Have you ever noticed how the four stages of money parallel the four stages of matter?
Barter, the direct exchange of goods and services, corresponds neatly to solid matter – which, in a very real sense, it is. Swapping one goat for a bushel of cabbages, or one goat for the labor of plowing three acres, is certainly a solid exchange. The advantage of barter is that it’s difficult, but not impossible, to cheat in such an exchange; a skinny sickly cow may be worth less than two goats, or one’s plowing may be of inferior quality – but in general the value of such exchange is pretty clearly seen and understood.
The disadvantage of barter is its clumsiness. If you’re a farmer who grows potatoes, and you have a toothache, you may have a hard time persuading the town dentist to fix your teeth in exchange for a lot of potatoes. It’s far easier to swap your potatoes for some kind of goods that everybody wants, and on whose value everybody agrees, and then go looking for a dentist you like. For this reason – some seven thousand years ago, as near as the archeologists can tell – people developed specie money, still called liquid currency. Even in that early age, everybody could agree on the value of certain useful metals – gold, silver and copper – so reliably equal weights of these could become trade-standards. The oldest form of money the scientists have found is uniform silver rings, made of extruded wire wrapped around a rod and cut at the same point. This is also, apparently, the beginning of the custom of wearing earrings; in an age before the invention of pockets, one’s ears were the safest place to keep one’s money. The advantage of specie currency is its fluidity; as in the example of the potato farmer, you can swap any goods or services for the trade-standard, and then exchange the trade-standard for anything else. The disadvantage is, again, that it’s difficult but still possible to cheat on its value – by giving short weights or less-than-pure metals. Still, such cheats are necessarily minimal, and liquid/specie money is generally as reliable as barter.
Sometime during the Middle Ages, modern banking was invented – and paper currency with it. It began with jewelers, who usually had big sturdy safes to protect their materials: safes where other people could rent space to protect their gold or silver money. The jeweler/banker would then give the renter a paper receipt for the stored coins, and the renter could then trade the paper receipt for goods and services as if it were the real coins. This corresponds to the gaseous state of matter, in that paper promises – like gas – can expand to fill all available volume. Paper receipts can be forged, or outdated, and otherwise make cheating easy. There are banks and whole governments today whose paper-promise money is backed up by questionable ownership of questionable goods – or by nothing at all. This is the stage where inflation(!) becomes common.
Finally we come to credit, which corresponds to plasma in that it takes constant input of energy to maintain it at all. Credit is all promise and no substance, maintained purely by faith: faith that the borrower will repay the promise with real money, and faith that the lender will – if not repaid – come after the borrower with the force of law. Obviously, credit can expand as widely as gas – and can collapse on no more than a loss of faith. Is it any wonder that the portions of our economy that were based on credit have begun failing? A sober reflection would show that they should never have existed in the first place.