The Betrayal of Money: Everything You Need to Know About Inflation Threatening Your Wallet

We use money every day. From the morning coffee, commuting expenses, lunch, to evening grocery shopping. Money is like the air that accompanies almost every moment of our lives. But how much do we really know about this familiar money? What if one morning, the coffee that cost 5,000 won yesterday suddenly costs 10,000 won, and the next day 20,000 won? While your salary remains the same. This is the act of a thief quietly stealing the value of the money in our wallets called ‘inflation’.

This article is a long journey exploring the vast history surrounding money—from the birth of money, the emergence of the monster called inflation, to the new currency wars in the digital age. From the tricks of ancient Roman emperors to Zimbabwe’s 100 trillion dollar bill, we delve into the essence of money and the history of its betrayal through intriguing stories and examples. By the end of this journey, you will see the paper and numbers in your wallet in a completely different light.

Part I: How Was Money Born?

Have you ever imagined a world without money? Would everything be simpler and more romantic than now? Far from it. It was probably a much more tiring and inefficient world. Money is one of humanity’s greatest inventions. To understand why, we must travel back in time to the world before money was born.

1.1. Barter, the Exhausting Beginning of Trade

Once upon a time, there was a very diligent farmer. He took a cherished cow to the market. His modest goal was to get a few loaves of bread, a pinch of salt, and a new pair of shoes to replace his worn-out ones. But the market did not work as he expected. The baker said, “One cow is too much. I only need a chicken…” The salt seller said, “I can give salt, but I need firewood now.” The shoemaker said, “Nice cow! But my wife wants fish.”

The farmer sighed deeply. This was the biggest problem of the barter era, the ‘double coincidence of wants’—a very strict condition where the person you want something from must simultaneously want what you have for a trade to happen. Eventually, the farmer embarked on a difficult journey: selling the cow for firewood, exchanging firewood for salt, then trading firewood for fish, and finally getting shoes. After wandering the market all day, he was utterly exhausted. This process clearly shows other problems of barter:

• Indivisibility: You cannot cut a live cow into pieces worth one loaf of bread.
• Lack of a Standard Value: How many loaves of bread equal one cow? This had to be negotiated every time.
• Portability and Storage: The farmer had to carry the heavy cow around, unsure if the trade would succeed, and even if the baker accepted the cow, storing it without a barn would be problematic.

Barter was exhausting and inefficient. Humanity had to find a better way to solve this inconvenience.

1.2. What If Everything Could Be Money?

Amid barter’s inconveniences, humanity found its first solution: using an item that everyone wanted as an intermediary in exchange. This was the beginning of ‘commodity money’. Throughout history, various items served as money. In agrarian societies, grains like rice or wheat, or livestock played this role. Roman soldiers were even paid in salt, which was durable and universally needed, along with cloth and leather.

Among these, shells were especially successful commodity money. Their rarity inland, durability, and small size made them widely used in ancient civilizations including China. The Chinese character for money or wealth, ‘貝 (shell)’, is a pictogram based on shells, showing how deeply commodity money is rooted in our history.

From this emergence, we naturally understand the three core functions money must have:

1. Medium of Exchange: A bridge eliminating barter’s inconveniences.
2. Unit of Account: A standard to express the value of all goods, e.g., “This cow is worth 10 bags of rice.”
3. Store of Value: The ability to preserve value over time.

However, commodity money was not perfect. Grains rot, livestock can die, and salt dissolves in water. Humanity’s thirst for better money continued.

1.3. The Allure of Shiny Things: The Rise of Metal Money

To overcome commodity money’s limits, metals like gold, silver, copper, and iron emerged. Metals solved nearly all the problems of commodity money:

• Durability: They do not rot or change, preserving value permanently.
• Divisibility: They can be melted and divided without losing value.
• Portability: Small size and weight can hold high value.
• Homogeneity: Gold from anywhere with the same purity has the same value.

Early metal money was ‘weighed money’, where value was calculated by weighing metal pieces during transactions. Examples include China’s knife-shaped ‘Mingdao coins’ and spade-shaped ‘Bu coins’. Such coins have been found in ancient Korean sites, showing active trade between Korea and China. Records also show that Korea’s Gaya period used iron lumps as money.

1.4. The Seal of Trust: The Invention of Coinage

Weighing money every time became cumbersome, so humanity made its most revolutionary invention in money history: ‘coins’. Around 650 BCE, the Kingdom of Lydia in modern Turkey minted the world’s first coins from electrum, a natural gold-silver alloy. The key was not just shaping metal but stamping the ‘king’s seal’ on them.

This seal was a promise by the state guaranteeing the coin’s weight and purity. People no longer needed scales; counting coins sufficed. Trade speed and trust exploded, and commerce flourished. But this also opened Pandora’s box: once the state guaranteed money’s value, it gained the power to deceive it. The king’s seal symbolized trust but later became a tool to create the monster called ‘inflation’. The history of money is both a story of building convenience and trust and how that trust was betrayed and exploited. The evolution of money reflects the outsourcing of trust from individuals to external authority. Barter required trust only between two parties; commodity money required society-wide belief in an item’s value; coinage concentrated trust in the state. This ‘outsourcing of trust’ enabled large economies but also planted a fatal weakness: if the state betrays trust, the whole society can collapse.

Summary of Money History

Part II: The Birth of the Monster Called Inflation

Coinage advanced commerce but opened a dangerous temptation for rulers. When needing war funds or building luxurious palaces, raising taxes provokes public backlash. But secretly increasing cheap metals in coins was easier and stealthier. This marked the start of state-driven inflation, the ‘betrayal of money’.

2.1. The Copper-Nosed Roman Emperors

Our first case is the vast commercial empire of Rome. In 64 CE, a terrible fire devastated much of Rome. Emperor Nero planned grand reconstruction but lacked funds for both rebuilding and his lavish lifestyle.

He devised a cunning plan: ‘debasement of currency’. He secretly ordered the mint to reduce silver content in the denarius and increase cheap copper. The coins looked similar but had less value. Legally, they held the same value as old silver coins. Nero paid soldiers and contractors with this ‘fake money’, effectively minting more coins with the same silver.

News spread quickly. Clever Romans hid old pure silver coins and rushed to spend the debased ones. The market flooded with bad money while good money disappeared—a phenomenon known as Gresham’s Law: “Bad money drives out good.”

Nero’s trick was just the beginning. Many Roman emperors followed suit when finances were tight. By the mid-3rd century, silver content dropped below 5%, turning coins into copper with a thin silver coating.

The result was disastrous. As coin value plummeted, prices soared. Hyperinflation ravaged Rome’s economy. People lost faith in coins and began paying taxes with goods like grain or cloth. The monetary economy collapsed, reverting to barter. In 301 CE, Emperor Diocletian issued the ‘Edict on Maximum Prices’, setting price ceilings on goods and services as a drastic measure. But merchants hid goods rather than sell at a loss, black markets flourished, and the policy failed. Distrust and economic chaos contributed to the Western Roman Empire’s fall.

2.2. The King’s Debt, The Kingdom’s Pain: Henry VIII’s Great Debasement

Jumping to 16th-century England, Henry VIII, famous for six wives and founding the Church of England, waged frequent wars and lived lavishly, always short on money. He dissolved monasteries to seize wealth but still fell short.

He adopted the same method as Roman emperors. From 1544, Henry initiated the ‘Great Debasement’, drastically lowering silver purity from 92.5% to just 25%.

These coins earned Henry the nickname ‘Old Coppernose’ because the copper beneath the thin silver plating showed through the king’s nose on worn coins. People daily saw the copper nose, a stark reminder of falling currency value.

The outcome mirrored Rome’s: soaring prices, economic chaos, and loss of trust in English currency across Europe. Merchants weighed coins before every transaction.

But there is a hopeful twist. Henry’s daughter, Elizabeth I, upon ascending the throne, prioritized restoring the broken currency system. In 1560, she recalled all debased coins and issued new high-purity silver coins. Though costly, this reform restored trust and laid the foundation for England’s rise as an economic power. This case shows that restoring currency trust is a political decision of national fate, beyond mere economic policy. When rulers show commitment to rebuild trust, the economy stabilizes.

2.3. Overflowing Silver, Exploding Prices: The 16th-Century Price Revolution

So far, we saw rulers causing inflation by producing bad money. But can inflation occur if ‘good money’ suddenly floods the market? 16th-century Europe was a massive experiment.

After Columbus’s discovery of America, Spanish conquistadors found huge silver mines like Potosí in Bolivia and shipped enormous amounts of gold and silver to Europe. This precious metal spread across Europe, causing money supply to explode.

Over about 150 years, Europe experienced the ‘Price Revolution’, with prices rising continuously—sometimes sixfold. This was unprecedented; prices had been stable for centuries.

This event teaches us another key cause of inflation: the Quantity Theory of Money. Simply put, if the amount of money (M) grows faster than the goods and services (T) it can buy, prices (P) must rise. In 16th-century Europe, silver inflows increased money supply rapidly, but agricultural and manufactured output couldn’t keep pace. Excess money chasing limited goods drove prices up.

Thus, inflation can arise not only from rulers’ deceit but also from systemic imbalances between money supply and production. While Rome and Henry VIII’s inflation was artificially caused by ‘fiscal necessity’, the Price Revolution confirmed the historical pattern that war funding needs lead to inflation. War demands huge costs; raising taxes is politically risky; debasing money is the easiest solution for rulers. The loss of value in Roman soldiers’ pay and English merchants’ coins abroad is a recurring tragedy when states shift fiscal crises onto citizens’ savings.

Part III: The Paper Era: Promises, Problems, and Chaos

Metal money was heavy and inconvenient, especially for large transactions requiring carts full of coins. This discomfort led to another revolution in money history: the birth of ‘paper money’. This light and convenient invention advanced commerce but unleashed inflation on an unprecedented scale.

3.1. The Invention of ‘Flying Money’

Surprisingly, paper money originated not in Europe but in 11th-century Song Dynasty China. Merchants in Sichuan struggled with heavy iron coins; buying a bolt of silk required 130 jin (about 80kg) of iron coins.

To solve this, merchants entrusted iron coins to trusted guilds and received paper receipts—‘Jiaozi’, the world’s first banknotes. People traded these lightweight notes instead of heavy coins and could redeem them for coins anytime. The value of Jiaozi was based on the promise of convertibility to metal money, the core principle of ‘convertible currency’.

Governments soon adopted this as official currency. Later, during the Yuan dynasty, Westerners like Marco Polo marveled at it. Europe’s first banknotes appeared much later, in 17th-century Sweden, for similar reasons.

3.2. The Hell of Hyperinflation

The era of convertible notes was peaceful as long as promises were kept. But what if governments broke their promise and printed far more paper money than metal reserves? Hell broke loose: uncontrollable price surges called ‘hyperinflation’.

History vividly shows horrific examples.

Case Study 1: Tears of the Weimar Republic (1921-1923)

After losing WWI, Germany’s Weimar Republic owed astronomical reparations. When France and Belgium occupied the industrial Ruhr region over payment delays, the government ordered passive resistance (strikes) and promised to pay workers’ wages.

With tax revenues cut and expenses rising, the government’s only choice was to print money—a ‘monetization of debt’.

The result was one of history’s worst economic disasters:

• Unimaginable price rises: A newspaper costing 0.3 marks in 1921 soared to 70 million marks by November 1922—over 200 million times.
• Money’s value vanished: People received wages twice daily and rushed to buy goods immediately. Money became worthless within hours. People hauled wheelbarrows full of banknotes; notes were cheaper than wallpaper or firewood and used as such.
• Middle class collapse: Life savings and pensions became worthless overnight, destroying Germany’s middle class. Their despair fueled extremism, paving the way for Hitler and the Nazis.

This nightmare ended in November 1923 with the introduction of the ‘Rentenmark’. Without gold, Germany backed the new currency with all land and industrial assets and stopped printing money. This dramatic case, called the ‘Miracle of the Rentenmark’, shows that money’s value ultimately depends on trust.

Case Study 2: The Worst Hyperinflations in History

Weimar was not unique. History records even worse:

• Hungary (1946): Post-WWII Hungary experienced the fastest hyperinflation ever. Prices doubled every 15 hours, and the government issued a 100 quintillion pengő note with 20 zeros. Causes were similar: war damage, reparations, and reckless printing. Hungary stabilized by introducing the forint and returning to the gold standard.
• Zimbabwe (2000s): The most recent tragic case. Under Robert Mugabe’s dictatorship and failed land reforms, agriculture collapsed. The government printed money to cover deficits, leading to the 100 trillion Zimbabwe dollar note, which couldn’t buy a few eggs. Bus fares changed daily; people abandoned local currency and used US dollars unofficially. In 2009, Zimbabwe abandoned its currency and adopted the US dollar officially.

Case Study 3: Joseon’s Lesson, Dangbaekjeon (1866)

This lesson is close to home. In 19th-century Joseon, Heungseon Daewongun undertook the massive reconstruction of Gyeongbokgung Palace, burned during the Imjin War. To cover costs, he issued ‘Dangbaekjeon’, a new currency worth 100 times the existing Sangpyeong Tongbo coins. But its copper content was only 5–6 times higher.

As expected, people hoarded high-value Sangpyeong Tongbo and used low-value Dangbaekjeon (Gresham’s Law). Money flooded the market, and prices soared. Within two years, rice prices rose sixfold. Facing chaos and public outcry, Daewongun banned Dangbaekjeon circulation after just six months.

Hyperinflation Comparison

Hyperinflation is not just rising prices; it is a disaster destroying the entire social trust system. When money becomes worthless, people give up saving, cannot plan for the future, and society distrusts each other. In Hungary, people bartered coats and boots for grain, regressing to barter. Thieves stole baskets but left money because baskets were more valuable. This painful lesson shows how society can regress primitively when the state breaks its promise to guarantee money’s value.

Part IV: The Maze of Modern Financial Systems

After two world wars and horrific hyperinflations, the world craved a more stable monetary system. The result is today’s complex modern financial system. Yet it remains vulnerable to the age-old challenge of inflation. The complete break from gold, stagflation, and the pandemic usher money history into a new phase.

4.1. Farewell to Gold: Nixon Shock and the Era of Fiat Money

In 1944, Allied representatives met in Bretton Woods, New Hampshire, to design a new world economic order. The ‘Bretton Woods system’ fixed the US dollar to gold (1 ounce = $35), and other currencies to the dollar, indirectly tying the world to gold.

This system worked for a while. But in the 1960s, the US printed far more dollars than gold reserves to fund the Great Society welfare programs and the Vietnam War. Countries like France and the UK demanded gold in exchange for their dollars, draining US gold reserves.

On August 15, 1971, President Richard Nixon announced the ‘Nixon Shock’, unilaterally ending dollar convertibility to gold. This broke the link and collapsed Bretton Woods.

This was a pivotal moment in money history. Currency was freed from gold’s physical shackles, relying solely on the issuing government’s ‘credit’ and ‘promise’. This marked the full advent of ‘fiat money’, the credit money era. All money today is fiat, its value not intrinsic but based on our ‘belief’ that governments and central banks will maintain stability. When this belief breaks, tragedies like Weimar can recur.

4.2. Stalled Growth, Soaring Prices: 1970s Stagflation

In the 1970s, after breaking from gold, the world faced a new crisis: ‘stagflation’—stagnant growth with soaring inflation, a combination mainstream economics struggled to explain.

The main cause was an external shock: the ‘supply shock’. In 1973, the Yom Kippur War led OPEC to quadruple oil prices and cut exports. As oil is the lifeblood of industry, production and transportation costs surged, triggering ‘cost-push inflation’.

This differs fundamentally from the 16th-century ‘demand-pull inflation’ caused by excess demand. Governments faced a dilemma: easing money supply to boost growth raised prices, tightening money to curb inflation deepened recession.

The nightmare ended with Paul Volcker, appointed Fed Chair in 1979. He crushed inflation expectations by raising interest rates to 20%—the ‘Volcker Shock’. Though it caused deep recession and high unemployment, it finally tamed inflation. Volcker’s resolve showed that in the fiat era, central banks’ key mission is maintaining ’trust in price stability’, sometimes at great cost.

4.3. Pandemic Aftermath: Inflation Debates 2021-2023

Recently, we all experienced pandemic-driven inflation—a massive economic mystery. Who was the culprit?

• Suspect #1: Supply Chain Chaos. COVID-19 halted factories and closed ports, paralyzing global supply chains. Scarcity pushed prices up. Russia’s 2022 invasion of Ukraine further spiked energy and grain prices.
• Suspect #2: Money Tsunami. Governments flooded economies with money to revive stalled growth. The US gave stimulus checks; central banks cut rates to near zero, pumping liquidity. This money fueled strong consumer demand.

Economists fiercely debated: the ’transitory inflation’ camp argued prices would stabilize once supply chains normalized; the ‘structural inflation’ camp insisted excessive money supply required tight policy.

In truth, the culprit was a complex crime: strong demand (money tsunami) hitting paralyzed supply chains. Unlike the 2008 crisis where money inflated asset prices, pandemic money flowed directly to consumers, pushing up everyday goods and services prices. This episode revealed the modern financial system’s complexity and unpredictability.

Part V: Where Is Your Wallet Heading?

From Roman denarii to 21st-century digital codes, money has constantly evolved. Now, the era of government and central bank monopoly on currency issuance is ending, facing a huge transition challenged by new technologies. The cryptocurrency rebellion, central banks’ counterattack, and new inflation threats await. What will money look like in the future? Where will your wallet go?

5.1. Rebellion in the Digital Age: Cryptocurrencies

The 2008 global financial crisis bred deep distrust in the existing system. Amid this chaos, an anonymous programmer named ‘Satoshi Nakamoto’ introduced Bitcoin—the first decentralized digital currency operating solely on cryptographic proof, without central authorities. This signaled a new monetary system based on code ‘proof’ rather than state ’trust’.

Can It Be a Refuge from Inflation?

Bitcoin supporters claim its capped supply of 21 million coins makes it a digital gold alternative to endlessly printed fiat money. They hope Bitcoin can protect assets when government policies devalue currency.

But reality is complex. Bitcoin’s extreme price volatility makes it unsuitable as a stable store of value or medium of exchange. One day you might buy a car with one Bitcoin; the next, only a bicycle.

Lessons from Real Cases

• El Salvador’s Experiment: In 2021, El Salvador boldly adopted Bitcoin as legal tender. Results were mixed. Most citizens were unfamiliar with Bitcoin; technical issues, distrust in government, and price swings kept usage low. For the poor, Bitcoin’s sudden value drops made it too risky as salary.
• Argentina and Turkey’s Choice: In countries where local currencies suffer hyperinflation, people turn to cryptocurrencies out of desperation. They prefer stablecoins like USDT or USDC, pegged to the US dollar, not Bitcoin. This is a ‘digital dollarization’ phenomenon, a modern Gresham’s Law in the digital realm.

5.2. Central Banks’ Counterattack: The Rise of CBDCs

Governments and central banks facing crypto challenges are not idle. Their response is Central Bank Digital Currency (CBDC)—digital fiat money issued directly by central banks.

Advantages and Concerns

CBDCs can reduce cash issuance costs, improve payment efficiency, and provide financial access to the unbanked.

However, CBDCs grant unprecedented power to central banks. Governments could directly distribute stimulus payments or impose negative interest rates on savings to force spending during recessions. Also, all transactions would be recorded on central servers, raising serious privacy concerns about state surveillance of personal economic activity.

5.3. New Challenges of the 21st Century

Future inflation will be influenced not only by technological changes like cryptocurrencies and CBDCs but also by larger structural shifts.

• Deglobalization: For decades, cheap goods from China kept prices low. But US-China tensions and the pandemic have strengthened ‘deglobalization’ or ‘slowbalization’, prioritizing security over efficiency. Production is returning home or nearby, raising costs and long-term inflation pressures.
• Greenflation: The ‘green transition’ to combat climate change may drive inflation. Demand for critical minerals like lithium, nickel, and copper for EV batteries and renewable energy is surging, outpacing supply and pushing prices up. The cost of moving to a green economy appears as rising prices.
• Demographics: Aging populations affect inflation. A shrinking workforce (wage pressure) combined with growing retired consumers spending savings (demand increase) can simultaneously tighten labor and boost demand, pushing prices higher long-term.

Conclusion: Ultimately, It’s All About Trust

From shells to metal coins, paper notes, and invisible digital codes, money’s form has endlessly changed. But one core value has remained constant: trust.

We believed in intrinsic value, the king’s seal, and government promises to exchange for gold. Today, we rely on the invisible faith that governments and central banks will keep money stable.

Inflation is the clearest symptom when that trust wavers or breaks. Greed, war madness, political failure, or unpredictable disasters have always prepared money to betray us. History reminds us that money’s value is never eternal or absolute.

Now, we stand at another great turning point. Bitcoin calls to trust algorithms over states; CBDCs promise to strengthen state trust digitally. Deglobalization, climate change, and aging populations shake the economic rules we knew.

In this chaotic era, where is your wallet headed? Whom and what will you trust? That choice will determine your future wealth.