Before the Gold Standard

Written by David Frum on Wednesday December 7, 2011

I'm very much enjoying Charles Mann's 1493. So much of the book has deep relevance to current affairs, including this piece of monetary history on p. 135:

[In contrast to commodity money,] fiat money has no intrinsic value, and is worth something only because a government declares it is. ... From a government's point of view, commodity money is problematic, because the government does not fully control the money supply - the nation's currency is at the mercy of random shocks. For example, at the time of [Christopher Columbus'] voyages cowry shells were used as currency from Burma to Benin. Then Europeans shipped in vast quantities of shells from the cowry-rich Maldive Islands, in the Indian Ocean. Governments throughout the region were overwhelmed. A financial system that had been in place for centuries disintegrated in a flash.

On the other hand, don't you think there must have been some Equatorial Ron Paul fulminating against the new-fangled European innovation of shiny disc money, and insisting that if cowry shells were good enough for Benin's Founding Fathers, they ought to be good enough for the Benin of today?