From Barter To Banking

Diving deep into mone ary confusions and illusions

By Fur an Mohammed Ahmed

 FROM BARTER TO BANKING

I believe it's my duty to share the truth and

help you grasp our current direction, and
frankly, the outlook isn't optimistic.

I know there might be folks who disagree

when I talk about the negative aspects of our
system. I see the fractional reserve system
as a major global issue. To quote Sir Rajesh
Reddy Sahab, "Na bolu sach, to kaisa
aaina mai? Jo bolu sach, to chakna chuur
hoojaau." "How can I not speak the truth if I
am a mirror? If I do, the mirror will shatter."
I'm open to critique, as long as it's logically
grounded.
 FROM BARTER TO BANKING

TABLE OF CONTENTS

Pg No.
Title

4
The Contagious
"I-Want-What-They-Have"Syndrome

8
Cracking the Code:
Is It Life or Educa on Behind the Curtain?

11
CHAPTER 1:Swapping Sandals -
The Island's Crea ve Credit Chronicles

19
CHAPTER 2: The Tangled Web of Trust -
Island's IOU Intricacies

25
CHAPTER 3: The Rise of Fishy Currency-
Turning Teeth into Treasure

1
 28
CHAPTER 4: Currency Conundrums:
From Fish Teeth to Fluctua ng Prices

35
CHAPTER 5: Golden Solu ons-
Taming Infla on and Cra ing Prosperity

43
CHAPTER 6:Rainy Days and Shiny Coins-
A Wall of Protec on and Taxing Tale

49
CHAPTER 7:Locking Up Treasures -The Goldsmith's
Safe Haven and the Birth of Banking

58
CHAPTER 8: Tricky Transac ons - Bob's IOU
Adventure and The Magic of Promissory Notes

67
CHAPTER 9: Cheques, Chuckles and the
Island's Ingenious Solu on

2
 FROM BARTER TO BANKING

73
CHAPTER 10: Sailing Beyond Gold -
Gold, Cheques, and Pirate-Proof Plans

89
CHAPTER 11: Gold's Slumber Party and the
Not-So-Sleepy Goldsmith

99
CHAPTER 12: Bank Run

112
CHAPTER 13: (crucial)***
The Mandrake Mechanism- Magic Money Moments
and Unending Interest

137
Conclusion

3
Urooj-e-Adam-e-Khaki Se Anjum Sehme Jate Hain,
Ke Ye Toota Hua Tara Mah-e-Kamil Na Ban Jaye.

~ Allama Iqbal (1935).

The rise of man made of clay has terrified the heavenly

beings, who fear that this fallen star may become
brighter than the full moon.

The Contagious "I-Want-What-They-Have" Syndrome

When I was a little kid, I used to see other kids with new
stuff all the time. They had shiny toys and cool gadgets,
and I would be like, "Wow!" But also, "Huh? How do they
keep getting new things?" It was like watching a magic
show where the magician pulled endless toys out of a
tiny hat. Honestly, I had plenty of things to keep me
happy, but there was something about those new
goodies that made me want them too. It was like a
contagious case of "I-want-what-they-have" syndrome.
If they had it, it must be super special!

One day, curiosity struck me like a lightning bolt, and I

asked my father, "Papa, why doesn't the government
just print more money so that everyone can be rich and
buy whatever they want?" I thought I was the Einstein of
economics with that question! His response was akin to
a magician refusing to reveal his secrets. "Oh, my

4
 FROM BARTER TO BANKING

curious little one, that's a question for the ages. It's a bit
complicated, you know." And like that, the topic was
untouched, leaving me to ponder the mysteries of the
economy and its wild ways.

But here's the thing, after that moment, life was a wild
jungle, with all its wild animals, confusing paths, and
treacherous terrains. It was like trying to navigate
through a maze while blindfolded, and the only guide
you had was a mischievous squirrel with a map of
riddles. It's like trying to crack a secret code known only
to math magicians. You know, those brainy folks who
can solve equations faster than you can say "super-cali
fragilistic-expialidocious!" Despite the confusion, I
wasn't one to chicken out from a challenge. Armed with
determination and a superhero cape, I set off to
uncover the mysteries of this jungle. I wanted to make
economics as easy as counting fingers or tying
shoelaces. So, I decided to write a book that would be
like a fun roller coaster ride of knowledge. No fancy
words or jargon that makes your brain do somersaults!
Just plain, simple language that even a talking parrot
could understand. My goal was to write a book so easy
to read that you wouldn't need a dictionary or the
internet to look up big, scary words. Imagine munching
on your favorite candy without getting a toothache!

5
Purpose
Why do you have this cool book in your hands right
now? Are you trying to become an economics whiz or a
money magician? Maybe you want to figure out why
people act the way they do. But wait a second, why
aren't you sitting in a boring old classroom, scribbling
notes about this stuff? Well, I've got a secret for you:
these special books by talented writers are like secret
treasure chests of knowledge. They're like the thrilling
adventures you watch on the big screen, but all
squished into pages.

I put a lot of effort into making this book as exciting as

a roller coaster ride. We start right at the beginning,
when things were as simple as building blocks, and we
journey together to the mind-boggling puzzles of the
world today. But guess what? I promise it won't be as
confusing as a jigsaw without the picture on the box.
Even a clever kid like you can follow along!

Note
Now, listen up! Here's the scoop: while the characters
and tales in the book are stuff I made up, the ideas
behind them are as real as your favorite snacks.
Imagine reading a history book that's a bit like a
superhero comic. We'll talk about fish teeth being used
as money (crazy, right?), and the shiny discovery of gold

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 FROM BARTER TO BANKING

that came after. Just remember, even though I've

twisted the story a little, the ending is still spot-on true.

I get it, this part might make you scratch your head at
first, but don't worry. It's like trying to figure out a tricky
video game level. You might not get it right away, but
trust me, you'll level up in no time!

Here's the exciting part: after each chapter, you're going

to scoop up a nugget of wisdom. Think of it like
grabbing magical powers in a game. And here's the
magic spell—use that wisdom in your everyday life.
Picture this: you're in a shop, picking out some goodies.
Watch closely as the shopkeeper and you swap things.
Ever wondered why they hand you stuff in exchange for
a piece of paper? What's so special about that paper?
Why do people chase after it like it's the last candy at a
party? Can it really rescue folks from being poor? How
can a piece of paper feed hungry tummies?

And here we are, my fellow adventurers, ready to dive

into the wild world of economics together. So buckle up,
put on your safari hat, and let's set forth into the jungle
of knowledge! Remember, we're in this together, and I
promise to make this journey as entertaining and
enlightening as a circus full of brainy acrobats! Happy
reading.

7
Cracking the Code: Is It Life or Education Behind the
Curtain?
So, you might be asking yourselves, "Why bother with
economics? I've got my own problems to deal with!" But
hold onto your hats, because I got some answers that'll
make you go, "Whoa!" You know that famous quote,
"Bazar se guzra ho, kharidaar nahi hoon". ~ Akbar
Allahabadi (I'm merely a passer-by from the market. I
am not a buyer). But even if I learn all the ins and outs
of this money stuff, will it really affect my life? Let's find
out! Picture this: We all know this person who spent
almost two decades learning science, math, economics,
languages, and whatnot. They worked the 9-to-5 grind
for over 40 years, but guess what? Financial instability
became their not-so-awesome sidekick! Dreams, once
high-flying, got delayed like an overdue pizza.
Something's fishy, right? Is it a life thing or an education
glitch? Let's crack this mystery!

Overview
Enter our sassy book's main goal: getting into your brain
and dishing out the answers you crave! What is money?
How does it actually work? Does it really buy anything?
Why is there a gap between rich and poor? What's the
solution to that? And why does Mr. Rich have a fancy
car while I'm still on my tricycle?

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 FROM BARTER TO BANKING

Hold onto your wallets, 'cause we're talking recession,

inflation, deflation, and dramatic drumroll economic
expansion and contraction! But wait, there's more! We'll
also cover the moral, human, and honest ways of
handling this money business. So, buckle up, money
explorers, we've got quite the adventure ahead! And
here's a fun thought: You know how we sneak a peek at
those food packet ingredients to be nerdy about our
health? Well, just like that, you're a part of this money
game, my friend! Understanding the money maze is like
knowing if you're munching on a nutritious salad or a
chocolate cake (not that there's anything wrong with
chocolate cake, though). So let's kick-start this journey
and navigate the money universe. We'll crack the code,
and you'll emerge financially wise and wealthy like a
wizard! Ready to dive in? Let's rock this cash-filled boat!

Unmasking the Modern Mirage

Imagine an economy as a whole living body, and guess
what? Money is the blood keeping it alive and kicking!
But hold on, what on earth is money? Well, nowadays,
it's nothing more than a simple piece of paper. Let me
take you back to the funky '70s, August 9, 1971, to be
precise. That was the day when everything changed!
Before that, money used to be real-deal money. You
know, the kind backed by precious stuff like gold, silver,
or even paper cups (just kidding about the cups,

9
though). Real money had some serious value, and you
couldn't just magically make it appear with a few clicks
on a keyboard. No "voila!" like a wizard casting a spell. It
took some serious effort to get those coins clinking in
your pocket! But well, times change, and now money is
all about trust and faith in the government and the
system. So, next time you see a rupees bill, just
remember it's not as fancy as it used to be. It's just a
piece of paper with lots of hope and promises printed
on it!

Now, get ready for the grand adventure! Remember,

read this book as if it's the most thrilling story ever. Let's
dive in like brave explorers, and uncover the secrets of
the world together!

10
 FROM BARTER TO BANKING

CHAPTER 1

Swapping Sandals:The Island's Creative Credit

Chronicles

Once upon a time, in a land far, far away, there was a

little island filled with honest and friendly folks who
lived together like a big, happy family. No sneaky
politicians on this island, no siree! They grew corn, rice,
and wheat, and there were skilled craftsmen and a
fisherman who was the talk of the town.

Now, our hero, the fisherman, had a fantastic day of

fishing and caught a bunch of fishes. But oh dear, in all
the excitement, he stepped on a nasty thorny stick and
hurt his foot! Ouch! The poor fellow didn't have any
sandals to protect his precious toes. And here's the
thing – in this magical time, money hadn't been
invented yet, so people traded goods instead. Barter
system as we know it. Fancy, huh? Off he went to find
the island's famous sandal maker, Bob! You couldn't
forget Bob; he was just a tiny fella but mighty skilled in
making sandals that fit like a dream. The fisherman
waddled over to Bob with a big smile, fish in hand, and
said, "Bob, my buddy! I got some fresh fish here, all juicy
and delicious, and guess what? These fishes were
shouting your name when I caught 'em!" Bob scratched

11
his head, thinking hard. "You know, fisherman, I'm
grateful for the offer, but my pantry's full of food grains
already. I don't want those tasty fishes to go to waste."
The fisherman's face fell like a deflated balloon. He
needed those sandals to keep fishing and providing for
his family! But wait! In the nick of time, Bob's eyes lit up
like fireworks on New Year's Eve. He remembered
something! "Hey there, fisherman! I've got an idea. My
trusty cutter's gone all dull and wonky. If you can get me
a new cutter, I'll gladly make you a fine pair of sandals!"
Aha!

The fisherman's eyes twinkled with hope. He agreed to

help Bob find a shiny new cutter. After all, he
desperately wanted those sandals, and he was one
smart cookie. Off he went, on a mission to find
someone willing to trade a cutter for his fresh fish. His
feet took him straight to the island's blacksmith – a
mountain of a man, with six-pack abs like a Greek god,
and flames dancing around him as he worked with iron.

The fisherman approached, all charm and charisma,

and said, "Hey there, Blacksmith! I've got a
once-in-a-lifetime deal for you! Fresh, tasty fish, just
caught this morning, and these fishes were practically
begging me to come to you with this offer." Well, the
blacksmith was intrigued! Who could resist such a

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 FROM BARTER TO BANKING

sales pitch? He asked the fisherman what he wanted in

return, and the fisherman spilled the beans about Bob
and the sandals and the cutter and how smart he was,
you know. The blacksmith nodded, impressed, and
exchanged the fish for the cutter. With the shiny cutter
in his hands, the fisherman raced back to Bob's
workshop, knocking on the door like a drummer in a
rock band. Bob opened the door, saw the gleaming
cutter, and grinned from ear to ear. In a flash, he handed
the fisherman a pair of the comfiest sandals he had
ever seen. With his new sandals, the fisherman felt like
a prince of the sea. He ventured into the oceans,
stomping on every stick with the finesse of a dance
move. Revenge was sweet, and his ego was satisfied
like never before!

And that, my friend, is how this quirky tale on the honest

island showcases the magic of economics—where
supply and demand dance together like islanders at a
feast! So next time you ponder about the curious world
of economics, remember the fisherman, Bob, and their
delightful exchange of sandals and cutters, all without a
single coin in sight!

Alright, let's zoom out and take a peek at the big picture!
In the story above, we had a cool fisherman (our hero),
a little dude named Bob with super sandal skills, and a

13
hulking Blacksmith with six-pack abs – talk about
island eye-candy! Now, this island is a hive of activity
with 100 folks hustling to earn a living. But wait, we've
only talked about one trade between our trio so far.
Imagine 100 people doing this kind of stuff daily – it's
like a trade frenzy! Keeping track of all these deals can
be as tricky as solving a jigsaw puzzle blindfolded. The
more numbers, the crazier it gets! It's like counting
coconut trees during a typhoon – pure chaos! But fear
not! To keep things smooth like a sandal slide, they
need a genius plan. Maybe they'll hire an accounting
wizard, a coconut calculator, or a parrot with better
memory than a computer! Gotta find a way to balance
those books and keep the island's business booming!

Let me explain this concept with an interesting story

from the same island we are on right now. Fisherman
who made a fantastic deal with Bob the sandal guy.
They swapped fish for sandals – talk about stylish feet!
But, uh-oh, the next day, the fisherman faced a fishy
dilemma. The fish just didn't want to come close to
shore, maybe they were feeling camera-shy! He tried all
day, but no fishy catch for him. So, with a sad face, he
headed home, wondering how to feed his family that
day. "No pressure, No diamonds," they say, but our
fisherman needed a plan! Suddenly, a lightbulb moment!
He dashed to the corn farmer's house and knocked like

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 FROM BARTER TO BANKING

a bongo drummer at a carnival! Farmer opened the

door, puzzled. The fisherman explained his situation, "I
caught no fish today, but I need to feed my family. Can
you help me with some corn?" Now, here comes the
clever part – the fisherman hatched a brilliant idea! He
said, "You know, you usually exchange 3 corn for 1 fish,
right? So, how about this – you give me 3 corn today,
and I'll give you 2 fish tomorrow! Extra fish, no charge!"
Farmer was intrigued but cautious. He said, "Hmm,
sounds fishy to trust you. What if you can't catch fish
again tomorrow?" The fisherman assured him, "Fear
not, my friend! I promise to deliver! But, if you're still
worried, let's make it official. Write the deal on that
ancient, magical tree in the island center, where
everyone knows its secrets." So, the deal was written on
the tree – 3 corn for 2 fish, and the islanders witnessed
it like a grand announcement. No more fishy business!
Fisherman went home, fed his family, and true to his
word, the next day he triumphantly handed over 2 fish to
the farmer, who danced like a happy scarecrow! Deal
done, mission accomplished! The farmer erased the
tree record with a satisfied smile.

In this narrative, our hero, the fisherman, took those

three corn from the farmer on credit and offered him
some interest in exchange for his services. By doing so,
our fisherman effectively spends more than he earns on

15
credit. Fisherman did not catch any fish that day,
therefore his earnings were zero, but his spending was
three corns, which he and his family consumed. Credit
card companies, banks, and local lenders all sell their
products under this principle.

The fisherman's luck took a dive that day. He caught no

fish, zero, zilch! Yet, he had already munched on those 3
corn with his family – Spending more than he earned
using credit, that's the fisherman's newfound trick!

When the islanders spotted their deal on the magical

tree of trade, they were intrigued. It was like a finance
101 lesson! "Hey, we can do this too!" they exclaimed.
Credit became the new fad, practiced daily like yoga!
And so, every credit deal was scribbled on that tree. The
islanders were swiping their way through transactions
faster than you can say "credit card"! But soon, the
tree's bark couldn't take it anymore – it was full, like a
squirrel's stash of nuts! To keep things legit, the
transactions had to be public – like announcing "I owe
you" from the mountaintops! No secrets allowed!

Birth of IOU (I Owe You) Certificates

There was no place left on the tree to write any more
credit transactions. The islanders put on their thinking
caps. They needed a way to keep track of the deals
while making sure no one cheats. Accountability was

16
 FROM BARTER TO BANKING

key! What is the solution to this problem? And lo and

behold, from the depths of creativity, the legendary IOU
(i owe you) was born! drumroll With IOUs, they could
have their deals and maintain proper records. It was like
a superpower to track credit while keeping everyone in
check. Borrower and lender, all happy and accountable

The fisherman's fishy adventures continue! Can you

believe it? The fishes decided to play hide-and-seek
again – pros at dodging his hook! But our persistent
hero didn't give up. Back to the farmer he went,
knock-knock, telling the tale of the elusive fish. And
guess what? The farmer agreed to do the 3 corn for 2
fish deal again. They strolled back to the magical tree,
only to find it jam-packed with credit transactions.

Not even a single spot left for our dynamic duo! No

worries, though! The fisherman's brain was brewing
ideas faster than a coffee machine. He said, "Hey,
farmer, we did a deal before, right? I can trust you! Let's
do something different this time. I'll write on a fancy
piece of paper that I owe you 2 fishes. Let's make it
dramatic – date and time included!" Farmer was
impressed, but no tears this time (maybe he ran out of
tissues).

So, the fisherman scribbled his IOU(i owe you) on that

piece of paper and added his signature or thumbprint

17
for flair. Ta-da! The deal was set. Next day, success!
Fisherman caught fish, and he handed over 2 fishes to
the farmer. The farmer, in return, gave back that
precious IOU (i owe you) – like a fishy receipt!
Fisherman took the IOU (I owe you) and tore it into
several pieces indicating the end of the transaction.

Now, brace yourselves for the twist – here comes the

scary part! The IOU (i owe you) concept sounds cool,
but as we venture deeper into the wild jungle of credit,
things can get spookier. How, you ask? Stay tuned for
the next thrilling episode of Island Finance 101! Buckle
up, my friends, for the rollercoaster ride of fishy deals,
creative credit, and mysterious IOUs!

18
 FROM BARTER TO BANKING

CHAPTER 2

The Tangled Web of Trust: Island's IOU

Intricacies

Remember that island with all those honest folks? They

were like a big, happy family, doing their jobs and living
life contentedly. There were farmers, sandal makers,
blacksmiths, and fishermen, each earning their living
with joy. But then, something mysterious and invisible
happened that you couldn't see without a third eye. And
what was it? The fisherman introduced a new thing:
credit! Oh boy, once the islanders discovered credit, it
was like finding a treasure chest! They learned they
could spend more than they earned, and some even got
a little lazy, taking days off and borrowing stuff on
credit, hoping to return something better later. But you
know, there's a catch. Comfort and laziness are like
magnets for us humans. Who wants to work when we
can chill, right? But let's remember, greatness lies
beyond the comfort zone!

Now, let's talk about that epic deal between our hero
fisherman and the farmer. Yep, it's the one where credit
came into play! The fisherman bought 3 corn on credit
and promised to give the farmer 2 fish the next day in

19
return. Once the deal was done, he dramatically tore up
the IOU certificate into bits and pieces, sealing the
transaction with a flourish! And guess who was there to
witness this mind-blowing event? Our friend Bob, the
sandal guy!

When he saw the fisherman tearing up that IOU

certificate, he smelled adventure! He thought it could be
a treasure map or some secret message. So, once the
coast was clear, Bob sprang into action like a sandal
sprinter! He collected every piece of the torn IOU, not
leaving a crumb behind, and dashed back to his
workshop. With a burning passion, he tackled that
paper puzzle like a pro, using all his smarts and skills.
Bob finally finished that paper puzzle after putting in a
lot of effort, devotion, passion, sacrifice, discipline, and
clever work for a full seven and a half minutes(he timed
it!). He pieced it all together. And what did that piece of
paper say? He began to read it. The top of the paper
has the words IOU (I OWE YOU) as the paper header.
Below that, it was written "This is an agreement
between a handsome, good-looking farmer hereby
referred to as seller and a smart but not so
good-looking fisherman hereby referred to as buyer.
Because the buyer did not catch any fish on this day, the
seller agreed to sell 3 corn to the buyer on credit. Now,
the buyer pledges to repay the seller by two fish the

20
 FROM BARTER TO BANKING

next day for the service." Bob also discovered the

farmer's and fisherman's stylish signatures at the
bottom of the IOU certificate.

Bob couldn't hold it in anymore. He shouted to the

skies, "This is amazing!" But he didn't stop there. The
next morning, he boldly posted a sign outside his
workshop: "Sandals available on credit" (Oops, we mean
sandals, but hey, spelling happens!). A curious man
came by, and Bob explained the deal. You get the
sandals now, but pay back the full amount plus a little
extra after 3 days. The man was puzzled, worried about
the famous tree overloaded with credit transactions.
But wait, Bob revealed his brilliant plan - using paper
IOU certificates instead of writing transactions on tree!
And like a wildfire, the IOU craze spread across the
island! They bid farewell to the crowded tree and
welcomed the paper revolution. But, dear readers,
remember, every coin has two sides. So, let's buckle up
for more fun and see how this IOU madness shakes up
the island dynamics! The adventure continues, and it's
going to be a wild ride!

As we continue the island's tale of trading goods and

services, we witness a transformation in their economic
dynamics. Remember how credit and IOU (i owe you)
certificates were introduced, making transactions

21
easier? Well, it didn't take long for some mischievous
demons to emerge alongside these new practices. You
probably recall Bob, the sandal maker, who boldly
offered "Sandals available on credit" with his
eye-catching poster. One day, a huge figure, the
blacksmith with six abs, approached Bob's workshop.
The blacksmith wanted a good pair of sandals that
could fit his massive feet, and he proposed to make the
purchase on credit, as this was a novel idea on the
island. Being a blacksmith, he offered to give Bob a
high-quality hammer and an extra pair of scissors in
return for the sandals on credit after two days. Excited
about the deal, Bob quickly drafted an IOU (i owe you)
certificate. He made sure to write down all the details of
the agreement between the "buyer" (the blacksmith)
and the "seller" (Bob himself). Both parties signed the
certificate, and the blacksmith left with his brand-new
sandals.

But here's where the trouble began. Two days later,

while working on his sandals, Bob broke a needle and
needed a replacement. Instead of being fair and
exchanging something of value for the needle, he
succumbed to an evil idea. He added the needle to the
list of items the blacksmith owed him in the IOU (i owe
you) certificate, hoping no one would notice. Alas, this
is what happens when there's no one to hold you

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accountable. The absence of public witnessing and

oversight made Bob feel he could sneakily edit the deal
for his advantage.

When the blacksmith returned after three days with the

promised hammer and scissors, he was in for a
surprise. He spotted the needle in the IOU (i owe you)
list, bearing his signature at the bottom. Perplexed, he
questioned Bob about it, but Bob insisted they had
indeed agreed to it. The blacksmith felt trapped, as he
did sign the certificate, but he couldn't recall any
mention of the needle. Seeing the blacksmith's
dilemma, Bob cunningly demanded payment for the
hammer, scissors, and needle, threatening to keep the
IOU (i owe you) certificate intact until then. Feeling
helpless, the blacksmith had no choice but to create a
new needle using his hard-earned materials, sweat, and
time. He returned to Bob, completed the transaction,
and with a heavy heart, the deal was done.

And so, on this island, a few people began exploiting

the powers of the IOU (i owe you) certificate for their
own gains, taking advantage of the lack of transparency
and accountability. The once simple and fair system of
trading goods slowly became a playground for trickery
and deceit. Who knows what other surprises await on
this intriguing island of economic evolution!

23
Good folks were fuming, worried about these shady
dealings. They needed a rock-solid solution, something
that couldn't be tampered with even by the craftiest of
island tricksters.

Now, let's dive back into the story and see how things
are shaping up on this little island paradise.

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 FROM BARTER TO BANKING

CHAPTER 3

The Rise of Fishy Currency: Turning Teeth into

Treasure

Oh, remember our hero, the legendary fisherman? The

dude who scored snazzy sandals with his cleverness,
bagged bargains with brainpower, and introduced credit
and IOUs(I owe you) when others were still scratching
their heads? Yup, that's our creative, honest, and let's
admit it, not-so-handsome hero. Even he was vexed by
the island's bad business practices and got tangled in
one of those tricky schemes.

So, one day, he'd had enough of the shenanigans and

stormed off to the seashore. The night was as dark as a
bear's armpit, but the stars above sparkled like a disco
ball. The waves whispered sweet nothings to the rocks,
and the ocean stretched out like a big, mysterious
blanket. Our fisherman sat under the dazzling
moonlight, pondering over the island's business woes.
Suddenly, a weird noise tickled his ears, and like a
curious cat, he followed it. After a short walk along the
shore, guess what he stumbled upon? A colossal dead
fish sprawled on the sand! Talk about useless
discoveries, right? He shrugged, turned around, and
headed back home. But hold your breath, folks, because

25
this wasn't just any ol' fish. Our fisherman's brows shot
up like fireworks, for he had a mind-blowing idea to fix
the island's business mess. He did a 180-degree turn
and sprinted back to the dead fish, plucked ten teeth
out, washed 'em clean, tucked 'em safely in his pocket,
and bolted home like Usain Bolt in a fish-tooth frenzy.

Next morning, he gathered all the island folks and stood

tall on a rock, showing off the fish teeth. "Behold! The
rare, one-of-a-kind, exclusive fishy teeth!" he announced
with dramatic flair. "Who finds these pearls of the sea
valuable?"

Lo and behold, every single hand shot up like a forest of

trees! The teeth were a hit! People were ready to trade
their goods and wares for those precious chompers.
Some were offering more, some were haggling for less,
but it all boiled down to one thing - how much they
valued the fishy teeth. Then, Mr. Moneybags, a wealthy
merchant, shouted, "Hey, fisherman! I'll give you 20
apples for one tooth!" That was the jackpot bid! The
fisherman grinned ear to ear and sealed the deal with a
handshake. He scored 20 apples while Mr. Moneybags
flaunted his fish-tooth pendant, making his daughter the
fanciest fish princess around. Our fisherman still had
nine teeth to spare. Those fish teeth became the
island's treasure! He spent four teeth on some fancy

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clothes and grub for his family, leaving him with five for
a rainy day. And oh boy, a storm was brewing in the best
possible way.

The very next day, people went nuts trying to catch the
elusive fish with the valuable teeth. It was like a fish
frenzy, a tooth treasure hunt! They toiled and sweated,
but at last, they caught one and brought it ashore in
triumph.

From then on, the IOU(i owe you) certificates got tossed
like old socks, and fish teeth took center stage as the
island's currency. Whoever amassed the most teeth
became the grand poobah of wealth, the fishy fat cat!
So there you have it! Our ingenious fisherman uplifted
the island's living standards, defeated bad business
practices, and turned fish teeth into a roaring success.
Now that's what I call a fish-tastic tale!

The basic line is that the first item to transform into

money on our enchanted island was fish teeth. It
developed into a storehold of value. As a result, people
began trading precious items for fish teeth. Nobody on
the island was able to use fish teeth for nefarious
purposes. As fish teeth were unaltered, people began to
believe in the concept of the power of money. The
islanders quickly embraced the use of fish teeth in
business, and it didn't take long for them to do so fully.

27
 CHAPTER 4

Currency Conundrums: From Fish Teeth to

Fluctuating Prices

Ah, behold the epic tale of life's trials and tribulations,

where problems and solutions dance like two peas in a
pod! Every human on Earth, without exception, has
faced those awkward moments that make us go,
"Whoa, can I just rewind this day?"

Now, even the wise scriptures have it scribbled in

sacred ink that we'll be put through some good old
testing. Fear, famine, loss of goodies, the works! But
fear not, for those who tough it out with a smile get a
special mention in the big book of rewards.

Let's say for example! The farmers! These hard working

folks have a green thumb and a heart of gold. They toil
under the sun and overcast skies, planting seeds and
nurturing them like their own little green babies.
Weather be darned! Nothing stops them from getting
that juicy harvest they crave.

Once the sun sets on their grueling day, they hit the
sack like champions. With no worries and a belly full of
good sleep, they wake up refreshed, ready to conquer

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 FROM BARTER TO BANKING

the fields again. Tranquilizers?(a medicinal drug taken

to reduce tension or anxiety.) Ha! Who needs 'em when
you've got the farm life to tuck you in at night?

Now, here's a twist in our tale - the rich. They may have
all the riches in the world, but guess what? Mental
stress knocks on their fancy doors, disturbing their
beauty sleep. They juggle thoughts like circus
performers, trying to keep up with their highfalutin
lifestyles.

But hold on tight, my friend, 'cause this isn't a

rich-vs-poor showdown. Oh no! Life's exam spares no
one. We're all in this chaotic rollercoaster, taking ups
and downs like brave adventurers on a quest. So, chin
up and embrace the trials that life throws at you.

And so, our tale continues, woven with humor and

simplicity, reminding us that life's a grand test where
everyone gets a fair share of challenges.

Hold on to your fishing rods, folks, because the fish

teeth frenzy continues on this delightful island
adventure!

With a splash of creativity and a sprinkle of humor, our

corn farmer friend takes center stage once more in this
tale of twists and turns.

29
Picture this: our corn farmer, with determination in his
eyes, wearing a hat that's seen better days, standing
amidst the rustling cornfields. But oh, calamity strikes
as the rain pours like a waterfall, and the farmer's
storage room turns into a leaky sieve!
"Oh, for the love of fish teeth!" he exclaims, shaking his
fist at the heavens. "This is one soggy mess!"

Enter the ever-reliable blacksmith, a burly figure with a

hammer as big as a whale. "Fear not, my friend," he
booms in a voice that could rival thunder. "I'll fix that
roof in a jiffy!"

But alas, after a thorough inspection, the blacksmith

delivers the news with a comical grimace. "I'm sorry,
dear farmer, but this roof is as rusty as a sailor's old
boots. It's beyond repair, I'm afraid."

The farmer's face falls faster than a falling coconut.

"Oh, sad, what am I going to do now?"

But in times of trouble, our farmer's brain fires up like a

lighthouse in a storm. "Ah-ha! Fishing to the rescue!"

With a glimmer of hope, he rushes to the ocean, where

the waves welcome him with a friendly splash. Armed
with his trusty fishing rod, he sets out to catch that

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breed of fish with the shiniest teeth in all the seven seas
and whose teeth is accepted as money on the island.

Now, imagine him battling against the waves, dodging

cheeky seagulls that eye his sandwich, and even having
a hilarious fish vs. farmer tug-of-war that would make
the islanders chuckle for days!
But perseverance pays off, and our farmer emerges
victorious after 2 days, clutching that prized fish with its
teeth gleaming like a pirate's treasure chest. "A-ha! Now
we're talking!" he declares, triumphant like a conquering
hero.

Back at the blacksmith's forge, the farmer unveils his

fish teeth jackpot, and the blacksmith's eyes widen like
two full moons.

With a deal struck and the storage room replaced, our

farmer returns home, grinning from ear to ear like a cat
who caught the biggest fish in the sea.

But this was just the beginning! Our clever farmer soon
realized that the fish teeth could do more than just fix
roofs. They became his secret weapon against all odds
– whether it was crops facing a bug attack or his socks
needing mending! The amount of fish teeth arriving on
the island increased as a result of his gradual
adaptation to venturing out into the ocean to catch that

31
specific breed of fish, plucking out its teeth, and using it
as a money to exchange.

Picture this: our islanders are busy trading fish teeth like
it's a currency fiesta! Standards were set. 20 apples, for
instance, would be exchanged for 1 fish tooth. 15 kilos
of rice were given in exchange for one fish tooth. 10
bunches of grapes for 2 fish teeth, and so forth.

But hold on, the prices are taking a wild ride like a
rollercoaster at a waterpark! Our trusty fisherman first
scored 20 apples for just one fish tooth, but now the
apple seller wants 2 fish teeth for the same batch of
apples! What's going on, you ask? Let's dive into the
hilarious fishy tale!

Now, remember our buddy Bob? The sandal maker with

a tiny head and a huge heart for deals? He hopped into
the market with dreams of 20 apples for 1 fish tooth,
but the famous rich merchant smiled! He chuckled like
a sneaky seagull, saying, "Oh, Bob, those cheap apple
days are history! Now it's two fish teeth for the same
apples!"

Bob's face turned into a confused octopus, and he cried,

"Why the crazy price hike, Mr. Merchant? I'm as puzzled
as a crab with an unsolvable riddle!"

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 FROM BARTER TO BANKING

But fear not, the merchant had an epic tale to tell! He

bragged about his tiny apple land, just big enough for
200 apples to grow. And folks were rushing in hungry to
buy apples for one fish tooth, leaving his stock as
empty.

So, he hatched a plan. He doubled the price to two fish

teeth, and guess what? Fewer folks wanted apples!

Bob's eyes sparkled like twinkling stars in the ocean

night. "Ah, I get it now! When everyone's chasing fewer
apples, the prices go all fancy-pants! In other words
when more money chases less goods, it causes prices
to go up. Am I getting it right"?

The merchant nodded like a wise old sea turtle, "You

got it, Bob! It's a dance of supply and demand. When
there is a shortage of a good, demand increases,
driving up costs. When there is a greater supply of the
good, demand declines, which drives down costs.
Simple as that!”.

Let me simplify the concept of inflation. Blow into a

balloon. What happens? It grows in size. Right? You can
keep the balloon in your pocket before inflating it. It will
never fit in your pocket after it has been inflated. It will
rupture if you push it too hard. Balloons are the same
thing before and after. Only the size has changed.

33
A glass of orange juice is another example. The more
water you add, the less concentrated it becomes and
the quantity increases. When you apply the same logic
to the money game, you will notice that the more money
the individuals on the island bring into circulation, the
more its value lowers (less concentrated) and the
quantity grows and the same quantity of money buys
less and less.

The main line is that anything with a higher supply and

a lower demand loses value. Anything with a low supply
and a high demand gains value. You see why the cost
of practically everything rises year after year. It is not a
rise in the price of the things. It is the reduction in the
purchasing power of money. When the value of money
falls, it takes more money to purchase the same item.

Take note of this! Prices will always remain steady as

long as the expansion in goods production matches the
increase in the money supply.

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 FROM BARTER TO BANKING

CHAPTER 5

Golden Solutions: Taming Inflation and

Crafting Prosperity

Let's get back to our island. Shall we?

Remember our farmer who injected a lot of new fish
teeth in the island's current currency circulation which
resulted in increasing prices of almost everything.
People on the island were finding it very difficult to
make a living. People were remembering beautiful days
when they used to barter things. Then comes the time
when they started using credit and IOU certificates.
Then comes the time when they started using fish teeth
as island currency. Then came the time when people
started injecting a lot of new fish teeth into the existing
circulation of fish teeth as currency which resulted in a
massive inflation. They have to come up with a solid
solution to tackle this big issue.

Our hero fisherman was worried about this situation

too. He was the part of the system after all. He was
thinking hard. He was thinking in his head "I introduced
fish teeth as currency on the island. After that, whoever
has the most amount of fish teeth of that particular
breed of fish is considered to be rich because they have
the most purchasing power. Because of that, people

35
started to put in all their efforts to catch that breed of
fish to use its teeth as currency and increase their
standard of living. By injecting more fish teeth in the
island's existing fish teeth currency circulation, the
prices of almost everything went up. Or I must say, the
value of fish teeth currency went down, which affected
mostly those people who had the least number of fish
teeth. Now, I feel it is my responsibility to find a solution
for this problem. I have to find a currency which cannot
be easily accessible by everyone. A currency which
cannot be altered.

A currency which cannot be manipulated by anyone for

personal gains. A currency which has value in
everyone's eyes. A currency which can be stored. A
currency which is rare. A currency which will protect its
users from inflation". Fisherman was closely
understanding the system, the problem and the solution
from his past experience. He was learning, reflecting
and projecting an optimal solution for a better future.
That is why you will always find fishermen to be
providers rather than consumers. He is not lazy.

On a really nice day, our hero fisherman was chilling by

the river, staring at the sky that turned all orange in the
afternoon. A cool breeze from the river played with his
hair, and the soft sounds of the water gave his ears a

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 FROM BARTER TO BANKING

little kiss. He sat there, looking at the river that seemed

to go on forever, trying to figure out where it ends, even
though it was too far away to see.

Then, out of the blue, something super shiny caught his

eye for just a teeny bit of time. Blink, and you'd miss it!
When he turned to see what caused that glint, he saw
something sparkly in the dirt by the riverbank, not too
far from him. That was a bit odd! At first, he thought it
might be a shiny rock, but it didn't really look like one.
So, with curiosity bubbling like a fizzy drink, he stood up
and walked over to check it out. And guess what? He
was totally surprised to find some sparkly bits of stuff
near the riverbank. No one had seen anything like that
on the island before!

Quick thinking, he grabbed a big leaf from a nearby

banana plant, 'cause those leaves are like nature's big
bowls. He scooped up all those sparkly bits and even
some dirt from the riverbank, all with his bare hands.
Then he wrapped it all up nicely in the banana leaf and
zoomed back to his house like a speedy squirrel, ready
to figure out what this mysterious sparkly stuff was.

But oh boy, after spending a whole 3 hours looking at it,

he was still scratching his head like a confused puppy.
So, he had this brilliant idea – why not show it to his
buddies? He called up Bob, the sandal expert, and

37
showed him what he'd found by the river. But guess
what? Bob got really mad, like a grumpy cat! He said,
"Seriously? You dragged me here to see dirt? What's
wrong with you?" and slammed the door as he left in a
huff

Then came the corn farmer, and he basically had the

same reaction as Bob. It was like a déjà vu of eye-rolls
and sighs. Finally, the fisherman gave a ring to the
blacksmith, who was like the island's strongman, with
muscles like boulders. Yep, that guy! The blacksmith
looked at the sparkly stuff and went, "Let's do some
experiments, my dude!"

Off they went to the blacksmith's workshop, the place

where metals got their makeover. The blacksmith
carefully separated the sparkly bits from the regular
dirt. He got a small iron cup, filled it with the sparkly
bits, and started warming things up. And guess what
happened? Those sparkly bits turned into liquid! Now
that was pretty odd, because dirt doesn't usually do
that.

The blacksmith was like, "Whoa, this is metal stuff, and

not the usual kind. The color of this metal is very rare
too. Never seen something like this before. It is
beautiful." The fisherman's eyes lit up like fireworks on
the Fourth of July. He asked the blacksmith, "Now that

38
 FROM BARTER TO BANKING

it's liquid, can we make it into any shape?" The

blacksmith grinned and said, "Why not give it a shot?"
He grabbed a little round container and poured the
liquid stuff into it. After a while, the liquid cooled down
and turned into a solid. And guess what shape it had? A
perfect circle!

The fisherman couldn't help but grin like a kid with an

ice cream cone. "We're like the first detectives of the
island, uncovering the coolest secret ever! What do you
think, blacksmith?" The blacksmith rubbed his chin and
said, "You're right! No one's ever seen this weird metal
thing here. We should give it a name!" The fisherman
thought for a second, then grinned from ear to ear.
"We're like the TOP G’s on this island, and we're not
getting any younger. Let's call it GOLD! How about
that?" The blacksmith laughed, "You're onto something,
buddy. GOLD it is!" And off they went, like a team of
explorers, ready for more amazing adventures. Gold,
here they come!

Not so long ago, our clever fisherman and the skillful

blacksmith stumbled upon something truly amazing – a
glimmering treasure, like the sunlight dancing on the
water. They tinkered and toyed with their find, crafting it
into a shiny circle of wonder. And guess what they

39
called it? Gold – a name that shone as brightly as the
metal itself.

Now, imagine this: our brave duo, the fisherman and the
blacksmith, decided to climb a big rock smack in the
middle of the bustling market on this island. They stood
tall and loud, like two daring explorers at the peak of a
mountain. The fisherman cleared his throat and started
to talk, "Hey, remember that time we all got crazy about
fish teeth? Yeah, you all went bananas for them and
treated them like the rarest gem in town, didn't ya?" A
chorus of nods and "yeps" echoed through the crowd.
With a twinkle in his eye, the fisherman continued, "Well,
turns out, we got a teeny tiny problem. Too many fish
teeth were floating around, making everything cost
more than a fancy castle! We'll call it 'Inflation' – a word
that sounds like someone inflated a balloon a bit too
much." Everyone gave a knowing chuckle.

But wait, hold your horses! Our heroes had a solution up

their sleeves, or rather, in their pockets. Ta-da! Out came
a gleaming, sunshine-yellow coin, held high for all to
see. The crowd oohed and aahed, but some skeptics
were like, "Hey, are you just pulling our fins here? Did
you make this from scrap metal and give it a shiny coat
of paint?"

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 FROM BARTER TO BANKING

With a grin as wide as the ocean, the fisherman played

along, "Go on, give it a scratch or two! It's not gonna
disappear like a puff of sea mist. Take your time, just
promise you won't sneak off with it, alright? Kidding!"
Laughter rippled through the crowd like waves on the
shore.

A curious man took the coin and gave it a little scratch,

like a detective examining a clue. Hours ticked by like
grains of sand in an hourglass, but finally, folks started
nodding in agreement. The gold was as real as a
seashell in their hand. Some die-hard fish teeth fans still
argued, but most folks embraced the golden idea with
open arms.The gold coins became the official currency
of the island.

So, what happened next, you ask? Our fisherman and

blacksmith turned into gold makers, churning out these
shiny coins like a magic trick they mastered. The
fisherman, being the clever cookie he was, kept a
watchful eye on the coin count, making sure there were
just enough to go around. Slowly but surely, he
transformed into the island's economic wizard.

And here's where it gets really interesting – one fine day,

the islanders had a grand idea. They gathered under the
shade of that famous tree, the one that had seen more
stories than a library. Voices rose like a chorus of

41
seagulls, "Fisherman, you're a smart cookie! You've got
more brains about business than a dolphin has flips.
How 'bout leading this ship?"

Fisherman, humble and thoughtful, asked for a moment

to think. After a short while, he called everyone together
and announced with a sparkle in his eye, "Alright, folks,
you got me! I'm ready to steer this ship to success, and
by Neptune's trident, I'll make sure our island is the
jewel of the sea!"

And so, with a cheer and a round of applause, our

fisherman became the island's leader, steering the ship
of trade, business, and prosperity. The island flourished,
like a garden in full bloom, thanks to the golden touch
of their wise leader.

And you know what's the best part? This golden

discovery, this tiny piece of metal, changed the island's
fate forever. Even a thousand years later, people will be
talking about it, just like how we listen to ancient
legends and tales.

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 FROM BARTER TO BANKING

CHAPTER 6

Rainy Days and Shiny Coins: A Wall of

Protection and Taxing Tale

Let's sail along the tides of time to see where this

golden journey takes us. It's bound to be a tale as
sparkling as the sun on the sea, a story that will make
us laugh, wonder, and dream for generations to come.

We found out that the star of our story, the

fisherman-hero, had risen to even greater heights. He
wasn't just a regular fisherman anymore; the islanders
crowned him their leader. This meant he had to oversee
all the island's trading, business deals, and the shifty
dance of gold. Imagine him like a captain steering a
ship of deals through a sea of opportunities and
challenges. His job? Keep things fair and square,
preventing anyone from cheating like a sneaky squirrel
stealing nuts.

So, there he was, the fisherman-turned-leader, holding

the torch of balance and order in one hand and a
magnifying glass in the other, scrutinizing each deal like
an eagle eyeing its prey. He was in charge of keeping
the peace, the harmony, and the gold flowing smoothly
like a happy river. And hey, he even had the power to

43
wag his finger at anyone doing the wrong business with
gold and send them to the corner.

Now, picture this: the island's rules were like a safety

net woven with the threads of common sense. The
fisherman was the mastermind, making sure no one
would try to knit their own gold coins and mess up the
dance floor. Any sneaky beavers caught making fake
gold coins were in for a splash of punishment. This was
because fake coins would flood the market like a
rainstorm and create chaos—just like how too many ice
creams in the summertime lead to tummy aches.

But guess what? Even with all this big leadership stuff,
our hero didn't forget his fish-catching roots. He was
the true multitasker of the island. He'd lead meetings by
day and catch fish by dusk.

One time, when the island got a bit waterlogged due to

a really rainy day, people living near the river freaked out
like squirrels without nuts. They ran to the fisherman's
door, knocking like friends eager for a sleepover, and
pleaded, "Hey, fisherman! Save us from the watery
rampage! Our homes are turning into soggy
sandwiches!"

The fisherman, who was all about smart moves,

thought, "Rain can be a wild river's cousin, but let's not

44
 FROM BARTER TO BANKING

panic." He told the damp crowd, "Hold on, don't swim in

your own tears yet. You can stay in my cozy hut till the
rain chills out. Rivers might have their tantrums, but we
can't outswim them." So, they camped in his snug place
until the rain got tired of its own drumming. When they
peeked out later, guess what? Their houses stood
strong like brave knights after a battle.

But remember, every story has its twist. Now, the

islanders had to find a plan for the next rainy
showdown. The fisherman, being the thoughtful genius
he was, climbed a rock like a hero climbing a mountain,
and shouted, "Hey, folks! Our island might turn into a
soggy biscuit soon if the river decides to dance wild
again! We need a plan, like, now!" People were more
nervous than chickens in a lion parade. A brave soul
asked, "Fisherman, we're a bit stuck here. Got any brainy
tricks up your sleeve?"

The fisherman, with a lightbulb glowing above his head,

grinned and said, "Hold onto your umbrellas, 'cause I do!
We're gonna build a rock-solid wall along the river, like a
shield against its mood swings." The folks living by the
river hesitated, "But, fisherman, our wallets aren't gold
mines. We can't afford a wall!" The fisherman shook his
head, "You see, this isn't just your problem, it's all our
problem. If we ignore it, the river will turn our island into

45
a giant swimming pool. So, let's join forces! Each of us
chips in just one gold coin. With that shiny treasure,
we'll build a wall and keep that river in its watery lane.
We'll even pay the brave folks who work on it."

The crowd huddled like they were crafting a plan for a

treasure hunt. Slowly, nods spread like smiles in a
sunny sea. "Alright," they agreed, "let's drop a gold coin
into the teamwork treasure chest!"

Days flew by, like seagulls chasing a breeze. With

sweat, teamwork, and a dash of fisherman magic, the
wall was built. It stood strong like a guardian, ready to
block the river's playful splashes.

Then, one rainy day, the river decided to dance wildly

again. It twirled and swirled, but this time, the wall
stood its ground. The islanders cheered, jumping like
dolphins at a beach party. The fisherman's plan had
worked!

The fisherman had another idea. He thought, "If

islanders can spare just one gold coin every few
months, I can turn this island into a paradise!" He stood
on that same rock, feeling as tall as a lighthouse, and
announced, "Hey there, friends! Imagine colorful
gardens where kids play, paths smoother than a
pebble's dreams, and safety from wild storms. Let's

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 FROM BARTER TO BANKING

collect a little tax, just one gold coin every six months,
to make our island sparkle like a gem."

The islanders went home that day with curious smiles,

like explorers ready to discover a new land. They
chatted with their families, as if solving a puzzle
together. The next day, they returned to the market
square, nodding like a field of sunflowers in a gentle
breeze.

"Fisherman, our island champion," they said, "your idea

sounds as sweet as a candy waterfall! We'll pay our
taxes, as long as you paint our island with happiness."

The islanders then began contributing one gold coin

into the island treasury every six months for the welfare
of the island. Our great fisherman was in charge of the
treasury. People were pleased, and things went
smoothly from then on.

Let us pause for a moment to consider what has just

occurred. Fishermen requested everyone on the island
to contribute one gold coin to the island's improvement.
And he kept his pledge to make the place a better one.
What if the fishermen start spending that money on
himself instead of the island's welfare? Think about it.
People will soon detect that the fisherman is stealing

47
from them in the form of taxes and will dismiss him
from his position.

People in our world have become so accustomed to the

theft of people's money in the form of taxes that,
despite knowing what is going on, we are unwilling to
take any action.

It is true that in our world, individuals who establish

business, generate employment, offer housing, or
develop the economy of the area frequently receive tax
breaks from the government. Businessmen typically
pay far less in taxes than individuals who work for a
corporation. Tax breaks are similar to incentives given
to people who do what the government wants them to
do. Tax breaks are available to support particular types
of businesses and boost employment in the region.

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 FROM BARTER TO BANKING

CHAPTER 7

Locking Up Treasures: The Goldsmith's Safe

Haven and the Birth of Banking

Once upon a super interesting time, on the island we've

been talking about, the islanders had this awesome
idea to put one shiny gold coin into a special box every
six months. This cool plan was to help their island
become even better. Guess who was in charge of this
magical box? Yep, it was the great fisherman! People
really liked this idea, and things were sailing smoothly.

But time flew by like a fast bird, and the fisherman

started getting a bit old. Don't worry, he was still super
good at what he did. Under his watch, the island
became really rich, and they even learned the secret of
making giant boats, which made their business grow
and spread to other islands. Everyone was happy to
give some of their shiny gold coins to make the island
awesome because they saw all the cool stuff it was
doing. They even put their gold coin tax collection
records out for everyone to see, like sharing your cool
drawings with your friends.

The islanders who were working hard and doing great

things were becoming richer and happier, just like when

49
you find a treasure chest full of candies. Time was
dancing by, and the island was like a big party of
happiness and wealth.
Now, imagine this: What if the whole world did this too?
Imagine if leaders everywhere used money to make
everything better for everyone, instead of just keeping it
all for themselves or their favorite toys. That would be
like the biggest party with everyone sharing their
favorite treats!

But wait a second, have you ever wondered why some

people still don't have enough even when there's so
much money around? Well, here's the trick: sometimes
the money that's supposed to help those people ends
up going somewhere else. It's like if you were sharing
your ice cream, but your friend decided to eat it all
without you. Not cool, right?

But let's jump back to our amazing story! Remember the

island? They figured out that using gold coins as money
was like having a treasure that everyone agreed was
super special. As time danced on, they decided to make
different sizes of gold coins. It's like having different
toys for different adventures, like

using your small toy cars for zooming around and your
big toy dinosaurs for stomping adventures.

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 FROM BARTER TO BANKING

Oh, and get this: they even decided to use gold coins
instead of fish teeth for money! It's like saying, "Hey, we
have something even better than fish teeth!" Gold coins
were so special and shiny that everyone loved them.

Some smart merchants who were getting super rich

came up with a brilliant idea. They made stunning
necklaces with a shiny gold coin as a pendant and gave
them to their wives. It was like giving a sparkly crown to
the queen of the house! Soon, all the rich merchants
were making beautiful jewelry with gold coins, and it
became as famous as a superstar's favorite song.

But here's where the story takes a twist: there was this
clever person on the island who thought, "Hmm, what if
we make even fancier stuff with gold coins?" So, he
asked the fisherman for permission to turn the gold into
stunning jewelry. The fisherman said yes, but only if he
used his own gold. In just a few days, this person turned
his gold into amazing bracelets and necklaces. From
that moment on, everyone called him "The Great
Goldsmith of the Island."

People loved his jewelry so much that they were willing

to give him extra gold coins for his beautiful creations.
It was like trading your toys for even cooler toys! The
Goldsmith became so popular that even your pet dog's
friend's cousin knew about him.

51
But one day, a lady rushed to the Goldsmith in tears.
She had a necklace disaster while picking blackberries
– it got all tangled up in a tree branch and broke! The
Goldsmith thought for a moment and then said, "Don't
worry, I'll fix it! Just give me a small gold coin, and I'll
need two days." She agreed faster than a rabbit hopping
in a hurry.

After this, the Goldsmith had a brainwave: he started

fixing broken jewelry for gold coins! It was like having a
magical toy doctor who fixes all your favorite
playthings.

Now, get ready for some more excitement. One day, a

woman in the neighborhood was crying her eyes out.
She had put three gold coins on her table, but they
disappeared overnight. It was like a real-life mystery!
The Goldsmith got really worried. He thought, "Uh-oh,
what if something like this happens in my workshop?
I've got all these shiny treasures from people, and even
some gold coins of my own. If they disappear, I'll be in
hot water!"

He put on his thinking cap and came up with a plan.

Instead of catching a sneaky thief, he decided to
outsmart them. He ran to his buddy, the blacksmith, and
told him all about it. They cooked up a genius idea – an
ultra-strong iron box with a secret way to open it. The

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 FROM BARTER TO BANKING

key was so unique that nobody could copy it, even if

they tried super hard.

When the iron box was ready, the Goldsmith felt like he
had found a pot of gold at the end of a rainbow. He paid
the blacksmith for this magical box and locked all his
precious things inside it. It was like having a superhero
shield for his treasures.

From that day on, everyone trusted the Goldsmith even

more because they knew their treasures were safe. No
thief could even dream of getting inside that iron
fortress!

And guess what happened next? More and more people

started bringing their jewelry to the Goldsmith for
repairs.But the best part was, no one ever had to worry
about thieves again. It was like living in a kingdom
where the treasure was protected by a dragon.

A man approached the goldsmith one day and said,

"Hey Buddy! I'm leaving for another island that is far
away. It could take up to four days for me to return. This
is a business call. Because rice is in high demand this
season, I must sell my crops to the people of other
islands. This time, I've decided to sail across the ocean
with my family. But the difficulty is that I don't want to
bring all of my gold coins and jewels with me. I don't

53
want to take any chances. I also know you have an
expensive, robust iron locker where you keep your
jewelry and other valuables. Can you keep my gold in
your iron safe while I'm abroad and return it to me when
I return? I will give you one large gold coin merely to
keep my gold secure with you." Goldsmith rubbed his
chin and pondered for a moment. "Sure!" he replied. I
will keep your gold safe until you return. But you must
first sign an agreement with me." "What agreement"?
The man inquired. "I will write on a piece of paper that
you have given me your gold to keep it safe until you
return in exchange for one large gold coin," Goldsmith
explained. In that agreement, we will also specify the
number of gold coins, jewels, and other items that you
will keep with me. We both have to sign this document
only to keep the records straight." The man thought it
was a fantastic idea and soon brought his gold, handed
it over to the goldsmith, signed the deal, and bam! The
transaction was completed.

Well, guess what? The word got out like a wildfire on the
island! Everyone started talking about it, like how
rumors spread in the schoolyard when someone finds a
treasure map in their cereal box.

People began to realize something important. They

thought, "Hey, maybe our gold things aren't really safe at

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 FROM BARTER TO BANKING

home. Who knows, a sneaky thief might come and

snatch them away! And have you seen those lockers for
sale? They're like giant boxes, way too big to fit in our
tiny houses! Plus, they cost a mountain of money! So,
why not just give a coin to the goldsmith? He's got this
super-strong locker that's like a fortress! Our treasures
would be safer than a squirrel's acorns there!"

Imagine a long line of islanders, like a parade of excited

ants, all waiting outside the goldsmith's workshop. They
were clutching their special things like pirate treasures,
ready to hand them over.

And here's the super-easy part: You just walked up to

the goldsmith with your treasures, and handed them
over. He put them in his super-duper locker, then
grabbed a piece of paper. This paper was like magic
because it had all the important stuff written on it. You
know, like what you gave him, how much it is worth in
the market (like how much candy you could buy with it),
and even the day you put it there and the day you
planned to take it back. At the tippity-top of the paper, it
said, "I owe you." It's like the grown-up version of
promising to share your lunch.

Guess what? Both the goldsmith and you signed that

paper, just like friends would sign a secret pact. Then,
ta-da! Two copies of the IOU certificates were made.

55
One was kept safe with the goldsmith, and one was
handed to you like a treasure map – a treasure map
that led right back to your goodies!

When the day arrived to get your stuff back, you trotted
over to the goldsmith's place, clutching your IOU
certificate. You met the goldsmith, who checked your
IOU certificates and his IOU certificates . If they
matched – like two puzzle pieces fitting together – he
grinned like a squirrel who found a nut. And what did
you get for your happy dance? Your treasures, of
course! Just a teeny bit of gold, like a coin, was given to
the goldsmith as a thank-you. It's like tipping a waiter,
but with a coin that's as big as a cookie!

So, The basic transaction was for depositors to deposit

their valuables with the goldsmith in exchange for a
receipt called an IOU (i owe you) certificate. When the
depositor returns the IOU certificate, the goldsmith will
return all of the valuables that the depositor had placed
in the goldsmith's locker. Finally, a big size gold coin
was charged by the goldsmith for keeping the
depositors' treasures safe in the locker.

If you carefully examine this process, you will have an

understanding of the very early phases of the current
banking system. This is how banks came to be. You're
probably scratching your head right now. How? This

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 FROM BARTER TO BANKING

does not resemble a bank in any way. Right? I'll show

you each and every change in the system as the story
progresses. All you have to do is hold on tight. This is
going to be an extremely intriguing and exciting topic.
We'll look at how it evolved, its current state, and its
possibilities for the future. I made every effort to keep it
as basic and entertaining as possible. Unlike those
finance gurus who use complicated phrases on
purpose to make the subject uninteresting for you.

57
 CHAPTER 8

Tricky Transactions: Bob's IOU Adventure and

the Magic of Promissory Notes

Hey, remember that guy Bob? Sandal maker? Yeah, that

little guy! Well, guess what? He had 20 small size gold
coins all saved up. But he got the jitters about stashing
those coins in his house. So, he grabbed those 20 coins,
his precious savings, and marched straight over to the
goldsmith's workshop.

You know the goldsmith, right? He had this ginormous,

strong-as-an-ox, and fancy iron locker in his
workshop.Knock-knock! Bob's at the goldsmith's door.
When the goldsmith popped the question, "What's
cookin'?" Bob says, "Hey there, Goldsmith pal! Would
you do me a favor and stash these 20 small size gold
coins safely in your big ol' locker? These are my
hard-earned savings, and I'm nervous some sneak
might snatch 'em. Plus, I'll pay you 2 small gold coins
for babysitting' my coins in your safe. But here's the
kicker: I'm clueless about when I'll come pick up my 20
shiny gold coins from your locker." The goldsmith just
smiled, "Bob, chill out! I got your back. I'll tuck your 20
gold coins safely in my safe for 2 small gold coins. And

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 FROM BARTER TO BANKING

about the return date? Don't sweat it. You can cash out
whenever you want, no extra fees.

Then, like a magician pulling a rabbit from a hat, the

goldsmith whips out a piece of paper and scribbles IOU
right at the top. Underneath, he scribbles, "Listen up,
folks! Bob and the goldsmith have a pact. Bob handed
over 20 gold coins to the goldsmith for safekeeping in
his iron vault. The goldsmith said, 'Deal!' and scored 2
small gold coins for his troubles. When Bob hands in
this IOU note, the goldsmith has to return 20 gold coins,
as promised. They both whip out their snazzy
signatures at the bottom of the IOU note and... ta-da!

Bob's wearing a grin ear-to-ear. The goldsmith's

beaming too. And just like that, the deal's sealed and
the story's told!

Now, we know from the story that Bob the sandal maker
has an IOU certificate, which he received from the
goldsmith when he deposited his 20 gold coins in the
goldsmiths locker for safekeeping. That IOU certificate
contains all of the information of the transaction and
agreements, as well as the signatures of both parties at
the bottom. When Bob needs his 20 gold coins back, he
simply needs to return the IOU certificate to the
goldsmith. As agreed upon and promised, Goldsmith
will instantly return his 20 gold coins.

59
One day, our buddy Bob was in real trouble. He had
oodles of sandal orders piling up, and he had to pull an
all-nighter to get them done.Suddenly, his cutter
shattered into two pieces.Time was as scarce as
snowflakes in summer, and he couldn't spare a second
to trot over to the goldsmith's, wait for the nod of
approval, pocket 20 shiny gold coins, and then sprint
back to the blacksmith's lair to bag a new cutter. Nope,
this was a "deliver or drown" situation.

So, with a heart pounding like a drum solo, Bob dashed

to the blacksmith, waving his precious IOU certificate
like a secret treasure map. He hollered, "Hey, you,
blacksmith with abs of steel! The island's charm! I'm in
a jam here! I've got a gazillion sandal orders breathing
down my neck, and I gotta deliver 'em, come thunder or
high water. But here's the kicker – my trusty cutter went
kaput right when I needed it most. Wallet's dustier than
a desert, but I've got 20 small size gold coins locked up
in the goldsmith's locker. I need you to be my hero –
take this IOU thingy, strut over to the goldsmith's, show
'em my signature, and come back with 20 glittering gold
coins on my behalf".

Blacksmith, looking as puzzled as a cat at a dog party,

scratched his head and protested, "Hold up! Why on
Earth would the goldsmith toss 20 gold coins at me just

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 FROM BARTER TO BANKING

because of this fancy IOU certificate? You think he's

handing out coins like candy at a parade? I mean, sure,
we go way back, but that doesn't mean he's tossing
gold left and right."

Bob scratched his head, deep in thought. "Huh, true

that. But I've got a plan! I'll write a letter – 'Hey,
goldsmith pal, let the blacksmith grab my 20 coins on
my behalf. I'm swamped and can't drop by. Here's my
fancy signature to prove it's me.' Boom! Problem solved.

Blacksmith rubbed his chin, looking like a detective

piecing a puzzle together. "Well, I've seen weirder things,
and this might just work. Give me that letter and your
IOU certificate. Off I go to the goldsmith's lair. And
here's a brand-spankin' new cutter for your journey!"

The Bob's IOU certificate was magically exchanged for

a gleaming cutter, all thanks to that IOU sleight of hand.

The blacksmith marched to the goldsmith's workshop

with the IOU in one hand and the letter in the other. Gold
coins twinkled in his dreams as he presented the proof
of Bob's coin conquest (I OWE YOU certificate and the
letter of request). The goldsmith, with an eagle eye,
scrutinized the IOU and the letter, cross-referencing
Bob's signature like a detective sizing up a sneaky
suspect.

61
"Well, well, well, if it isn't the blacksmith of legends!" the
goldsmith mused. "I've known you since dinosaurs
roamed the island, and I'll trust your sixth sense for
good vibes. This letter's got a whiff of truth to it. Bob's
got sandal emergencies, and you've become his gold
retriever. Is that the jig?"

The blacksmith nodded like a bobblehead on a bumpy

road. "You got it, oh wise goldsmith! We traded a cutter
for this IOU certificate and he told me to give this letter
of request along with the IOU certificate."

The goldsmith beamed like a sunflower in summer.

"Alrighty then! Let's bust this first-of-its-kind deal. I'll
give you 20 shiny coins on Bob's behalf."

The goldsmith handed over the treasure to the

blacksmith, sealing the deal with a handshake that
could rival a wrestling match. The blacksmith sprinted
back to Bob's lair, bringing a shiny storm of 20 gold
coins out of which he took out 1 gold coin and said
"That cutter you are using right now is worth 1 gold
coin." Bob gave him a thumbs up. Bob has 19 gold
coins left with him.

Then the blacksmith raised an eyebrow, like a detective

about to solve the mystery of the sneaky sandal wizard.

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 FROM BARTER TO BANKING

"Hey, Bob! Remember that time you pulled a sneaky

needle trick on me?"

Bob scratched his head, his cheeks turning pinker than

a flamingo's feather. "Umm, yeah, about that... I admit, I
played a teeny-tiny trick. Sorry, buddy."

The blacksmith grinned. "No worries, pal! I forgive you.

We're all friends here."

And so, in a dance of notes, coins, trust, and a sprinkle

of mischief, Bob got his cutter, and the island's legends
grew by another chapter.

Now! Why is the story so essential in the book? Allow

me to elaborate. You see! Our blacksmith agreed to
trade the steel cutter for Bob's IOU certificate. Why did
he agree to do it? Because, if you read this closely, you
will notice that the IOU certificate Bob provided the
blacksmith was backed by his gold coins in the
goldsmith's locker. When that piece of paper (IOU
certificate) is backed by gold coins or anything valuable,
that piece of paper immediately begins to have the
same worth as the valuable commodity used to back it.
In our scenario, the agreement signed on a piece of
paper (IOU certificate) between the goldsmith and Bob
was worth the same as the 20 gold.

63
In our case, the agreement was signed on a piece of
paper (IOU certificate) between the goldsmith and Bob.
That piece of paper was worth 20 gold coins. How?
Because with that piece of paper, one can withdraw 20
gold coins from the goldsmith locker. So possessing
that piece of paper is equivalent to having 20 gold coins
in your pocket.

Let's travel back in time. I'll include some old currency

notes that say "Promise to pay the bearer on demand."
What does that even mean? Who promises to pay the
bearer on demand? What are they going to pay the
bearer on demand? Let us investigate! This is the RBI's
guarantee of the banknotes' worth. This promissory
note guarantees the note bearer that the RBI will never
fail under any circumstances. If someone holds a
100-rupee note, they don't have to worry about its
exchange value because the RBI has agreed to give
them gold or products equal in value.

Hmm! Now that is interesting. If you take the words

"promise to pay the bearer on demand" seriously, you
should put it to the test. How will you do this? You could
be holding a 100 rupee note right now. Take that 100
rupee note to the bank and request gold in exchange.
Let's wait and see what happens. They'll probably kick
you out of the bank because they think you're crazy.

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 FROM BARTER TO BANKING

“We truly are a species with amnesia. We have

forgotten a very important part of our story.” ― Graham
Hancock

Do you recall the story of the blacksmith, Bob, and the

goldsmith? The gold coins were obtained from the
goldsmith by Blacksmith using the IOU certificate on
Bob's behalf. Gold coins have genuine value. The IOU
certificate is nothing more than a piece of paper that
helps you to withdraw your genuine valuable asset (gold

65
coins). IOU certificates have no inherent value. Unless it
is backed by gold, it is only a piece of paper, as we have
seen in the story. What I'm trying to say is that the
currency notes in your pockets right now are nothing
more than an IOU certificate. The most interesting
aspect of this is that you cannot obtain gold in
exchange for those currency notes (IOU certificates).
But why? Why are they refusing to allow you to
withdraw gold in exchange for currency notes (IOU
certificate)? The simple answer is that today's currency
notes (IOU certificates) have no gold backing. And it
gives me goosebumps every time I consider how awful
the system has become.

More on this will be explored in the final section of this

book because you need to first understand the system
before you can understand the problems in it and start
looking for solutions. So, let us continue our exploration
of the system.

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 FROM BARTER TO BANKING

CHAPTER 9

Cheques, Chuckles, and the Island's Ingenious

Solution

Alright, let's dive back into our awesome story!

Remember that story about the clever blacksmith, Bob,
and the skilled goldsmith? We learned some super cool
stuff about gold and those fancy IOU certificates.

Our story takes another curious twist. You see, Bob, the
maker of fine sandals, had just put the finishing touches
on all his sandal orders. As he sat admiring his
handiwork, he suddenly realized he had a gleaming
hoard of 19 gold coins in his possession. He quickly
realized that these were the coins that the blacksmith
had withdrawn on his behalf. A twinkling treasure
indeed, but oh dear, the thought of mischievous thieves
eyeing his precious pile filled him with worry!

So, he had a genius idea! He rushed over to the

goldsmith's workshop, like super-fast, and said, "Hey,
Mr. Goldsmith, could you keep my 19 gold coins safe?
You know, in your iron safe?" The goldsmith said, "Sure
thing, buddy!" And he put those precious coins into his
super strong locker.

67
Now, the goldsmith wanted to be really nice, and he
started making one of those IOU certificates for Bob.
But guess what? Something went wrong! He looked
puzzled, and he told Bob, "Hey, you left 20 gold coins
here before. And just yesterday, the blacksmith took
them out for you!" Bob was like, "Yeah, I told him to grab
them on my behalf." The goldsmith was like, "That's not
the big issue here. The thing is, the blacksmith had to
take out all 20 gold coins on your behalf just to use 1 of
them! And now, you're giving me back 19 gold coins to
lock up again."

Bob scratched his head, looking a bit puzzled, and said,

"I'm a bit lost here. What's the problem? Can't I put gold
in and take it out whenever I want?" The goldsmith
chuckled and said, "Totally, my friend! It's your
hard-earned money, so you can play with it as you like.
But the hiccup is that the blacksmith had no choice but
to take out all 20 gold coins on your behalf just to use 1.
I'm thinking, if he had a choice to take out just 1 gold
coin instead of all 20, would he have done that?" Bob's
face lit up, and he replied, "You've got a point, Mr.
Goldsmith! There's a glitch in this setup. Why in the
world would someone take out all their savings when
they only need a tiny bit? We need to fix this!"

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 FROM BARTER TO BANKING

The goldsmith nodded wisely and said, "Hmm, let me

put on my thinking cap for this one."

After thinking really hard, the goldsmith's smile was so

big that Bob could've counted his teeth one by one. The
goldsmith exclaimed, "Hey, Bob! Get ready to hear
something cool! I'm not completely sure if it'll work, but
let's give it a shot. Here's the plan: we'll make lots of tiny
IOU certificates for every deposit, like little promise
notes. These certificates will have my special signature
on them, and a tiny space left for something important.
When someone wants to buy something, they can write
down how much money they want to use on the
certificate. Then, the person selling the thing will bring
the certificate to me, and I'll give them the gold that
matches what's written on the certificate. If this works,
we won't have to worry about taking out all the saved
gold every time someone wants to buy something!"

Bob scratched his head and said, "Hmm, sounds

interesting, but I got a bit lost there. Can you give me an
example?" The goldsmith nodded and said, "Sure thing!
Let me make it simple with a story. So, remember
yesterday when the blacksmith took 20 gold coins from
your account? But you only needed 1 gold coin for
yourself. Well, because we didn't have any other way,
you had to take out all 20 coins. Now, you're back today,

69
putting those 19 extra coins back into your account. So,
my plan is this: when you put those 19 coins back, I'll
give you 19 tiny IOU certificates, each with my special
signature. These are like magic notes that you can use
later. When you want to buy something, take one of
these notes, write down how many gold coins you want
to use, and sign your name. Give this note to the person
selling the thing, and they'll bring it to me. I'll check
everything and give them the gold coins you wanted to
spend. Let's say you want to buy a goat worth 2 gold
coins. Just take a note, write '2 gold coins' on it, and
hand it over to the goat seller. They'll bring it to me, and
I'll give them 2 gold coins from your saved stash. It's
like a magic promise note!"

Bob's face lit up like a firefly at night. He was amazed by

the awesome idea. He exclaimed, "We should give a
cool name to these tiny IOU certificates. Since there's a
lot of checking going on, let's call them 'Cheques'!" The
goldsmith burst into laughter, and with that, our island
became even more clever with its money. They yelled
out, "To infinity and beyond!" towards the sky. And so,
the story continued with more adventures ahead…

As a result, everyone on the island began to use

Cheques. Cheques have become quite widespread in
everyday business. Cheques have value because they

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 FROM BARTER TO BANKING

are backed by gold. People trusted Cheques because

they were backed by gold. Without the gold backing, the
Cheques would have been nothing more than a piece of
paper with some beautiful lettering on them. Nothing
more and nothing less. Everyone was content, and they
were getting richer by the day. On the island, there is no
evidence of unethical business practices.

Take a moment to look back and realize where we

began the journey. A fisherman was exchanging his fish
for sandals. We've come a long way since then. People
now exchange a piece of paper that is as valuable as
gold because that piece of paper (Cheques/IOU
certificate) is backed by gold.
Hopefully you observed something in this book.
Whatever is going on on this island is the product of a
problem-solving action. Everything that has grown up to
this point has been the consequence of thesis,
antithesis, and synthesis.

(Thesis - A statement or hypothesis that is put forward

as a premise to be maintained or proved).

(Antithesis - A literary device that contrasts opposing

words, ideas, or traits).

71
(Synthesis - The joining of components or elements to
produce a whole. Synthesis is usually formed by
combining the results of thesis and antithesis).

If you look closely, you will notice that our surroundings

are the outcome of thesis, antithesis, and synthesis.
Humans are always growing as a result of thesis,
antithesis, and synthesis. With this phenomenon in
mind, Allama Iqbal expressed it beautifully:
Urooj-e-Adam-e-Khaki Se Anjum Sehme Jate Hain

Ke Ye Toota Hua Tara Mah-e-Kamil Na Ban Jaye ~

Allama Iqbal (1935).

The rise of man made of clay has terrified the heavenly

beings, who fear that this fallen star may become
brighter than the full moon.

Turn to the very 1st page of this book.

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 FROM BARTER TO BANKING

CHAPTER 10

Sailing Beyond Gold - Gold, Cheques, and

Pirate-Proof Plans

Now! Let us return to our island. On the island, 15 years

passed. People continued to use cheques on a daily
basis. The business was growing. Everything was going
swimmingly.

Let's zoom out a bit. We can see how commerce

evolved on our island in a phenomenal way. As we've
seen in previous chapters, the invention of ships
connected neighboring islands. People on this island
traded not only among themselves, but also with the
connecting islands. Essentially, the business expanded
from a local to a national level. The creation of ships to
connect the islands and establish a network deserves
credit.

As previously stated, the islands were linked by oceans.

Ships were mostly utilized to transport goods from one
island to another. As the business grew, the sailors
realized it would be more profitable to transport
products from one island to another and return with
goods from that island. It was advantageous for them
to travel back and forth in this manner. Because of the

73
islands' good connectivity, if one island thrived in
anything by using their own creativity, the other
well-connected islands adapted the same creative
talents and enhanced their standard of living. So,
because of connection, if one island grew, the other
connected islands grew with it.

When we look at the larger picture, there are three

islands, including the one we're on right now. Our
island's trade was connected to three neighboring
islands. Each island has its own set of advantages.
Each island has its own set of commodities. For
obvious reasons, each island has its own cuisine.

Now that trade has been nationalized, the

distinctiveness of one island's goods has been valued
by other islands, who are willing to pay a reasonable
price to acquire such goods. With that, all four islands
evolved in commercial practices to the point that
practically all jobs, such as fisherman, blacksmith,
goldsmith, sandal maker, or farmers, were almost the
same in the neighboring islands as well.

Remember! All of the islands were learning and

adapting ideas from one another, they all had the
system of gold and IOU certificates. As a result, the
goldsmith profession flourished. You may wonder why.
The answer is obvious. There must be a goldsmith

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 FROM BARTER TO BANKING

where there is a trade to manage the funds, keep the

gold safe, produce the IOU certificates, and settle the
trades.

In this section of the book, I will take you on an

adventure of national trade and financial settlement. So,
charming adventurers, put your caps on and let's roll
into the jungle.

For the sake of simplicity, we'll refer to these islands as

island A (most of the earlier stories in this book took
place on island A), island B, and island C.

One fine day on island A, a boy named Alf was on a

mission that was more exciting than a treasure hunt. He
had a slick ship that he and his wise old dad had
crafted with their own hands. Now, Alf was the captain,
while his father had kicked back at home, confident in
his son's abilities. And let me tell you, Alf was no
ordinary lad. He was super honest, and his hair was the
talk of the town – as smooth as a fluffy cloud!

Alf had a magical moment when he went to island B

before. He spotted a real fancy need – they were
craving corn like it was the yummiest treat on the
planet. But, hold on, Alf was from island A, remember?
But that didn't stop him. He did some serious
homework right at home on island A. Lo and behold, he

75
found a farmer with the juiciest corn ever. The deal of
the century went down – 100 corn for 30 shiny gold
coins. The farmer was dancing with joy for the huge
sale, and Alf was grinning from ear to ear, knowing he'd
make at least 50 gold coins selling the corn on island B.

So, picture this: Alf whipped out his fancy-dancy

checkbook, scribbled his autograph like a superstar,
jotted down "30 gold coins," and handed it over to the
farmer with a wink. "Hey, take this magical piece of
paper to the goldsmith. He'll unlock my gold coins from
his super strong locker," Alf said with a wink. Farmer, all
cool and confident, replied, "Don't sweat it, buddy. I'm a
corn-dealing pro. I know the drill. You go rock island B
with those corn I just gave you." They high-fived (well,
shook hands, but you get the picture) and went on their
merry ways.

But wait, the story's not done! Alf's eagle eyes spotted a
tomato gap on island A. Yup, you heard right. Tomatoes
were in demand on his home turf. Now, where could Alf
find these precious red delights? You guessed it, island
B was the tomato paradise. Alf's mind started whirring
like a spinning top – he saw an opportunity to make a
fortune by bridging the tomato gap.

Now here's where the plot thickens – Alf realized he

needed to pack some gold coins for his island-hopping

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adventure. His grand plan was like a jigsaw puzzle

falling into place. He'd load his ship with the 100 corn
he bought for just 30 gold coins on island A. Then, he'd
swoop over to island B, sell the corn for a sweet 50 gold
coins, and watch his fortune grow. But Alf wasn't done
yet! He'd purchase 100 juicy tomatoes on his way back
to island A for that same 50 gold coins. And here's the
genius part: Alf was certain he could sell those
tomatoes back on island A for a whopping 70 gold
coins.

So there you have it – Alf was on a mission, not just for

profit, but for adventure and success. The islands were
his playground, and he was the clever mastermind
working the strings, making sure everybody got what
they needed. But, my friend, this tale is far from its final
chapter. The wind is still whispering secrets. Hold onto
your hats, because who knows what's waiting on the
horizon?

Alf! The super smooth-haired boy. He was like a hero in

a storybook, with his hair shining like a waterfall in the
sun. Alf had this ship, like a big boat, and he loaded it up
with 100 corns – yep, the same ones you eat at picnics
– along with water and shiny gold coins. He was like a
captain, you know, steering his ship to island B. The sun
was high up in the sky, but guess what? It wasn't too

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hot. There was this amazing breeze that made
everything feel so good. Alf's hair was dancing in the
wind, just like in a cool dance party.

He stretched out on his ship, like he was taking a nap

on a comfy bed, looking up at the sky. And oh boy, the
sky was like a blue blanket with fluffy white
marshmallows floating around. They played peek-a-boo
with the sun, like they were hiding and saying,
"Surprise!" Alf was daydreaming about all sorts of cool
shapes those marshmallow clouds could be. He heard
the wind whistling, the water whispering, some seagulls
chatting far away, and even his own thoughts having a
chat party in his head. It was like a magical place!

Then, ta-da! He opened his eyes, feeling like he woke up

from a dream, and guess what? There was a tiny ship
zooming toward him. But wait, it wasn't a friendly ship
like Alf's. Nope, it was pirate time! The pirates, with their
swirly swords, hopped onto Alf's ship like they were
doing a crazy stunt. Alf's eyes went as big as pancakes!
Those pirates grabbed his gold coins, did a ninja move
back to their ship, and sailed away like they were
chasing a rainbow.

Guess what? Alf's gold was like a sneaky ninja, gone in

a flash! He wasn't sad about his other stuff, like the corn
and water, because those pirates only had eyes for the

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gold. Alf was like, "Whew, they didn't take me as a

souvenir!" He got up and steered his ship like he was
racing against time, heading back to his home on island
A. It was like a movie chase scene, but on the water!
Soon, Alf's story was like a gossip that everyone knew.
People on island A heard about the pirate party, and
they were all like, "No way, not on my ship!" Alf, being
the wise guy he was, decided to skip his plans of selling
stuff on island B. Instead, he had a corn-selling fiesta
right there on island A, where everyone could come and
get their munch on.

But hey, the story doesn't end here! Nope, there's more
to come. So, hold onto your imagination, because Alf's
adventure is far from over…

So, after a few days, Alf was like, "Hey, fisherman and
goldsmith pals, gather 'round!" They all gathered like a
bunch of excited ants, wondering what Alf was up to.
Alf started off by saying, "Hey there, my awesome
buddies! Today, I'm so thankful to have you here. You
won't believe the crazy thing that happened – those sea
pirates came and swiped my gold! You remember,
right?" The fisherman nodded, all serious, and said, "Oh
yeah, we remember. That was like a pirate party crash!"

Fisherman thought for a moment and then was like,

"Listen up, folks! We gotta fix this problem, or our island

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will be stuck in a gold pickle forever. Everyone's afraid
to sail out because they're like, 'Oh no, pirates gonna get
us!'" He scratched his head, looking all smart. "You
know what, guys? How about we surprise-attack those
pirate rascals? That'll teach 'em a lesson!"

Goldsmith, being the thinker in the group, was like,

"Hold your seahorses, fisherman! I'd love to whack
those pirates with my creativity, but here's the thing –
pirates are like hide-and-seek champs. They keep
moving around, like musical chairs on the sea. No way
we can find 'em easily."

Fisherman was like, "True dat, true dat. But hold up,
folks! We can't give up that easily. There's gotta be
some way to outsmart those bastards." Then Alf, with
his thinking cap on, was like, "Hey, hey, hold on! I think
I've got a plan. But it's up to the goldsmith here to give it
the golden touch."

Goldsmith was all ears, like a bunny hearing a carrot

story. "Come on, Alf, spill the beans! I'm all ears, ready
to tickle 'em."

Alf leaned in and started, "Alright, check this out, you

creative genius. You know why everyone on this island
(island A) carries gold on ships from one island to

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another? 'Cause they're afraid the other islands will not

accept our cheques."

Fisherman nodded, like, "Yup, other islands' cheques are

just pieces of paper to them."

Alf continued, "So, last time when I was on island B, I

thought of this epic plan. I tried to buy a leather hat,
whipped out my cheque, scribbled '2 Gold Coins' on that
paper, and handed it over to the leather hat seller. The
hat seller carried the cheque to the island's goldsmith.
The goldsmith declined to give the hat seller two gold
coins right away.The hat seller was startled! He
scratched his head and asked the goldsmith, "Why?"
"What's the deal with the cheque goldsmith?" "I will give
you the reason for not accepting this cheque,"
Goldsmith responded. But first, you must bring the guy
to me who bought your leather hat and gave you this
cheque." Luckily, I was still on island B, and the leather
hat seller found me. He invited me to come with him
because the goldsmith wanted to see me.

Fisherman was like, "Wait, what did the goldsmith say?"

Alf mimicked the goldsmith, like, "Listen, young Alf, I

see your name on this IOU certificate (cheque). You're
from island A, right?"

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"Yup, that's me!" I said to the goldsmith.

Goldsmith was like, "Here's the twist, buddy. That piece

of paper also known as ‘cheque’ ain't worth a bean. It's
like a blank postcard, waiting for a stamp. I am unable
to give the hat seller two gold coins in exchange for this
cheque. Why you might ask? Because you (Alf) didn't
deposit any gold in my locker. You can't just buy
anything with that piece of paper, commonly known as
"cheques," which have no value in itself. It only has
worth when backed up by gold. In our scenario, you
currently have no gold coins stored on island B under
your name. I can not give 2 gold coins to this leather hat
seller on your behalf because you (Alf) do not have any
gold in my locker on this island (island B). You gotta
have gold stored with me to use it."

Fisherman was chuckling, like, "Oh, that's a plot twist!"

Alf grinned, "Totally! So, in the end, I gave the hat seller
actual gold coins from my pocket 'cause I didn't want
him rowing to island A just to withdraw 2 gold coins in
exchange of the cheque I gave him to purchase the hat.
We laughed about it, like, 'Imagine that!'”

Alf concluded, "And that's how I realized cheques

without gold backing them up are nothing but a piece of
paper. No value, no nothing.

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Now, the fisherman and the goldsmith on island A were

all ears, hanging on to Alf's every word. After hearing
Alf's story, the goldsmith of island A chimed in, "Well,
well, Alf, you learned your lesson the hard way. But
you're right, you need to have some gold coins
deposited with a goldsmith on an island to use those
fancy cheques."

Alf, like a thoughtful detective, said, "Hold on,

goldsmith! What if we could use those cheques on any
island without depositing our gold coins at each one?
Imagine folks sailing with their IOU certificates instead
of heavy gold on their ships. That could save us from
pirates and shipwrecks and all those troubles. Those
pirates won't know what hit them when they do not find
any gold coins on the ship! Furthermore, they will not be
able to withdraw gold coins using those cheques
without our signatures on it."

Goldsmith was nodding like, "I'm with you, Alf. But how
do we convince goldsmiths from other islands to give
gold for our cheques when we haven't deposited any
gold with them?"

Alf, the idea-sparkler, said, "Hold your hat, goldsmith!

This is where you step in, my creative genius friend.
Imagine this – goldsmiths from island A, island B, and
island C having a grand meet-up every three months.

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They'd gather like a secret club to sort out our gold
business. Are you following me?"

Curious goldsmith asked, "Explain this meet-up thing,

Alf."

And Alf, like a storyteller spinning a web, began, "Alright,

listen up! Let's say I'm on island A and I want to buy 100
super-tasty tomatoes from island B for 50 shiny gold
coins. But here's the twist – I don't wanna carry those
gold coins across the ocean. So, I come to you,
goldsmith of island A, and I'm like, 'Hey, take my 50 gold
coins and give me 50 cheques.'"

Goldsmith was nodding along, catching the drift.

"Gotcha, Alf. I will hand you 50 cheques for your gold."

Alf, the mastermind, went on, "Exactly! Then I take my

50 cheques to island B, and I trade them for the
yummiest tomatoes. The goldsmith on island B, he's
got my cheques now. Here's where the magic happens.
You, the goldsmith of island A, have my 50 gold coins,
and the goldsmith of island B has my cheques worth 50
gold coins."

Fisherman, all eyes shining, was like, "Wait, what will

happen next?"

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Alf grinned, "Buckle up, folks! Every three months,

goldsmiths from all the islands – A, B, and C – gather at
a secret goldsmith summit. Goldsmith of island B
hands you my 50 cheques, and you hand him my 50
gold coins from your locker. Boom! Transaction
complete! And guess what? You goldsmiths can charge
a teeny bit for being the golden bridge between islands."

Fisherman and the goldsmith were nodding like, "Ah, Alf,

you've cooked up a genius plan!"

Alf kept the ball rolling, saying, "Hold your excitement,

guys, 'cause that's just one example. Imagine tons of
transactions like that piling up for a whole three
months! Gold coins and matching cheques, all getting
ready for the big trade-off when you goldsmiths have
your meet-up. You'll be rolling in the gold with those
fees! What do you think?"

Goldsmith was all smiles, "Alf, my friend, you've got my

applause! These ideas of yours are pure gold. I'll talk to
the goldsmiths from the other islands. Let's make this
brilliant plan a reality!"

Fisherman, catching the wave, added, "So, wait a

minute. You're telling us that traders won't need to carry
their heavy gold on their ships anymore? Pirates will be
scratching their heads when they don't find gold on

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ships. About the goldsmiths' secret meeting ship? All
goldsmiths must travel to the secret meeting locations
in a distressed-looking ship. Because these ships will
be carrying gold just once every three months, they
must be disguised to avoid pirate attacks. Pirates are
unlikely to assault a ship that appears to be in distress.
It'll be like a ninja ship, sneaking around the sea once
every three months. They won't know when to expect it!
Plus, with gold being replaced by those paper cheques,
ships can carry more stuff. Alf, you're like a
mini-business genius! Let's do this!" Alf couldn't help
but grin like a Cheshire cat. "You guys are the best! Let's
get this show on the road!" And just like that, the idea
was planted, growing like a magic beanstalk. The plan
was put into action, and guess what? It worked like a
charm. Gold was cozy and secure, traders were sailing
with joy, and those sneaky pirates had to find a new
hobby. The island was buzzing with excitement, like a
bee party in full swing. And all thanks to Alf's brilliant
kid brain!

With that, a fresh notion was introduced. People from

all around the islands began transporting IOU
certificates (Cheques) rather of gold aboard their ships.
IOU certificates (Cheques) were much lighter in weight
than gold because they were made of paper. As a result,
the sailors expanded their ship's weight limits and

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carried more commodities for trading. More items =

greater profits.

A solution arose from a problem. And it is precisely how

humans are designed. We would not have evolved in
this manner if human beings had not encountered
problems in the first place.

Anyway, the goldsmiths of islands A, B, and C were all

honest people who worked together to ensure that
commercial transactions were carried out honestly,
swiftly, efficiently, and smoothly. Cheques issued on
island A can be used on islands B and C; cheques
issued on island B can be used on islands A and C; and
cheques issued on island C may be used on islands A
and B. People believed that at the end of the day, our
island's financial representative (Goldsmiths) would
settle the transactions every quarter. As a result, the
goldsmiths' business expanded.

They were getting richer by the day. Because, well, why

not? They were honest people working hard, filling the
gap between supply and demand, providing people with
the facility of keeping their gold safe in their massive
iron locker, and providing IOU certificates (cheques) so
that they could spend their hard earned money
flawlessly not only on island A but also on islands B and
C. Goldsmiths on all islands were forced to purchase

87
two massive additional lockers for gold storage while
maintaining records. The number of transactions
climbed, as did the amount of gold stored in the locker.
It was a win-win situation for everyone.

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CHAPTER 11

Gold's Slumber Party and the Not-So-Sleepy

Goldsmith

People across the entire island began to improve their

living standards as business and infrastructure
expanded. We know for a fact that when humans have
enough food to eat, enough water to drink, clean
clothes to wear, a safe place to live, and no problems to
worry about, the population naturally grows. Looking
back in time, we can see that this has always
happened. The desire for more follows suit.

So, let us return to our island and continue the story. It'll
be interesting to see where it takes us. Let's get started!

Late one night, when the stars were twinkling in the sky
like diamond sprinkles on a velvet blanket, our
hardworking goldsmith was sitting at his wooden desk,
scratching his head and updating his record books. You
remember him, right? He's the guy with a big heart and
an even bigger pile of shiny gold.

Well, after a day full of clinking coins, our goldsmith

was busy like a bee, updating his accounts. He was
talking to himself, just like we all do sometimes, saying,

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"You know, it's the small ideas that pile up and create
something big. Not too long ago, people were swapping
goats for grains, and now, ta-da! We're passing around
little pieces of paper that promise gold. And you know
what? It's actually working! I can see the islands
bustling with more business than a beehive in spring.
What's more, one bright idea on one island gets
everyone's wheels turning, so all the islands are
hopping onto the same wagon of progress. And guess
what? Our goldsmith profession is shining brighter than
a dragon's hoard. Who knows what's around the corner,
eh?"

Now, picture this: as the moon peeked through the

window, the goldsmith's eyes were like two lanterns,
gleaming with determination. But here's the twist in the
tale: as he was tallying up his treasure trove, he
uncovered something fishier than a fish market on a hot
day. He realized that only a teeny-tiny 30% of the gold in
his iron locker was getting out and about, shaking
hands and doing the money dance in the village. Yep,
you heard it right - a whopping 70% of the gold was just
chilling there, like a sleepy bear in winter. 70% of the
gold in the locker was just there in savings. People who
saved it in that iron locker were very rarely using it.

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Can you believe it? Seventy percent, folks! But you know
what? Our goldsmith didn't lose his sparkle. He didn't
freak out like a scaredy-cat in a dark alley. Nope! He just
closed his book of numbers, stretched like a lazy cat,
and went off to catch some Z's.

The very next morning, the sun rose in the sky with its
golden rays, painting the world in shades of warmth.
But there was something not so bright about the day –
the corn farmer trudged his way to the goldsmith's
shop, his face wearing a frown like a sad puppy. He
greeted the goldsmith with a heavy heart, "Hey there,
my buddy goldsmith! I've got a bit of trouble."

The goldsmith, wearing his tinkering glasses, looked up

from his workbench with a curious glint in his eyes.
"What's got you looking as gloomy as a raincloud, my
friend? I'm here to lend you an ear, and a hand if I can."

The farmer sighed and scratched his head, "You see, I'm
just a farmer. Rain's like magic water for my crops, like
pancakes need syrup. But lately, the sky's been as dry
as a biscuit left out in the sun. My corn plants are
struggling to slurp up enough water, and it's like they're
in a race against time. My land's become a dusty dance
floor, and my corn's just not groovin' well. I worked my
fingers to the bone, but my fields look more like a
garden of sticks than corn stalks."

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He leaned in closer and whispered as if sharing a
secret, "And now, I'm as broke as a cookie jar after a
midnight feast. I ain't got no more gold to jingle in my
pocket. But I need some sparkle to spend, you know?
So, I was thinking', could you toss a few gold coins my
way? I promise, cross my heart and hope for rain, that
I'll give them back to you in a month. I got a hunch we're
gonna get a rain shower soon, and my corn will finally
kick up its heels. I'll even throw in a little extra gold as a
thanks-for-being-awesome bonus!"

The goldsmith's eyebrows danced a little jig, and he

pondered, "Hmm! I have not done anything like this
before. Give me some time. Lemme chew on this
thought gum for a minute." With a nod, he added, "Hang
tight, my farmer friend, and I'll rustle up an answer for
you."

As the farmer ambled out of the shop with a wave, the

goldsmith scratched his chin, his mind churning like
butter in a churn. "You know what? Last night, while I
was scribbling in my fancy ledger, I noticed a funny
thing. About 70% of the gold in my iron locker is just
sitting there, gathering dust like a book on a forgotten
shelf. It's like gold's having a slumber party in my locker,
but no one's invited!"

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He tapped his finger on the desk, thinking aloud, "What

if I could put that idle gold to work? Like lending it to
folks who need a few gold coins to help them out. When
they return it, they'd throw in some extra gold coins. But
first, I gotta chat with the gold's owner, explain the plan
like telling bedtime stories."

They'd be growing their gold stash without lifting a

finger. Just a nod of permission, and we'd both be riding
the golden gravy train. It's a puzzle where all the pieces
fit, a recipe where everyone gets a slice of pie. Yeah, I
think I've got something sparkly here!"

The goldsmith, like a clever detective, delved into his

records and discovered a sparkly secret: Alf the trader
had a bunch of gold coins saved in the goldsmith's
vault, napping like bears in winter. The goldsmith,
buzzing with excitement, summoned Alf over like a
wizard inviting a friend to a magical feast.

"Hey there, Alf! My buddy, you're quite the money

magician, aren't ya? Gold's your kind of music, right?"
The goldsmith grinned.

Alf grinned back, his eyes twinkling like stars on a clear

night. "You've hit the jackpot, my friend. I've got a soft
spot for those glittery coins."

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Leaning in like a conspirator, the goldsmith shared,
"Well, get ready for this nugget of a plan! Remember our
farming friend? He came knocking for a loan of 30 gold
coins not long ago. Promised he'd return those 30 gold
coins, plus toss in 10 extra gold coins as my profit. And
guess what? While I was scrutinizing my ledger like a
curious cat, I stumbled upon your stash – 30+ gold
coins, catching z's in my vault like a bunch of sleepy
owls."

Alf raised an eyebrow, intrigued as a detective on a

puzzling case. "You're spot on, pal. My coins have been
dozing off. I want to put them to use"

With a flourish, the goldsmith revealed his scheme, like

a magician revealing a trick behind his sleeve. "Hold
onto your hat, Alf! Here's the grand idea: you lend me
your snoozing coins for a bit, and I lend them to the
farmer. When he comes back with 30 gold coins plus 10
extra gold coins, we'd share that extra like buddies at a
picnic – 5 for you, 5 for me!"

Alf laughed and said "You've cooked up a feast of a

plan, my friend! So you're saying I can sip lemonade
while my coins do the heavy lifting?"

The goldsmith nodded like a wise owl. "You got it, Alf!
We're like captains of a coin ship, cruising without a

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care. The farmer plows the field, the coins do a little

dance, and we relax like kings in hammocks."

Alf's voice had the warmth of a cozy fire. "Count me in,

partner! You have my blessing – lend my coins to the
farmer, and when he comes back with 30 gold coins
plus 10 additional gold coins, we'll give each other a
high-five with 5 coins each."

The goldsmith clapped his hands like a maestro ending

a performance. "We're cooking with fire now, Alf! Oh,
and here's the cherry on top – instead of calling our
extra '10 additional gold coins,' let's jazz it up and call it
'Interest.' After all, we're both pretty darn interested in
seeing those coins grow!"

Alf chuckled, his laughter like a sparkling waterfall.

"You're a genius, my friend! From now on, it's 'Interest'!"

And thus, with a magical wave of ideas, the plan

unfurled like a hidden map. The goldsmith handed over
30 coins to the farmer. The stage was set for a
symphony of success – the farmer's fields thrived, the
goldsmith's pouch jingled, and Alf's gold multiplied like
rabbits in a magic hat.

After about 20 days, the farmer returns to the goldsmith

and gives him his 30 gold coins plus 10 more gold

95
coins for his help. Alf was called by the goldsmith and
given his share of five gold coins. The goldsmith kept
his portion of the five gold coins, and the transaction
was completed.

People gradually began to borrow more and more gold

coins from the goldsmith in order to expand their
business, and in exchange, the goldsmith and his
depositors, who allowed him to lend their savings to the
people, earned gold coins without performing any labor.
They just knew the concept of 'putting money to work'.
They sat back and watched their fortune grow. It was a
win-win situation.

This was the birth of a new notion in the system.

Everyone learned about this transaction and realized
that there is a method to spend more than you make.
Just like our farmer borrowed 30 gold pieces that he did
not have previously and spent it on his basic
requirements. His earnings were '0' at the time since his
crops weren't performing well.

In this case, the farmer took out debt to meet his

necessities.

What is debt?
It's the amount of money you borrowed from someone.
Think of borrowing as simply a way of pulling spending

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forward. To acquire something you cannot afford, you

must spend more than you make. To do so, you must
borrow from your future self. By doing so, you set a
time in the future when you will need to spend less than
you earn in order to pay it back.

Debt is beneficial when used correctly and honestly.

Debt is harmful when it is used irresponsibly. In his
book 'Fake,' Robert Kiyosaki makes an excellent point.
Debt is a loaded gun. It has the ability to either defend
or kill you. What makes him say that? Let me explain
how it works. Assume you borrowed money from a
bank and purchased a car. The bank will charge interest
on it. Your objective is to pay back the interest and
principal portion of the debt each month as soon as you
receive your paycheck from your job. You are now
working for two parties. One is your family, and the
other is the bank from which you borrowed money.

Assume you lost your only source of money, your job.

You are now responsible for your family and the car.
What are your plans? You have no alternative but to sell
the car and finish the bank payments. Every month, your
car takes money out of your pockets in the form of
bank payments. The debt you used to buy this car was
a bad debt. Why? Because it was draining your bank
account every month. What exactly is good debt, you

97
may wonder? A good debt is one that puts money in
your pocket. For example, suppose you give your car to
someone on rent and it pays you and the bank's loan
payments every month all by itself. You do not have to
make payments from your pocket to the bank for your
car because your car is paying for itself plus putting a
few additional bucks in your pocket.

An asset is anything that puts money in your pocket.

Liability is something that takes money out of your
pocket. Every wealthy person in the world, first invests
in assets and then in liabilities. All poor and
middle-class people around the world prioritize
liabilities. After spending their hard-earned money on
liabilities, they would prefer to keep it than invest it in
assets that appreciate over time. All of this is due to
financial illiteracy. More on this in the final section.

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CHAPTER 12

The Bank Run

Continuing our tale, things got even more interesting.

People were putting their trust in the goldsmith like
never before. It's like they were giving him a thumbs-up
and a wink without even looking twice. Why? Because
he was treating his depositors kindly, sharing a slice of
the pie he baked with their gold coins. Those who
handed over their gold were grinning ear to ear as they
pocketed some extra shiny coins.

Time moved on and the goldsmith's mind started to

spin like a merry-go-round. "What if," he pondered, "I
keep a secret from the depositors? I mean, they've
parked their gold with me, but do they really need to
know I'm loaning it out and making some sweet gold
juice from it? They're not using it anyway. And let's be
real, loan requests are hopping like frogs in a pond.
Waiting for their permission would be like watching
paint dry. The borrowers, they're pretty reliable. They've
been gold-returns-on-time champs lately. Now, for the
interest bit, I think I'll keep the jar all for myself. After all,
I'm the one rolling up my sleeves and taking the risk
here. It's like baking bread without sharing a slice.
Brilliant, right?"

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And just like that, the goldsmith whipped out a big
cardboard sign that screamed, "want a Loan? Just 2
gold coins interest for every 10 borrowed!" It was like a
golden siren's call, and the islanders charged in like
hungry puppies spotting a bowl of treats. The news of
this oh-so-affordable loan deal spread faster than
gossip at a bake sale. By the end of the day, the
goldsmith had lent about 40% of the gold coins in this
locker, which had not been utilized regularly by its
depositors. Those were the coins that were starting to
feel like forgotten toys under the bed.

As the moon rose in the sky, the goldsmith lay back, not
counting sheep, but counting gold coins in his dreams.
He imagined swimming through a sea of gold, like
Scrooge McDuck, celebrating how his pockets would
soon overflow with glittering riches. The borrowers
would return with their borrowed coins and the extra
coins they earned through toiling away. Little did they
know, the goldsmith's pockets had become a greedy
dragon's hoard, as he planned to keep every last
glimmer of interest for himself. And so, as the night
embraced the island, the goldsmith drifted into slumber,
snug as a bug on a rug, dreaming of gold coins that
would soon line his path to opulence.

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 FROM BARTER TO BANKING

A few days danced by like a tap-dancing seagull, and

our goldsmith was all set to welcome back the
borrowers who had borrowed gold coins from him,
along with a little extra as interest. The weather on our
island was doing its own funky dance, going from sunny
to rainy and back again. The water around the island
was rising like a kid's excitement on their birthday
morning. Remember that wall, the one the fisherman
and his gang built by the river? Well, it was starting to
show some cracks, like a biscuit that's been dunked in
tea a tad too long. The fisherman was turning into a
worrywart, checking those cracks as the river's water
level did a "Hey, I can touch my toes!" move. And then,
guess what? Boom! The river did a sneaky trick and
broke that wall and a few homes by the river went for an
unplanned swim. People started packing up their things
faster than a squirrel stashing nuts, and headed for the
safer center of the island. It was like a scene from a
spooky movie, minus the popcorn.

Meanwhile, the islanders, in a real hurry, sprinted to the

goldsmith's place. You see, they were all in a tight spot,
needing their gold coins pronto. The goldsmith's jaw
nearly hit the floor when he saw the crowd gathered
outside his shop, looking more impatient than a kid
waiting for their ice cream scoop. When he managed to
open those heavy iron lockers, his eyes nearly popped

101
out like they were on a spring. Guess what? About 40%
of the gold coins were nowhere to be seen.

The islanders wanted their precious gold back, all at

once. They didn't care about waiting or patience; they
needed those coins. But oh dear, the goldsmith had a
bit of a puzzle to solve. You see, he had lent a chunk of
their gold coins to other island pals. Now, he was in a
pickle. He couldn't just tell everyone that their gold had
taken a vacation to someone else's pocket. Nope, he
was trapped.

But then, ta-da! A lightbulb flickered above his head, and

he had an idea as bright as a starry night. He put on his
bravest face and came out to face the islanders, who
were now tapping their feet like a bunch of impatient
drummers. "Hey there, lovely island folks," he grinned,
like a kid with a secret. "Guess what? I can't seem to
find my locker keys right now. They're probably playing
hide-and-seek with me! Give me a bit of time to track
them down, and I'll call you one by one to hand over
your gold coins. And, oh yeah, don't forget to bring your
cheques!" And just like that, he bought himself some
precious time, as if he had pressed pause on a video
game. He was off to solve the puzzle of the lent gold
coins and save the day, or at least buy himself a chance
to fix things up like a master puzzle solver.

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Goldsmith hopped onto his ship like a kangaroo on a

mission and sailed off to island B. With a knock that
sounded like a woodpecker on a door, he greeted the
goldsmith of island B and blurted out, "Whoa, I'm stuck
in a pickle! Need your help. You see, I lent out about
40% of our shiny gold coins. Now, everyone on my
island's doing a gold rush, wanting their coins back. It's
like a stampede at my store! The problem is, I don't
have enough gold coins to make them all happy at
once. Could you toss some gold my way, pretty please?
Promise to pay you back by next month, with some
extra as a thank-you bonus."

The island B goldsmith scratched his head like a cat

thinking, "Hmm, this is like trying to fit a square peg in a
round hole. Imagine if I give you my gold coins and then
everyone here on this island decides to withdraw their
coins together! It'd be like a giant tower of Jenga falling
down, The chain of goldsmiths lending and borrowing
business! you know?"

The island A goldsmith nodded like a bobblehead,

saying, "Totally get it. But c'mon, chances of that
happening here are like spotting a unicorn with roller
skates!"

Island B's goldsmith grinned and said, "Alright, I'm

giving you a lifeline this time. Take these sparkly gold

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coins. But let's make it official – write me an IOU note,
so things are crystal clear, you dig?"

The island A goldsmith beamed like a kid getting an

extra scoop of ice cream, "Absolutely! I'll scribble up an
IOU like a pro."

Island B's goldsmith high-fived the air, saying,

"Awesome sauce! And remember, you're sailing the sea
with a treasure chest of gold. Keep an eye out for those
pesky pirates – they're like seagulls after your fries!"
Goldsmith of island A winked back and set sail.

Safely back on his home turf (Island A), the goldsmith

dashed to his shop and announced, "Hey-o, islanders!
I've got the iron lockers keys. It was just chillin' under
my pillow, my bad. If you want your gold coins, race me
to the shop!" Islanders swarmed the shop, scooping up
precious gold coins, their smiles as wide as the ocean.

Islanders beamed like sunshine on a summer day,

happy to retrieve their gold coins during a tricky time
when part of the island got a little soggy from flooding.

With a sigh that could blow out a birthday cake, the

goldsmith let out his breath. He was eagerly waiting for
the folks who had borrowed gold when it was on sale.
After a bit, finally! Borrowers started showing up, one by

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one, with their borrowed gold and interest. With a wallet

fuller than a squirrel's cheeks, he zoomed back to island
B's goldsmith and wrapped up the deal.

The grand finale? Goldsmith of island A didn't really

earn any gold coins because whatever he made, he had
to share with the island B goldsmith like a good buddy.

If we understand our island's goldsmith's business, we

may discover that it is similar to our Modern banks. Our
goldsmith has the same facilities as our bank. The
goldsmith shops were essentially the islands' banks.
However, those banks are still in their early phases.
There is still much evolution to be done before our
current banking system emerges. In our story,
goldsmiths are equivalent to bankers. And the problem
faced by the goldsmith when a large number of
islanders gathered to withdraw their gold coins at a
time when there were insufficient gold coins in the
locker is known as a "bank run.” You see, banking is a
very noble profession. The world will be a better place if
banks are run by honest individuals who are afraid of
dying and being resurrected one day.

I'm not saying they shouldn't work for money. Obviously,

they are conducting business to make money. But it
must be done honestly. Unfortunately, the majority of
banks gain money in dishonest ways. The banking

105
system is built up in such a way that it is easy for an
individual to be persuaded to do wrong for personal
gain, as we have seen in our story.

What was Thomas A. Edison thinking when he said

this?
“People who will not turn a shovel full of dirt on the
project nor contribute a pound of material, will collect
more money than will the People who supply all the
material and do all the work.” Think about it for a while.

Final Section
Welcome to the grand finale of this book! This section
is the most crucial part, and you'll soon see why.
Everything we've learned in the previous chapters will
come together here, forming a clear and vivid picture.
So, let's not waste any time and delve right into the
heart of the matter.

Imagine a piece of paper adorned with beautiful

designs, graced by a few signatures to give it that
professional and official look. Some folks call it a
currency note and some call it bank notes. In reality, it is
an IOU (i owe you) certificate. But is it just paper? Our
journey so far has shown us that this seemingly simple
sheet gains meaning when it's backed by something
valuable like gold or silver. Let's put this to the test, shall
we?

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 FROM BARTER TO BANKING

Picture this: you walk into a bank armed with a 500

rupee note, and you kindly ask them for a small piece of
gold worth 500 rupees in exchange. But hold on, they'd
likely show you the door faster than you can blink. Now,
why's that? Wasn't that piece of paper supposed to hold
value? It's true, that piece of paper can indeed buy you
food, clothes, shelter, and all your necessities. No doubt
about that. But here's the twist.

Ever wondered why there's such a chasm between the

wealthy and the less fortunate? (Here's a snapshot: In a
recent report by Oxfam India, it was unveiled that the
gap between the rich and the poor has been widening
over the years. Shockingly, a mere 5% of Indians
possess over 60% of the nation's wealth, while the
bottom 50% of the population holds just a tiny 3% of the
total wealth. This revelation came to light on January
17, 2023.)

Now, some of you reading this book might not be too

familiar with how the less privileged lead their
day-to-day lives. And honestly, it's not a pretty picture.
You might argue, "Of course, there are diligent and
industrious individuals who work tirelessly to elevate
their living standards, while there are others who are
content being laid-back and not aiming for a better life."
And that argument does hold water, at least to some

107
extent. But let's take a deep dive into this situation and
truly grasp the essence of what's unfolding here.

On April 3, 1957, this dialogue was published in the

British humor magazine Punch.

Q: What are banks for?

A: To make money.
Q: For the customers?
A: For the banks.
Q: Why doesn't bank advertising mention this?
A: It would not be in good taste. But it is mentioned by
implication in references to reserves of
£249,000,000,000 or thereabouts. That is the money
they have made.
Q: Out of the customers?
A: I suppose so.
Q: They also mention Assets of £500,000,000,000 or
thereabouts. Have they made that too?
A: Not exactly. That is the money they use to make
money.
Q: I see. And they keep it in a safe somewhere?
A: Not at all. They lend it to customers.
Q: Then they haven't got it?
A: No.
Q: Then how is it Assets?

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A: They maintain that it would be if they got it back.

Q: But they must have some money in a safe
somewhere?
A: Yes, usually £500,000,000,000 or thereabouts. This is
called Liabilities.
Q: But if they've got it, how can they be liable for it?
A: Because it isn't theirs.
Q: Then why do they have it?
A: It has been lent to them by customers.
Q: You mean customers lend banks money?
A: In effect. They put money into their accounts, so it is
really lent to the banks.
Q: And what do the banks do with it?
A: Lend it to other customers.
Q: But you said that money they lent to other people
was Assets?
A: Yes.
Q: Then Assets and Liabilities must be the same thing?
A: You can't really say that.
Q: But you've just said it! If I put £100 into my account
the bank is liable to have to pay it back, so it's
Liabilities. But they go and lend it to someone else and
he is liable to have to pay it back, so it's Assets. It's the
same £100 isn't it?
A: Yes, but-
Q: Then it cancels out. It means, doesn't it, that banks
haven't really any money at all?

109
A: Theoretically..
Q: Never mind theoretically! And if they don’t have any
money, where do they get their Reserves of
£249,000,000,000 or thereabouts??
A: I told you. That is the money they have made.
Q: How?
A: Well, when they lend your £100 to someone they
charge him interest.
Q: How much?
A: It depends on the Bank Rate. Say five and a half
percent. That's their profit.
Q: Why isn't it my profit? Isn't it my money?
A: It's the theory of banking practice that…
Q: When I lend them my $100 why don't I charge them
interest?
A: You do.
Q: You don't say. How much?
A: It depends on the Bank Rate. Say half a percent.
Q: Grasping of me, rather?
A: But that's only if you're not going to draw the money
out again.
Q: But of course, I'm going to draw it out again. If I
hadn't wanted to draw it out again I could have buried it
in the garden, couldn't I?
A: They wouldn't like you to draw it out again.
Q: Why not? If I keep it there you say it's a Liability.
Wouldn't they be glad if I reduced their Liabilities by

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removing it?
A: No. Because if you remove it they can't lend it to
anyone else.
Q: But if I wanted to remove it they'd have to let me?
A: Certainly.
Q: But suppose they've already lent it to another
customer?
A: Then they'll let you have someone else's money.
Q: But suppose he wants his too...and they've let me
have it?
A: You're being purposely obtuse.
Q: I think I'm being acute. What if everyone wanted their
money at once?
A: It's the theory of banking practice that they never
would.
Q: So what banks bank on is not having to meet their
commitments?
A: I wouldn't say that.
Q: Naturally. Well, if there's nothing else you think you
can tell me...?
A: Quite so. Now you can go off and open a banking
account.
Q: Just one last question.
A: Of course.
Q: Wouldn't I do better to go off and open up a bank?

………………..End of conversation.………………..

111
 CHAPTER 13

The Mandrake Mechanism: Magic Money

Moments and Unending Interest

Have you ever wondered about the secret behind

money's creation? Let's dive into this mystery without
all the complex banking and accounting jargon. We'll
use plain, everyday English to unravel it, and don't worry,
even though it sounds simple, it's completely accurate.

However, I must caution you that you should not

attempt to make sense of it.

G. Edward Griffin dubbed it the "mandrake mechanism,"

and it's at play wherever a central bank exists.

Picture this: a duo of players, the central bank and the

central government. They're like partners in this grand
game, seeking mutual rewards. It all begins with the
government's side when the government spends more
money than it collects in taxes. You may be wondering
how they can spend more than they take in in taxes.
Well, they stroll over to the treasury and ask for extra
cash – let's say 100 crores – that they don't have. The
treasury folks reply, "You must be joking! We're out of
funds. Everything from taxes is long gone." The
government shrugs and replies, "We had a hunch, but

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we hoped for some surprise money. No worries, we'll

just borrow the rest." So, they walk down to the printing
office. But hold on, they're not printing money; they're
printing certificates. These certificates are impressive,
adorned with fancy designs, perhaps a tiger at the top.
They read "Treasury bond," "note," or "bill," based on
maturity length. It's almost money, but not quite – hold
it up to light, and it spells out "I owe you." The
government wants people to step up and lend them
money in return for these IOUs. It's often called buying
bonds, but you're really loaning the government cash
and getting an IOU in exchange.

Why are people eager to loan money to the

government? Because it's rumored to be the safest
investment, backed by the government's "Full Faith and
Credit." Not everyone understands this, but it sure
sounds impressive. In essence, the government swears
to repay your money plus interest, even if they have to
squeeze it out of you through taxes. It's a pledge to tax
you, but folks don't fully ponder this. They just think it's
a fabulous investment, and they'll probably get
something back. Meanwhile, the government keeps
borrowing hefty sums, spending more than what taxes
yield. Yet, they're always hungry for more. They always
fall short.

113
No sweat, they say. They wander down to the central
bank's headquarters. The central bank has been waiting
for them; that's why it's around. Inside, the central bank
officer whips out a checkbook, writes a 100-crore check
to the treasury, and hands it over. Hold up a second!
Where did they get that much money? It's a ton! Who
deposited it into the central bank account for this
transaction? Well, here's the twist: there's no actual
money. It's a blank slate, just a checkbook. If you and I
tried this, we'd be in trouble or go to jail, but they can do
it because the government allows it. This is the catch –
the government's payoff for being in this partnership.
They can waltz into the central bank and summon any
sum they want, without facing the public's wrath by
saying, "Hey, we're hiking your taxes by ₹5000 per
family. You know how long they'd be in power. So,
they're quite fond of this "mandrake mechanism." The
public remains clueless about the cost; it just seems to
work like magic. And voila, this crores of rupees springs
to life the instant that a central bank officer signs the
check and hands it over to the government. Quite the
tale, isn't it?

Let's dive into a fascinating partnership involving the

central bank. Picture a gigantic 100-crore cheque as our
starting point. Imagine the Treasury official taking this
cheque and putting it into the government's bank

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account. Suddenly, the computers come alive, and the

ledgers reveal that the government now possesses a
cool 100 crores. With this, the government can write
cheques up to this massive amount. Money starts
flowing as government cheques find their way into
circulation.

Now, let's follow a simple ₹10,000 cheques, making it

easy for someone like the friendly newspaper delivery
person to grasp. Our newspaper friend receives this
₹10,000 cheque and can't believe that just 2 days ago,
this money didn't even exist. Yet, thanks to the magic of
government backing, it's now valid and spendable.
Excited, the newspaper hero deposits the cheque into
their own bank account at a local commercial bank. At
this point, the money transitions from the central bank's
realm to the private banking domain.

With the ₹10,000 safely deposited, the action kicks into

high gear. The banker, eyes gleaming, rushes to the loan
window and declares, "Listen up, everyone! We've got
money to lend!" This news is music to many ears,
because who doesn't like the idea of borrowing cash
from a bank? The banker exclaims, "We've got ₹10,000
to start, but don't fear—we can loan out much more, up
to ₹90,000!" Now, you might wonder, how can they lend
more than what they have? This is where the fractional

115
reserve system enters the stage, making things
interesting.

Here's the deal: The central bank has a rule for member
banks. They must stash away at least 10% of their
deposits as reserves. So, for the ₹10,000, they reserve
₹1,000 and can lend out the remaining ₹9,000. Imagine
you receive this ₹9,000 loan. What's next? Naturally, you
want to spend it. You deposit it in your checking
account or use it directly. This deposit of ₹9,000 adds to
the initial ₹10,000, creating a new deposit. Since the
central bank requires just 10% in reserves, they can loan
out the remaining 90%, and the cycle continues.

This merry-go-round of deposits and loans keeps

spinning until the whole chain reaches its conclusion.
Now, let's focus on the nitty-gritty. When that initial
₹10,000 arrives from our newspaper champion, the
banks can effectively loan out up to ₹90,000,
considering ₹10,000 as the reserve (10% of ₹1,00,000).
The rest—₹90,000—is up for grabs. But where does this
extra money come from? It's a magical creation that
springs to life when the loan is granted. It's as if it just
appeared out of thin air, right at that very moment.
For example, if you deposit ₹10,000 into your bank
account, the bank will immediately set aside 10% of

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that amount (₹1000) as a fractional reserve. Other

customers can borrow ₹9000.

If a consumer walks in and asks for a loan, this ₹9000 is

given to the customer. The customer then takes the
₹9000 loan and spends it. Because one man's spending
is another man's income, the ₹9000 is received by
someone, who then puts it in his bank account, which is
part of the same fractional reserve system. Now, the
bank sets aside 10% of the deposit and lends out 90%
of the deposit (₹8100) and the chain continues. (Seed
₹10,000) ₹9000 ₹8100 ₹7290 ₹6561
₹5904 ₹5314

Lets understand how expansion of money supply

works.

When commercial banks receive a deposit, let's say

₹10,000, they effectively create 90% of the deposit as
new money out of thin air. For instance, if we calculate
₹10,000 x 90% = ₹9,000, this newly created ₹9,000
comes into existence alongside the initial ₹10,000
deposit. Consequently, the money supply expands from
₹10,000 to ₹10,000 + ₹9,000 (the newly created funds
by commercial banks, largely in the form of credit),
resulting in a total of ₹19,000.

117
The newly created ₹9,000 is then lent out and
subsequently deposited into another bank account. At
this point, the receiving bank retains 10% of the deposit
as a reserve and uses the remaining 90% to create
additional money. For instance, considering ₹9,000 x
90% = ₹8,100, this ₹8,100 is introduced as new money,
which is added to the initial ₹9,000 deposit.
Consequently, the accumulated money supply becomes
₹19,000 + ₹8,100 = ₹27,100. This cycle continues until
the initial deposit of ₹10,000 has been expanded to
₹90,000. (Seed ₹10,000) ₹19,000 ₹27,100
₹34,390 ₹40,950

However, such an extreme expansion of the money

supply, if it were to occur, could lead to inflation. The
increased availability of money without a proportional
increase in goods and services can drive up demand,
potentially causing prices to rise and diminishing the
purchasing power of each unit of currency.

In simple terms, when we visit a bank and request a

loan, let's say ₹10,000, what exactly transpires? Many
individuals navigate life with a somewhat unclear
notion of this process. What genuinely occurs is that
you ask for ₹10,000. The bank records ₹10,000 in your
account. This sums up their involvement. They don't
mint coins, they don't print money, and they don't

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transfer precious metals. Their sole action is to credit

₹10,000 to your account through a computer interface.
Starting from this point, you begin to incur interest that
has never existed, doesn't currently exist, and never will
exist.

You might also ponder why no one is aware of this or

discusses it. The answer is straightforward:
indifference. Consider the Manhattan Project, a nuclear
weapons development endeavor. There were around
5,000 workers (I might be underestimating the count) at
the site, yet many were unaware of the project's nature.
They didn't realize they were contributing to a nuclear
weapons program. While this topic falls outside the
scope of this discussion, it's worth contemplating. This
phenomenon could be dubbed "Hierarchy," a kind of
intricate game.

Notice something vital here: The government's newly

created money is spent as needed, while the bank's
newly created money isn't spent. Instead, it's loaned out
to individuals like us, and we even pay interest on it.

Imagine the allure of this: Interest on something

seemingly out of nothing! Interest on nothing! If only we
all had a checkbook like that, life would be a breeze. We
could write cheques for grand sums, loan them out, and
watch others pay us interest. It's quite the deal, don't

119
you think? This arrangement is the cherry on top for
commercial banks. Legally recognized, this scheme is
paraded as a marvel. We view our banking system with
awe, unaware that it's actually a clever trick. It's not just
interest on nothing, but unending interest on nothing.
When this money is returned, banks consider it a credit,
ready to be loaned out again, and the cycle persists.
Banks thrive when their money is in motion, earning
interest as it moves.

Remember, beneath all the intricacies, it's really just ink

on paper or digital blips in computers. Yet, they're raking
in interest on this virtual magic. Curious, isn't it?

Hold on tight, because the story doesn't stop there – it

carries consequences. But what's the impact on us? Are
we tangled up in this web? Absolutely, we are! I've heard
folks chatter, "Those folks over there, they're brainy, they
deserve the wealth." Like it doesn't touch us. But let's
dive in. This money, seemingly materializing from thin
air, pours into the economy, and that's where the twist
happens. It waters down the value of the money already
in circulation. Picture it as adding water to an orange
juice– the juice gets thinner. Similarly, the economy
gets diluted by the influx of new money, and voila,
prices seem to rise. This phenomenon? We call it
inflation.

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Hold your horses, though – it's not really that prices are
shooting up, oh no! The currency's value is actually
slipping. That's what's going on here. Imagine, if our
money were actually linked to something tangible, like
gold or silver, or even tangible everyday items like
coffee cups, things that can't just be summoned out of
thin air. In that case, the purchasing power of money
would stay steady over time. The real worth of goods
hasn't really changed for centuries when measured in
real money. But when we express it in these papers we
call currency, like rupees, they're not really rupees!
They're central bank notes that purchase less and less
because more and more of them keep showing up,
diluting the economic juice.

But the rabbit hole isn't finished yet. We've lost some
buying power through this sneaky thing called inflation.
Now, here's the million-dollar question – who's won this
lost power of ours? Did someone snag it, or did it just
vanish into thin air? Well, brace yourself, because
someone did gain it! Yet, the identity remains a mystery.

Let's explore it further. Those who grabbed our lost

buying power were the lucky ducks standing right where
the freshly minted money entered the economy. At the
beginning of the chain, they received currency notes
identical to the ones already circulating, and they spent

121
them with full force. But as these notes flowed from
one hand to another, they weakened. By the time they
reached us, the average Joes at the edge of the pot,
their impact was diminished. The ones at the entry
point, they are the culprits behind our lost buying power.
Who are they? Well, we're well aware that the
government is in on it – remember that 100-crore
check?

The plot thickens. The government kickstarts this whole

operation, no surprise there. The ones who work for the
government, the contract-holders, grant-receivers,
they're not exactly lagging behind. But what about the
banking side? Who's having a field day there? Well, it's
the folks at the loan window! No shocker there, right?
When inflation's in town, borrowing's your buddy. You
take a rupee now and repay it with paisa later. Inflation
gnaws away at those rupees. Borrowing seems like a
win, while saving seems like a loss. Yet, pause for a
second – that borrowed gain? It circles right back to the
bank as interest on something that wasn't really there in
the first place. It's a pretend profit, a paper victory.
Oh, but there's more! During inflation, your paper
investments puff up like balloons. That house? Worth a
fortune. But then the economy contracts, and poof!
You're left with dust. And when you waltz into the bank
to snag some of that ethereal cash, do they just give it

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away? Not a chance! They want you to pledge your car,

your house – actual stuff, not airy nothings. The bank
stays in good shape, whether things are booming or
busting.

So, the burning question – who's walking away with our

lost buying power? Brace yourselves for this curveball,
folks – it's a duo, a partnership of two. The government
and the central bank – they're the magicians behind the
curtain, pulling off this feat.

In our story, we learnt that the IOU certificate (Currency

note) is only valuable when it is backed by gold. In our
narrative, the goldsmith could only make IOU
certificates equal to the number of gold coins in his
locker. Remember? Why isn't our currency backed by
gold in our world? The most obvious argument is that
when a currency is not backed by anything precious
(gold or silver), the people at the top of the pyramid will
find it easy to print as many IOU certificates as they can
with no limit. Sky's the limit as they say!

That is precisely why real assets are so difficult to

acquire. Real assets, such as land, gold, and silver,
which rise in value over time, are prohibitively
expensive. Those who save are losers. Why? Because
more printing causes inflation and inflation erodes the
purchasing power of your savings. Inflation is the most

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deadly invisible robber, in my opinion. It will steal money
from your iron lockers without your knowledge or
consent. To see the invisible thief, you must have a third
eye. It's like a character called shinigami from the
anime called 'Death Note'. He has the ability to see
numbers that are not visible to the naked eye. To have
those eyes, you must improve your financial literacy.

Imagine you tear a piece of paper from your notebook

at home. You grab a pen and start creating fancy
designs along the edges of the paper. Finally, you write
₹100 on it. Alternatively, if you possess graphic design
skills, you open your computer and craft a visually
appealing 100 rupee note. You print it out. Holding
either the hand-drawn or printed paper, you head to a
nearby shop. There, you propose exchanging this piece
of paper for some chocolates. Can you guess the
shopkeeper's reaction? He might consider you quite
eccentric.

On the flip side, if a bank were to engage in the same

behavior, that paper you've created becomes entirely
valid. Why's that? It's because the shopkeeper
understands that the paper you've fashioned wouldn't
be accepted by anyone, while the paper crafted by
banks holds value. This belief stems from the idea of
gold backing. There's a possibility that the shopkeeper

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assumes the bank-issued paper holds value because

it's associated with gold, whereas there's no substantial
basis behind the paper you've made. However, in reality,
both these papers are fundamentally the same. The
only contrast lies in one paper possessing an official
appearance, while the other lacks visual appeal.

Debt = Money and Money = Debt in today's world of

economics. The more debt there is, the more money
there is. Today's economic world is so far removed
from the concept of real money that it would be difficult
to comprehend if I said, 'For example, if everyone in
India decides to pay off their debts, there will not even
be a single rupee in circulation.' Why? because Debt =
money. All the money in circulation will end up in bank
lockers. The reason why you have that 10 rupees note
in your pocket is because somebody somewhere has
taken out a loan from the bank and spent it.

Have you ever wondered why the world's largest

corporations are in debt despite having enough cash in
their tanks? Why do they use debt instead of cash?
Think about it.

Debt, my friend, is like a recipe with two essential

ingredients. Think of it this way: there's the main

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ingredient, which we call the principal, and then there's
the extra flavor, known as the interest.

Alright, picture this scenario: you've got some money

you've saved up, let's say it's ₹100,000 that you've toiled
and sweated to earn over a decade. You've really
poured your heart into it. Now, along comes a buddy of
yours with a grand idea to kickstart a business, and
guess what? He is eyeing your hard-earned ₹100,000 to
fund it for the next five years. Now, hold on a minute!
This is no small thing. You've invested years of hard
work into amassing that cash. So, what do you do? You
ask yourself, "What's in it for me?" You're not wrong in
doing so. After all, that ₹100,000 represents your
dedication and sleepless nights. So, naturally, you'd
expect something extra in return for lending your
precious money. You'd ask for some interest on top of
your initial amount. And you know what? That's entirely
fair because you've worked tirelessly to earn that
money in the first place.

Now, let's peek into the banking world. Imagine strolling

into a bank to snag a loan. The bank folks simply
scribble on a piece of paper or tap a few keys on a
keyboard. And voilà, money's conjured into existence,
just like magic! This new money is then loaned to you.
The twist? Nobody's worked for it, nobody's sweated for

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it, and heck, nobody even owns it. It pops into existence
out of thin air, with the help of a little ink or those
keyboard taps. And what's the catch? Well, you end up
paying interest to the bank for years and years on this
money that was basically conjured on the spot.

You know, it'd be totally okay if the bank had hustled

hard to earn that money and then charged you interest.
That would be fair and square. But, truth be told, that's
not how it went down. No one put in the elbow grease
to earn that money; it just sort of materialized from
nowhere.

Lets dive deeper into the curious world of interest! Let's

imagine an intriguing scenario on a secluded island
where only two characters reside: the Bank and the
Borrower. Picture this: there's a single, official currency
note on the entire island. Our Borrower approaches the
Bank, requesting this single official currency note. But
here's the twist: the Bank says, "Sure thing, but when
you return it, I'll need not one, but two of these currency
notes – one as the principal amount and another as
interest."

Now, the Borrower's eyebrows raise, and he exclaims,

"Hold on a second! You're aware there's just this solitary
currency note in existence here, right? Plus, you're the
only one with the power to print more of it. How on

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earth am I supposed to produce an extra currency note
out of thin air?"

You see, it's crystal clear that the Bank has to work
some sort of magic and create another currency note
from scratch to cover that interest demand. It's like the
Bank printing more money out of the blue, just so the
Borrower can settle the interest. But guess what? Now
the Borrower is in trouble. He needs to borrow yet
another currency note from the Bank to cover that
interest component of the loan. And guess what? The
story goes on and on, like a never-ending loop. This
island scene begins resembling our very own economic
setup.

Now, let's get to the crux of the matter. Banks are the
masters of printing and lending out the principal sum,
right? But what they do next is what tickles the mind.
They ask for interest on that principal. Hold up – here's
the kicker: this interest component of the loan doesn't
exist anywhere in the entire universe! Why? Because the
Bank never actually printed it. They only printed the
principal component of the loan. So, in essence, that
interest part of the loan is floating around in the realm
of non-existence.

What's the logical move, you ask? Well, the Banks gotta
roll up their sleeves, print this interest component, and

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then dish it out to the folks. And guess what? The cycle
spins on and on, like a never-ending carousel of
currency notes. And with every newly printed currency
note, the pool keeps getting bigger and bigger. And that
is something we should be worried about. How in the
world are you going to pay off your debt by taking on
more debt? That's not possible.

Ever wondered about a different way to view things?

Banks don't always have to keep printing out more
money and lending it to folks just so they can pay
interest on their existing loans. Let's dive into this fresh
idea.

Imagine this: you've taken a loan from a bank to cover

your expenses. This bank charges you ₹1000 each
month as interest on that loan. Now, picture this—you're
on the hunt for a job to earn that ₹1000 interest
payment for the bank. Guess what? You land a gig right
within the same bank, where your task is to clean glass,
doors, and windows. In return, they're ready to hand you
₹1000 for your cleaning work. But hold on, things are
about to get interesting.

You walk away with your hard-earned ₹1000 payment

for making those surfaces shine. Yet, in a bit of a twist,
you also owe the same bank ₹1000 as loan interest. So,

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you snag your ₹1000 salary, step out, circle back
through the revolving door, and hand over that ₹1000
interest payment to the bank. Quite the cycle, right?
Now, here's where the curious part comes in.

Think about it. You've committed a solid 3 hours every

day, for 6 days a week, for an entire month. All this
effort was solely to fulfill the interest payment on a loan
that materialized out of thin air, thanks to a few taps on
a keyboard. You've essentially dedicated your time to
cover the interest in something that didn't physically
exist until it was conjured up.

If this doesn't tickle your mind, I don't know what will.

It's like a riddle of our financial world, prompting us to
ponder beyond the usual norms.

Who reaps the rewards of this system? We've

discussed this topic earlier, so let's break it down
simply. Who gains? It's the ones with the authority to
print money. That includes governments and banks,
along with businesses and people who get hold of this
freshly minted money at an early stage. They can spend
it before the costs of the things they want to purchase
shoot up to match the new money flowing around.
Essentially, they get goods, services, or assets on the
cheap, but then prices climb up. This leads to gains for
asset owners like homes or stocks, even if no real

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improvements are made to the actual house or

company. This situation often sets the stage for
speculative frenzies.

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Now, what about those lower down the ladder? People
with fixed salaries, steady incomes? Those living in
distant areas? And those who've saved up? By the time
this newly conjured money trickles down to them, the
prices of what they wish to buy have surged. Their
savings lose their purchasing power, while their
earnings mostly remain the same. Sometimes, they're
forced to take loans just to afford what they could
previously purchase. That means they have to turn to
banks. In actuality, this money creation process just
shuffles wealth from the bottom to the peak of the
pyramid. Consequently, the gap between the wealthy
and the less privileged grows ever larger.

What is the solution to all of these issues? If you think

about it, there are numerous answers available. The
most well-known are gold and silver. Gold and silver, in
my opinion, are the solution to all of these difficulties.
How? First, they must bring back the gold standards.
Following that, those at the top of the pyramid must
print money equal to the gold reserves. There should be
no extra IOU certificates printed.

Controlling greed is everything here! Especially when

you have the power to print it without limit.

Interest and Equity

Imagine you've got a great job and you're all set to make

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that big step towards owning your own house. You've

been eying those lovely homes, but alas, the prices have
shot up so high that buying one outright seems like a
distant dream. What to do? Well, you decide to march
into the bank, don your negotiation hat, and secure a
loan. So, you put down a chunk of your own hard-earned
cash as a down payment and pair it up with the bank's
funds. Voila! The house is yours, and life is a cozy
dream within those four walls.

But wait, life's plot twists are never far behind. Picture
this: out of the blue, your job – that trusty source of
income – vanishes like a puff of smoke. Panic stations,
right? Now, here's where the real-life roller coaster
begins. Your monthly payments to the bank, those EMI
things, they don't just disappear because your job did.
Nope, they're still on the prowl, demanding their dues.
How on earth are you supposed to conjure up those
funds?

So, you start digging through your possessions, like a

pirate hunting for treasure. You sell off things that
twinkle, things that you've gathered over the years – all
to keep those EMI wolves from the door. But let's say
your treasures aren't enough. Uh-oh, what now? Well, it's
time for the unthinkable. You've got to put that beloved
home of yours on the market, hoping its value

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outweighs the debt you owe to the bank. It's a
heart-wrenching sale, one that doesn't just take your
house, but a piece of your soul with it.

Now, pause for a moment. Some folks might chime in

with, "What's the fuss? Banks are just doing business,
right? Money in, money out, and they need to stay in the
green." And sure, that makes sense at a glance. But
here's the kicker – in an economy powered by
borrowing and debt, there's this tricky trio that keeps
popping up: inflation, deflation, and recession. They're
like the three musketeers of financial chaos. And guess
what? When the going gets tough, like a game of
musical chairs, jobs tend to disappear. It's like a cosmic
law. (Remember who and what caused these booms
and bursts.)

And here's the kicker. You, the little guy in this grand
financial theater, can't do much when these storms hit.
You're up against giants, the big shots, the Banks. They
hold the cards, they make the rules. And if you stumble,
if that job rug is pulled out from under you, they'll come
knocking. Your prized possessions? Theirs. Your
cherished home? Yep, also theirs. It's a tough tale of
Dawud and Jalut, and you're not holding the slingshot.

So, you're probably wondering, what's the magic

solution to all these problems, right? Well, we've

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cracked the code and here's the scoop – you might be a

small fish swimming in a sea of financial giants, and
taking them head-on might feel like setting yourself up
for a guaranteed defeat. But what if I told you there's a
different way to dance with the giants? What if, instead
of being a mere customer, you turned them into your
partners?

Now, let me break it down for you. Picture this: You're

eyeing that dream house, but your wallet's not quite
ready for the big purchase. You've got a good job, but
not enough cash to swing the deal. Let's say this dream
home costs a whopping 1 crore. So, what's the plan?
You waltz into the bank and pitch them a proposal:
"Hey, how about you buy this house on my behalf and
sell it back to me for, say, 1 crore 30 lakhs over the span
of 15 years?" Now, hold onto your hat, because things
are about to get intriguing!

Why does this play matter? Well, buckle up, because

now the bank – that big player – has skin in the game.
It's not just a bystander anymore; it's your partner in
crime, or should I say, business. What's changed? Risk,
my friend. Risk is the name of the game. In this
revamped model, if you hit a rough patch and stumble,
the bank's right there beside you, feeling the jolt too.
Why? Because in this partnership, both parties share

135
the risks. If life throws lemons, you both whip up some
lemonade together. It's like a financial buddy system.

Now, let's peek at the current playbook. In the regular ol'

setup, guess who's the lone ranger facing all the risks?
Yep, you guessed it – the small player, that's you.
Meanwhile, the banks are playing a different game
entirely, seemingly immune to the stormy weather.

But here's a wild thought – imagine if banks actually

hopped on board with this risk-sharing idea. Imagine a
world where they roll up their sleeves, dive into the
financial trenches with you, and buy themselves a slice
of that property pie. But hey, reality check: those
money-hungry folks might not be too keen on
embracing this change. Sharing your risk and sharing
the property's equity? That's a tall order for the
profit-focused minds.

And yet, think about it – if the notion of 'risk sharing'

became more than just a fantasy, imagine how this
world could transform. Partnerships built on shared
burdens, banks and individuals navigating the choppy
waters of finance together. It's a vision where the odds
are more even, where facing the unknown isn't a solo
mission, but a duet.

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CONCLUSION
"If the son of Adam (the human being) had two valleys
of money, he would wish for a third, for nothing can fill
the belly of Adam's son except dust, and God forgives
him who repents to Him." ~ Prophet Mohammed
(p.b.u.h).

Surah 57, Iron (Al-Hadeed) [59:20]

Know that this worldly life is no more than play,
amusement, luxury, mutual boasting, and competition in
wealth and children. This is like rain that causes plants
to grow, to the delight of the planters. But later the
plants dry up and you see them wither, then they are
reduced to chaff. And in the Hereafter there will be
either severe punishment or forgiveness and pleasure
of Allah, whereas the life of this world is no more than
the delusion of enjoyment. ~ Quran.

In wrapping up our journey through the world of the

monetary system, I aimed to turn a potentially dull
subject into an engaging exploration. My goal was to
help newcomers open their minds to rational thinking
about these topics, rather than reacting emotionally. I
distilled the content to its essence, offering condensed
information that balances creativity and interest.
Whether I achieved this goal is for you to decide.

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Remember, when you're part of the system,
understanding how it works is key. Otherwise, you
might be caught off guard, destabilizing your position.
This book's core purpose is to underscore the
importance of learning from the past, applying those
lessons in the present, and envisioning the future. By
grasping the system and taking it seriously, you'll find
your path to navigating it with confidence.

In this book, I had lots of important things I wanted to

tell you. But I stopped myself because if the book
becomes too long, you might not want to read it
anymore. This book is for people who want to learn
about money, how it works, and start from the
beginning. If things get too confusing, you might get
bored – I didn't want that to happen.

I worked really hard to explain difficult things using easy

and interesting stories. I wanted to make sure things
stayed fun and not too hard to understand. I hope that
every page of this book has taught you many new
things and made you excited to find out more!

Thank you for reading.

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