The history of the money

In order to understand about the currency crisis in Somalia we have to understand about the money; the essence of the money, what the money is all about; and to understand that we need to go back to the history of it. How its usage had started and how it has came to the way it’s used now. We have to also understand about the bank and how it correlates with the money.

At first the people used to barter, or trade their extra produces that they can spare (don’t need) for the other items that they need which they don’t/can’t produce themselves but others have labored to produce it. In order something to have a value it has to be a produce on which time and energy had spent by someone.

Then came the coins. The usage of the money started with valuable coins: made of precious metals gold, silver, bronze. These coins, themselves a produce, have their own value: buying power. So the people used to exchange/trade their extra seasonal produces, perishable or not, for these valuable items which can be stored for longtime time in order to save something for the bad weather. Also they used to buy with these valuable items for the necessities they themselves don’t produce.

Then come the Bank: which simply started as a safe-room and a record keeper. The people entrusted the bankers with their valuable coins to keep them safe for them against the losses: of burning, of thievery, etc. The bankers produced paper receipt which can easily be moved around with than the heavy metal coins. Those receipts were simply a guarantee that the bearer of that receipt will be paid at request the amount of gold, silver, or bronze coins on that receipt by the guarantor, the issued bank. The people used those receipts, money paper, for their current trades while knowing that its last owner should go to the counter of the issued bank and could anytime collect its value written on it, in gold, silver or bronze.

Sometime later some cheat bankers, like our later-day’s Gass, realized that it will be unlikely to happen that all the depositors come to bank at one time to collect all their deposits; that means they (bankers) will always be in possession of someone’s coins; those cheat bankers then started producing their own paper receipt which they loaned, of course with interest, to the propertied business people and the rulers/governments who needed the cash. This is where the usury ( ribaa) started; because borrowers used to payback more of the same coins on top of ones written on the money paper (receipts) they borrowed! Same as the way the banks loan us today.

So recently, has the rulers and the state governments came into involving in the banking business as regulators and overall guarantors of the private banks still with a money ( paper receipt and precious metals coins) based on gold; after sometime the governments also issued their own money, still based on gold, for the same purpose as of the cheat bankers, issuing money papers for which they don’t have its gold. Eventually, the peoples of world found themselves chasing around valueless paper money (paper receipts and cheap metals coins) with no guarantee of its value in gold. Yet, very recently, and before the Bretton Woods Agreement, the value of any money in the world were pegged to its respective gold values.

The goodness in governments’ involvement of the money business was in the regulating of its issuance; controlling the counterfeit; collecting taxes with it; and most importantly enforcing its circulations by paying with it the salaries of its workers. Those regulatory actions, by boosting the confidence of the consumers, have lended it an artificial values which enabled it to buy real valuable items on which the time and the energy had spent! The artificial value of any paper money depends on consumers confidences on its owner government which in turn depends on the monetary or military power of that government. The rich governments, who collect more taxes on their rich and productive peoples, are rich and military powerful and thus their moneys are strong and more valuable. The poor governments, whose people are less productive thus collect less taxes and/or who spent their tax money wrongly, their moneys value less than the rich governments’ ones; and sometimes become worthless. It recently happened to ZIMBABWE to found its dollar currency , when consumers confidences on it has fallen to the bottom for political reasons, overnight became worthless which forced the Mugabe government to switch to the usage of US dollar and South Africa’s rand!

In order for some thing to have a value, time and energy have to be spent on producing it; that means there must be a need for that thing, so that time and energy have to be spent on it. Every little time or no time has spent on producing money and thus there is intrinsic values in it: (paper receipts and cheap coins) have no value themselves.

Conclusion: with the above in mind, let us ask ourselves these questions about the Somali shillings: who is its legitimate owner? Which government/who regulates its issuance and controls its counterfeit? Who can enforce its circulation and with what means?

These are the factors that set the artificial values of itself inherently valueless paper moneys. Without valid answers to these questions, more importantly when there is regulator of its issuance, when anyone foes or friends can print it out, there is valid money in there. As a result the currently-in-circulation Somali Shillings are all nothing but worthless counterfeits!

Therefore, switching to other currency is imperative for the sake of the Somalis businesses and consumers, if something are to saved from already dilapidated economy.

Suggestions: with every limited options: a) an issuance of our own new currency b) a usage of US dollar c) or a usage of another friendly government’s currency, I should only commend the option B; for option A not being affordable whereas C is unavailable!

By Ahmed Khalif, June 06, 2021