxes could only be paid in coin. Poverty and unemployment began to plague the colonies just as it had in England, because the operating medium had been cut in half and there were insufficient quantities of money to pay for goods and work. Indeed, this was the cause of the Revolutionary War, and not the Stamp Act or a tax on tea, as is taught in all history text books.  “The Colonies would gladly have borne the little tax on tea and other matters had it not been the poverty caused by the bad influence of the English bankers on the Parliament, which has caused in the Colonies hatred of England and the Revolutionary War.” – Benjamin Franklin


One of the first Acts of the Continental Congress was to issue Continentals as the currency of the Colonies. It was the issuing of the Continentals that gave tangible evidence that the Colonies were united, and Continentals financed the Revolution. What is not taught in conventional history is that the British counterfeited more than twice the amount (perhaps 8 times) authorized by the Congress and after the War the currency lost its value until it was practically worthless. When it came time to write the Constitution there was a general sense that coin was much more reliable than paper scrip and so the relevant paragraph reads: Congress shall have the authority “To coin Money, regulate the Value thereof, and of foreign Coin, and fix the Standard of Weights and Measures;”. To this day Congress issues the coins, debt free.

to be continued

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