The History of Money

Adam Smith came up with the idea that money evolved from barter, which is basically where we're swapping our specific skill sets. But then people started to seek out commodities like shells and glass beads as a transactional instrument because they were scarce in their local community. The problem was when settlers from other areas would come into these foreign lands and they would realize why are they transacting this thing that is very abundant in my area? And all of a sudden it would become diluted or wreck havoc in these local communities. That's what we would call seniorage. Seniorage is when you can produce a monetary good at a much lower cost to you than the good is actually valued in the marketplace.

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