Trade is the bedrock upon which all civilization is built. It is essentially the practice of exchanging goods and services one has, for goods and services one needs.

This is necessary because no one is an expert at everything. Generally, people are really good at one or two things, moderately good at a few other things, and crap at everything else. So, without trade those who were good at growing corn, wouldn’t have much to eat other than corn, and their farming equipment would likely be made of leaves and twigs, unless they just happen to be good at smithing as well.

Oh, sure, they could also start farming cows for their meat, but they’d probably be terrible at it. Half the livestock would die, and the other half would want to. So instead, the corn farmer would just go to the local butcher, who might be getting sick of eating beef every single day, and exchange a bushel of corn for a nice, juicy steak.

These days we use money, but in principle it’s the same thing. We exchange what we have for currency, which we then exchange for what we need. Currency makes the whole process simpler and easier. Buying stuff doesn’t have to happen at the same time as selling stuff, and the value of an object can be fine-tuned to a much more precise degree.

Of course, there was a time when currency had a lot of value because it was something with a lot of value: gold! We used gold and silver as currency because these precious medals had an inherent value to us, primarily because of their rarity and the fact that you couldn’t just make more of it. Eventually, we started using paper that was backed by gold. Banknotes that represented a set amount of gold stored at a particular bank. This eventually evolved into something called ‘fiat money,’ which only has value because the government says it does. And this has worked pretty darn well for us over the past four decades. We’ve all been using fiat money without issue.

Well… most of us have. Apologies to all those living in Zimbabwe but I wouldn’t have blamed those troubles on your currency, but on your shit President.

Of course, this is something most people already know; or at least, those who’ve taken macroeconomics know. But the point is, currency works. And without it, we wouldn’t have a society.

Which is why I’m a bit perplexed at a recent episode of My Little Pony. It’s the episode where everypony abandons the Equestrian Bit (EQB), and goes back to a traditional bartering system of economics.

What is the nation coming to? Continue reading →