Betting on the future

Here is the scenario: I'm 10 years old, but I must seem like a regular Rock o' Gibraltar because all the neighborhood dudes trust me with their marbles when they go on vacation.

During one of these marble-babysitting jobs, I happen to meet a kid who's in a jam and needs marbles, like quick, for a tournament. Well, I don't own any marbles-exactly-but there's these beautiful agates sitting up in my room in their drawstring cloth pouch doin' nothing. And Jimmy won't be back till Sunday. Why couldn't I just lend a few solids and cat-eyes; plus the kid said when he gets his paper route money he'll buy me two extras for my trouble.

I think I have just described "fractional reserve banking." Once upon a time there was wampum, decorated belts, and large stones. But you don't always want to lug home a barrel full of peppercorns in exchange for your white beans. So that fizzled.

Later, folks would keep their silver coins safe by depositing them with the goldsmith. He would hand them receipts-which over time were traded as money, because everyone knew there was gold behind them thar papers.

One day it occurred to the goldsmith that he could do better than babysit. It wasn't really necessary to have all the depositors' savings on site; he could keep a fraction in reserve and lend the rest, at a little profit, even though he had made a deal to give people back their valuables on demand. OK, technically speaking, this would leave more notes than reserves to redeem them with. But what are the chances of a run on the smithy's?

Footnote I just read in my KJV Bible at Romans 13:8 ("Owe no one anything except to love"): "taking a loan" is "banking on the future." Interesting perspective for our times.

To hear commentaries by Andrée Seu, click here.