Once upon a time people lived in societies without money. Nevertheless everyone was busy. The hat-maker made hats, the boot-maker made boots, the candle-maker made candles. What they enjoyed most of all was to haggle and barter. Boots were exchanged for candles and hats for boots. The problem was that often the candle-maker did not need boots and the boot-maker did not need a hat. Because of this problem people had to travel far and wide to find a suitable swap.

One morning the hat-maker woke up wearing a wizard’s hat. Inside the hat was a great idea. Why didn’t everybody exchange for something they all desired? What everybody in that land desired was gold and other precious metals. These metals were also very useful as they were easy to break down into smaller pieces and they could be made into different shapes. Gold was particularly valued as it did not corrode. Everyone was delighted and the number of exchanges increased dramatically. The hat-maker sold her hats for gold and then used the gold to buy gloves. The glove-maker then used the gold to buy a winter coat and the coat-maker used the gold to buy boots. In this way the gold continued to pass from hand to hand.

The trouble was that there were brigands in the land who also loved gold and silver. People were frightened of carrying the gold on their travels or having a pile of gold in their homes in case it was stolen. The solution came from special people who worked with gold and silver. They had to have strong, safe places to keep the metal and were called bankers because, in Italy, where they first appeared, they sat on a bench to do their work (banco is old Italian for bench or table). So the traders left their gold and silver with the bankers.

The bankers then had a bright idea of their own. Some people seemed to have lots of gold and silver and others didn’t have any.