People think about money much of the time: Do they have enough to live on? Can they afford to buy a new car or house, or rent a better apartment? How much can they spend on food or clothes, or pay for their children’s education? There’s a seemingly endless list of wants and needs for most everyone.

Even with all the attention we pay to the uses of money, we rarely, if ever, think about the money itself — that is, the actual pieces of paper or coins we carry around to buy things. Where do they come from, and just what do they actually represent?

What would you say if, instead of our paper currency, you were offered some beads or shells for something you were trying to sell? Would you consider accepting beads or shells from your employer?

Before the advent of money, barter was the way goods and services were exchanged. Although barter in the United States is still used — to the tune of about $11 billion a year — it’s a relatively minor, almost miniscule, part of an economy that totals about $14 trillion.

From about 9,000 to 6,000 B.C., livestock was often used as the medium of exchange. Later, crops were used. About 1,200 B.C., cowry shells were used in China. Tools made of metal were also used, which subsequently led to round coins. Around 118 B.C., leather money (deerskin edged in vivid colors) was used in China, where paper currency also first appeared but was discontinued in 1455. Another form of currency, wampum (white) beads, was used by North American Indians.

Almost anything can be used as money, which can very confusing. The primary requirement, of course, is confidence — that is, the confidence to exchange property or provide services for pieces of paper. We accept it because we’re certain it can be used to acquire other property or obtain the services of others. I don’t recall ever hearing anyone express any concern about the money we use, except that they would like to have or need more.

No matter what type of money has been used, it worked because people had confidence that it represented the value of the goods and/or services that could be bought and sold with it. Banks used to give receipts to their depositors, which indicated the receipts could be redeemed for whatever goods of value they were holding (usually gold or silver). Initially, these receipts denoted gold or silver held by the banks, and they were generally accepted as money because they were “as good as gold.”

With the advent of modern technology, a new form of money has developed: electronic funds — that is, the transfer of claims for money held by financial institutions in depositors’ names, which takes money beyond the physical possession of some sort of property, even paper or coins, to a digital accounting system that keeps track of ownership with bookkeeping entries.

During the Free Banking era (1837-64), individual banks were allowed to issue their own currency, which was often redeemable in gold or silver. Unfortunately, much of it was worthless. By 1860, about 8,000 banks were issuing notes that had no value.

In 1913, the same year the 16th Amendment to the Constitution established the federal income tax, the Federal Reserve Act created the Federal Reserve banking system, which is the foundation of the banking structure in the United States today.

The United States went off the gold standard in 1971 and turned to the use of fiat currency, which is money that’s not backed by a physical commodity, such as gold or silver. The most important factor that gives our money value today is preventing the supply from becoming too great in relation to the size of the economy, along with the faith of the people who use it. In addition, legal tender laws require creditors to accept the U.S. government’s money in settlement of debts — thus, although the currency and coins that are in circulation today are not backed by anything, we are forced to accept them.

So far, that hasn’t been a problem. But when government creates an excess supply of currency it cheapens the value and that causes inflation, which is another way of saying that it takes more dollars to buy things. The out-of-control spending of the Obama administration is taking us down that path, and unless they stop, we can expect to see a return to high rates of inflation.

— Harris R. Sherline is a retired CPA and former chairman and CEO of Santa Ynez Valley Hospital who as lived in Santa Barbara County for more than 30 years. He stays active writing opinion columns and his blog,