What's wrong with PRICE-GOUGING?
Coinage evolved from actual goods that were exchanged. Arrowheads and ax-heads and spear-heads were exchanged like currency, and in some cases early coins did resemble these things. In China, they had 'Knife money,' which was a standard 'coin' made to resemble a knife, obviously an official successor to the use of knives as a proto-currency. Other tokens that were used were cowrie shells, obviously not government issued.
While you are technically correct, we do not 'know' that this happened this way, the progression from valuable goods to coins is quite clear and intuitive. There was undoubtably a period between the time when people exchanged arrow-heads and used them to actually be arrows, to a time where some people used arrow heads as currency with no intention of using them as arrows, and then the government deciding to issue coins to replace the actual sharp arrow heads.
We do know in fact that Adam Smith was wrong and virtually no primitive societies used barter in exchanges between the members of the society, which are the vast majority of exchanges. Barter was only common in their equivalent of foreign trade, trade with other tribes.
In exchanges between the members of the society they used gifting as a form of exchange to avoid the biggest problem with barter, the double coincidence of wants, that someone who needs a different good that he holds has to find a barter partner that not only has the good that is needed but who wants the good being offered in exchange. If this wasn't hard enough the need for each others good have to occur at the same time.
In gifting the individual with the immediate need would find a member of the society that had the needed good and would express admiration for the needed good. The owner of the needed good would gift the it to the needy party with the tact understanding that the gift exchange created an obligation to reverse the gifting at some time in the future. Exchanges within say a tribe didn't depend on barter then, they depended on the same thing that they do today, credit and debt.
Gifting obviously required the trust on the part of the initial gifter that the recipient would honor the unspoken obligation to reciprocate with a gift in the future. This was sufficient in a small society of say less than fifty families where it is possible for everyone to know everyone else therefore you would know who the deadbeats are who won't honor their obligation to return the favor of a gift.
This is how government first got involved in the economy. In larger society where you didn't know the needy partner in a gift exchange you would ask the trusted authority, the tribal chief or a religious leader for example, if this person could be trusted to meet the unstated obligation of a return gift in the future.
This evolved in time to more formalized system were the trusted authority would guarantee the exchange, that the debt would be paid back, for a small fee of course. The trusted authority would require the borrower to deposit something of value to establish his worthiness. This over time evolved into the temple form of exchange, the temple would require a deposit of say grain or an obligation to do so in the future and would issue a letter that the bearer had this much credit with the temple. The letters were exchanged for the goods and this was an early form of our fiat credit and debt based money.
This is how you can have a money system based on say cows or shiffs of grain. (sheaves?) you didn't have to lead the cow to the market to barter and then on to the butcher to make change. The relative value of goods and services were fixed. A loaf of bread's relative value was fixed at say a hundredth of a cow or a fifth of a temple offering. Note that this puts the lie to another of Adam Smith's fables, it requires price fixing, the value of a good was determined by authority, who fixed the prices, not by the market.
The temples evolved into banks. It didn't take the banks very long at all to realize that they could create much more money than they had deposited in their stores since all that they had to do was to write on a piece of paper or a clay tablet to create money. The government had to step in to guarantee the currency and to control the banks.
Commerce got done for thousands of years this way before the emergence of coins made out of metal. When coins were invented in the ninth century BC they initially were used just for small purchases where it was inconvenient to do the accounting every time.
The gold standard was actually little more than a failed experiment. The gold in the money has to be worth more than the intrinsic value of the metal. Arbitrage is a bitch and it always happens. As long as there have been metal coins they have always had a higher value as money than the value of metal as a result. The same holds true for money backed by gold. When the vast experiment with the gold standard ended with the war that it caused, World War I, it is estimated that only 10% of the money in the gold standard countries was backed by gold.
This is the problem with bitcoins. like our fiat money bitcoins don't have any intrinsic value, but unlike our fiat money they become more valuable over time because the effort required to "mine" new bitcoins, solving increasingly complex algorithms, increases their value. This makes them unsuitable to use as money. There was a point in time that if you borrowed a enough bitcoins from a friend to buy two coffees worth six dollars and waited one year to pay your friend back those same bitcoins that bought coffees before are worth thousands of dollars.
Why? Because bitcoins were dreamed up by libertarians who long for us to return to the economic suicide of the gold standard. They purposely designed bitcoins to become increasingly rarer in relation to the demand in the insane belief that the money becoming more valuable, what economists call deflation, is better than than the money becoming less valuable, the opposite of deflation, inflation. Once again, they are completely wrong. Deflation is horrible for the economy. It surely leads to recession and depression. It rewards the person who keeps their money in a shoebox under the floorboards and punishes investors, consumers and debtors.
