You want one of Ali's stickers. Her stall only takes shells as money.
You find a beach covered in shells. Anyone can scoop up a bucketful!
Would Ali still love shells as money?
In some places, people really did use shells and salt as money.
Over time, many people chose gold and silver instead. They last, and they are rare.
Gold is heavy and hard to guard. You have a whole sack of coins.
Where do you keep it safe?
The bank gives you a paper note. It says: swap me for gold any time. Now you carry paper, not a heavy sack.
About 1,000 years ago, people in Chengdu, China, used paper notes instead of heavy coins. Later, there were not enough coins behind the notes, so they lost worth.
The notes were a handy way to avoid carrying heavy coins. Then the government took over making them, and kept too few coins behind them.
Source: Jiaozi, early Chinese paper money (Wikipedia) · History of money (Wikipedia)
Ben's bank has 10 gold coins. It gave out 30 paper notes! On Monday, Cara and everyone else ask for gold.
What happens?
In 1933, America's government told most people to hand in their gold. They were paid for it, but could not keep it.
In 1971, America stopped letting other countries swap dollars for gold.
Today, most money is numbers in bank accounts. You can't hold them, but you can spend them.
Put the story of money in order. Tap what came first, then next.
Money changes shape.
Shells, then gold, then paper, then numbers. Its jobs stay the same: swap, save and measure. Saylor calls money a battery for your work.
Here is a puzzle. If money is now numbers, who decides how many there are?
Who makes new money? Find out in chapter 4.
🧠 What you learned
- Money has changed shape again and again
- Paper notes began as promises of gold or coins
- Today most money is numbers in bank accounts
🎯 Question 1 of 13 · Easy
What did people really use as money in some places long ago?
Why would a beach full of shells make shells poor money?
Why did people like gold as money?
What was the trouble with carrying lots of gold?
What did a bank note promise at first?
About how long ago did paper money start in China?
What happened in 1933?
In 1971, who could no longer swap dollars for gold?
Today, what form does most money take?
Ben's bank has 10 gold coins and gave out 30 notes. Why is that risky?
Which list matches the order in our story?
In China, what went wrong when there were not enough coins behind the notes?
Shells, gold, paper and numbers look very different. What do they share?
Well done!
You earned a badge: From shells to gold to paper
Education, not financial advice. Never put in money you can't afford to lose.
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Gold and money: 1931 and 1933
Gold and money parted ways in steps. In 1931, Britain's pound left the gold standard. On 5 April 1933, Executive Order 6102 told most Americans to hand in their gold by 1 May. That meant gold coins, bullion (gold bars) and gold certificates (paper receipts for gold). They were paid 20.67 US dollars an ounce. There were exceptions, such as up to 100 dollars in gold coin per person and collectors' coins.
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Gold and money: 1934 to 1974
In 1934, America raised the official gold price to 35 US dollars an ounce. In 1944, 44 nations met at Bretton Woods and agreed a system in which the US dollar could be swapped for gold at that price. On 15 August 1971, foreign governments could no longer swap dollars for gold. Americans could own gold freely again from 31 December 1974.
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Why did 1971 happen? Two accounts
Accounts of the 1971 decision point to strain on the Bretton Woods system. America was spending more abroad than it earned, and its debt was growing from the Vietnam War. By 1966, non-US central banks held 14 billion US dollars, more than America's gold reserves. Michael Saylor tells it as a long slide: he says countries left gold in 1914, and the US defaulted on gold in 1971. Both describe promises to hand over gold growing bigger than the gold held.
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Goldsmiths and banks
Early bankers such as goldsmiths took in gold and issued paper notes that could circulate as money. Robert Breedlove, who hosts the Saylor Series, calls early banks money warehouses: the receipts became the money. He also describes the upside: a bank lends savers' gold to entrepreneurs and pays the saver a yield.
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Banks and bank runs
Goldsmiths also lent some deposits out. The notes could be cashed on demand, but the loans came back later. That was an early form of fractional-reserve banking: keeping only some of the money to hand. Later, some banks issued notes far in excess of the gold and silver they held. If too many people ask for gold at once, the bank cannot pay. That is a bank run.
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How banks answer runs
Modern systems have defences. Deposit insurance pays each saver back up to a set amount, so there is less reason to rush. A central bank can also lend to banks in a crisis, as a lender of last resort. Experts note that both fixes can make banks less careful with risky loans. Still, the benefits are commonly believed to outweigh that cost. In 2007, Northern Rock, a UK bank, suffered a run. The 2008 crisis brought a wave of bank takeovers by governments.
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Coins and paper are both old
Coins are credited to the kingdom of Lydia in Asia Minor, around the 7th century BC. Paper money came in Song dynasty China in the 11th century. The first notes, called jiaozi, appeared in Chengdu to replace heavy coins, and the government took over making them in 1023. Later notes were issued without enough coins behind them, and inflation (rising prices) followed. These steps overlapped, and different places moved at different speeds.
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Good coins, bad coins
Michael Saylor argues that money follows a long cycle. Good rulers mint good coins. Later rulers debase them, which means making them with less metal. Conquerors then melt and re-mint, and winners write the history.
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Gold's strengths
Michael Saylor argues that for thousands of years gold was the best way people had to store energy. The host, Robert Breedlove, adds that gold's job was final settlement of large deals. Saylor calls the 1870 to 1914 gold standard reasonably stable, like a good mechanical watch.
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Gold's weak points
Saylor says gold was too heavy and slow for a fast global economy. Storing it means trusting a bank, a city and a government. In his view, gold in one place is easy to seize, as in 1933. The 1933 order gave a different reason: the government said hoarding gold was hurting the economy during the Depression.
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Not everyone loved gold
In the 1880s, grain prices fell steeply. In the depression of the 1890s, US farmers went bankrupt. Silver supporters blamed a money supply that could not grow. Defenders of gold blamed better production and transport. In 1896, William Jennings Bryan gave his famous "Cross of Gold" speech, asking for silver as well as gold.
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Did gold deepen the Great Depression?
Economists such as Barry Eichengreen, Peter Temin and Ben Bernanke blame the gold standard of the 1920s for part of the Great Depression. They say it stopped countries from helping their banks and growing their money. A 2024 study of 27 countries found that leaving gold helped them recover. Economists still argue about how far this applies to every country.