The Ascent of Money

The Mountain of Money

Idealists beginning with Karl Marx have excoriated money and the “cash nexus” that they believe threatens human relationships. However, the only societies that existed without money were singularly ill-equipped to survive. Hunter-gatherer cultures lacked money and had remarkably high rates of violent deaths. The Inca Empire had no money, but Francisco Pizarro – who was very interested in money – conquered it almost single-handedly. In Bolivia, he and his men discovered a mountain of silver ore they called Cerro Rico (“rich hill”). They sent tens of thousands of tons of silver back to Spain, which discovered something new and strange: All this money did not make it rich. The increase in the money supply merely led to increased prices. In some ways, Spain’s silver impoverished it by preventing the development of the viable industries and democratic governmental structures that could have helped it fit a changing world.

The Birth of Banking

Meanwhile, in Italy, the Medici played midwife to the distinctly modern institution of banking. There, as elsewhere, people who needed credit had to use high-interest loan sharks who encouraged...