Suppose in an alternate history, 21st century USA operated on the barter system... no system of money is used. It has all the technology of the 21st century (computers etc). Just no money. The knowledge of "what money is" and economics is there, but for whatever reason they've chosen to stick with barter.

Now the government decides to introduce money. What would be the steps to create money, get it into circulation and then get people to use money instead of barter? ie: how do we get the current american financial system from scratch.

I ask this question because I've tried to understand money creation, but I'm always a bit puzzled because it starts with a money system already in place... I want to understand how it would be created from scratch.


1 Answer 1


The way in which colonial governments forced indigenous tribes to use money was to impose a tax that had to be paid in money. For a textual reference, this is described in “Understanding Modern Money: A Key to Full Employment and Price Stability” by L. Randall Wray. (This concept is discussed quite often in Modern Monetary Theory, and articles are probably easily found using a web search.)

The way the locals could get money is via providing labour at a fixed wage (or goods at a fixed price). They could trade amongst themselves to allow those with a surplus of money to distribute it to those who did not get money this way. This has the effect of forcing monetary transactions into the economy.

As was typical for colonial powers, policing was brutal to ensure that the taxes would be obeyed.


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