I recently finished Money: The True Story of a Made-Up Thing by Jacob Goldstein, co-host of NPR’s Planet Money podcast. As with Planet Money, the book has something of value for people well-versed in economic history/know-how as well as those completely new to anything economics. The book also shares Planet Money’s uncanny ability to use (often quirky) stories to make a point. I found Money to be a short, digestible, and – given its length – surprisingly comprehensive look at the history behind society’s evolving definition of, use of, and attempts to reign in the power of money.

The biggest takeaway for a reader of any background is found in the book’s conclusion: “…the reminder that there’s nothing natural or inevitable about the way money works now. We know money will be very different in the future; we just don’t know what kind of different it will be.” We all have so intensely internalized what “money” looks like, what it can and cannot be, what government actions will cause inflation, that even people swimming daily in finance and economics forget how malleable the nature of “money” has been.

This valuable lesson comes from the book’s rich history of what societies have used for money and how they’ve dealt with certain difficulties along the way. The barter economy Adam Smith described in Wealth of Nations, the book points out, never really existed. People always exchanged their stuff for what they wanted from other people. There wasn’t any currency as we think of it at first, but there was reciprocal gift-giving. “A power move, like insisting on paying the check at a restaurant,” as Goldstein puts it.

I found it notable that, despite not having the bustling marketplaces we see today everywhere in the world, it was still commerce that brought the earliest communities together: The Greek agora was meant to act as a meeting place for civic discussion, with a sideshow for a place to allow people to exchange their wares. “In the long run, shopping won out over public discourse.” I’ve always thought people underestimate the power of commerce to bring communities together, and this seems to be an illustration of that power. (Sadly perhaps, people have shown themselves to be much more interested in going to the farmer’s market than town hall meetings.)

For as long as groups have declared power over others, they have collected taxes. But without a standard representation of value like money, cloth and grain acted as something the government in China could collect around the 11th century. So everyone had the annoyingly inefficient responsibility to weave or grow to some extent just to pay taxes. The arrival of coin currency from invading Mongols allowed Chinese people to specialize in their crafts and manage to pay taxes by focusing their time on what they did best. This allowed China to flourish centuries before the future economic powerhouses of Europe.

But the man who drove out the Mongols and eventually founded what became the Ming Dynasty wanted to Make China Great Again, and that involved getting rid of the “money” system that had allowed China to be the world’s most advanced nation by the late 14th century. Soon China went back to the cloth-and-grain system and regressed tremendously. The removal of money from China is not exactly the entire story here, but the book shows an interesting experiment about the economic impacts of introducing and then removing money.

The great lesson from this time is that China had, for centuries, thrived under a system where money was not tied to anything like a precious commodity. Money was worth something because everyone else just believed it was worth something. And this is essentially what defines our monetary system today. The dollar cannot be eaten or boiled down into jewelry. Short of the government accepting it as payment for taxes, it doesn’t have any value if everyone decided one day that it no longer had value.

But historically the idea that money was tied to nothing but the government’s enforcement (sometimes by death) of its value typically didn’t sit well with people. Linking currencies to gold or silver was thought to establish credibility, and somewhat limit the ability of warmongering sovereigns to inflate their way out of any problem. (Of course even under such regimes, people would fudge the weight of their coins, and sovereigns often spent their way to fiscal ruin.) The United States dollar was no exception. The convertibility rate of the dollar to gold was essentially fixed, giving predictability to the international financial system and confidence to the users of dollars.

Fast forward to the late 1920s. A banking ‘panic’ – where people all at one time were worried their banks would fail and their deposits would be wiped out – started as any of them did around then. People decided they’d convert all of their dollar deposits into gold. This was before the FDIC insured bank deposits, so people thought the safest place for their savings was out of the bank and into gold. But banks only have so much gold, and as the gold supply dwindled, it created a vicious feedback loop where people’s fear created a run on the bank’s gold deposits.

The Federal Reserve – only created recently in an effort to smooth over panics and financial crises like this – decided to raise interest rates. This was what the playbook said for countries who were using the gold standard. Raising interest rates was as a way to incentivize people to keep their money in banks and prevent the impending bank runs that would cause a financial crisis. The higher rates meant depositors would get higher returns. But raising interest rates also means investment becomes more difficult. And when there’s a contraction of the money supply, economic activity shrinks.

And this, dear readers, is how the Federal Reserve made an otherwise garden variety recession into the Great Depression. FDR, against all the doomsday prediction of his advisors, took the dollar off of gold. It allowed for a speeder recovery and showed, yet again, that our assumption of what money needs to be can cause us to be quite dogmatic about what will happen when the nature of it is changed. FDR, according to Goldstein, stopped the bank runs with his comforting fireside chats. Indeed, when it came to bank runs, it really was that the only fear we have is fear itself. Once everyone thought banks weren’t at risk, they stopped pulling out their money and it became a self-fulfilling prophecy. Yet again, the shared trust in the credibility of the dollar and banks was what gave the system its value.

The history of central banks has shown societies’ delicate experiments with how to best prevent financial crises and the United States is no exception. Alexander Hamilton pushed for a “national bank’ at the country’s outset. Populist Andrew Jackson thought that banks and the coastal elites that ran them had too much control over the inland farmers and countrymen he was claiming to represent. So he got rid of the national bank.

What dominated for decades was a period of ‘free banking’ where any bank could print their own currency. At one point, there were 8,370 different kinds in circulation. A helpful reference book would tell merchants the value of each bank’s bill and, in an effort to prevent counterfeiting, the appearance of each bank’s currencies. It sounds like total chaos, and in some ways it was. The system led to financial panics every decade or so and the US went back to a national bank called the Federal Reserve in the early 20th century for good reason.

But the frictions in the system weren’t as catastrophic as you might think. As Goldstein says, “Travelers typically lost around 1 or 2 percent when they exchanged paper money, in the same ballpark as the fee I pay today when I can’t get to my bank and have to use another bank’s ATM.” Also, perhaps surprisingly, there weren’t all that many totally fraudulent banks. Today, imagining 8,000 different corporations printing their own Monopoly money sounds insane. But it worked better than you’d think!

Today, the Federal Reserve is run by 12 regional banks and it sets short run interest rates on the open market by selling treasury bonds. That might sound like a lot of confusing word soup to someone not totally in the mix of finance and economics. But just know that what the Federal Reserve does today is a little different than what it did pre-Financial Crisis, more transparent than what it did before the 1980s, and much different than what it did when the dollar was still chained to gold before the 1930s.

There is an important distinction between “money” and “currency.” Currency is the coins and bills we can hold in our hands. But money can be numbers on a screen and what banks do. Put another way, there is a concrete tangible amount of currency, but the amount of money in the system is always changing. One of my dollars deposited in a bank can be lent out to someone looking to start a business. That businessperson take the dollar and pays a construction worker to build an office. I still have a dollar, the investor has a dollar, and the construction worker will do something with that dollar. This “money multiplier” is what causes economic activity to thrive, and is in part what stopped China from reaching its full potential during the Ming Dynasty. But this distinction, or at least the ability to have the distinction, is pretty counter-intuitive and seemed primed for disaster for most of history.

Even our definition of a “bank” should be flexible. Today, as with most of history, a bank does two things: takes in and holds people’s money; and lends out money. Why do banks need to do both roles? Money shows a scenario where some institutions are essentially ‘money warehouses’ that store your money, while others are the ones that take risks and lend to borrowers using the money of investors. The mismatch between people wanting to safely deposit their money and the risks banks take is essentially where many frictions in the financial industry lie.

The arrival of cryptocurrencies has shown potential disruption to the idea that only the Federal government can control currency. If our dollar bills have value only because everyone else agrees they do, why would numbers on a ledger be any different? So far, the issue is that the fluctuating value of Bitcoin makes it hard to be used as a ‘storage of value.’ I’ll admit that Bitcoin has been around much longer than I predicted, but it still has too many of the problems of historic attempts at money. Blockchain technology and cryptocurrencies may have some value for society in the future, even it currently looks unlikely to replace the fiat money system we have now. If there’s one lesson about monetary history and Money, it’s that you should never count out changes that at first glance look pretty absurd.

Money has been printed by governments and it’s been printed by private banks. It’s been backed by precious commodities like gold and silver and it’s been backed by nothing. It’s been represented as coin and bills and it’s been represented merely as numbers on a screen. Its confusing nature has caused financial panics even when there was nothing wrong. Our relationship, control, and treatment with the concept of money will continue to change. A book like Money shows us how we should learn to accept and accommodate that inevitable change.