Watch the origin of money playing out in real-time in Cyprus

Credit-backed money could be passed around the nation after the implementation of capital controls.

The origins of money are frequently fought over. Classical economics textbooks frequently cite the idea of a barter economy switching to money for the efficiency gains. Adam Smith, in 1776, was well aware of the problems with barter economies, writing that:

One man, we shall suppose, has more of a certain commodity than he himself has occasion for, while another has less. The former consequently would be glad to dispose of, and the latter to purchase, a part of this superfluity. But if this latter should chance to have nothing that the former stands in need of, no exchange can be made between them.

The problem is, that didn't happen. David Graeber's book Debt: The First 5000 Years contains a pretty thorough demolition of the idea, noting that no anthropologist ever has found a pre-monetary society which operates a barter economy in that fashion. A few societies which have lost money for other reasons have reverted to barter, but that's a whole different thing.

Instead, Graeber writes, money arose from debt. Its first role is as a unit of account, a way of tabulating that the person who you lent a cow owes you something; then, as the amount of outstanding debt in society grows, those IOUs become tradable, and eventually standardised. You can even see that on British bank notes – they are, strictly speaking, promissory notes, representing not a sum of money, but a sum of debt. "I promise to pay the bearer, on demand…" reads the text on the front.

And now, as David Keohane excerpts over at FT Alphaville, we could be seeing that route to money creation re-occurring in Cyprus. Citi's William Buiter writes that the capital controls imposed on the country:

Will, if they persist for more than a few weeks, likely lead to a search for alternative media of exchange for internal transactions. IOUs of large, respected enterprises could for example be countersigned and start to circulate more widely as media of exchange and means of payment. This was the case, for instance, during the 1970 bank strike in Ireland, uncleared cheques were made negotiable (like bills of exchange) and pubs and shops served as credit verifiers. These could later develop into more full-fledged parallel currencies, if internal euro liquidity in Cyprus remains very scarce.

It's also another example of how private money creation – à la Bitcoin and so many other initiatives – isn't that new or trendy at all. But the problem for groups of citizens making their own private money is that eventually they have to contend with a government.

That's not, as some of the more alarmist bitcoiners and goldbugs would have it, because the Government comes in and seizes your money if you start to rival its power. (That said, most countries do have laws on the books preventing you from minting your own coinage.) It's the more prosaic matter of taxes.

Governments have the power to demand payment of taxes in whatever currency they want – and usually, the currency they control. So while private money might grow relatively sizeable in Cyprus, no matter how organised it gets, people will always need to hold onto euros – and Bitcoin is going to struggle to get a foothold as a "real" currency if you need to convert back to pounds every April to pay HMRC.

Still, one of the few fun things about living in these interesting times is that those of us who know basic economics get to watch our textbooks played out in front of us. Northern Rock was a bank run with real queues outside the front of the building; Bitcoin lets us have a more up-to-date example of a speculator's bubble than tulip madness; and now we're seeing the origin of money in real-time.

Photograph: Getty Images

Alex Hern is a technology reporter for the Guardian. He was formerly staff writer at the New Statesman. You should follow Alex on Twitter.

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Brexit is teaching the UK that it needs immigrants

Finally forced to confront the economic consequences of low migration, ministers are abandoning the easy rhetoric of the past.

Why did the UK vote to leave the EU? For conservatives, Brexit was about regaining parliamentary sovereignty. For socialists it was about escaping the single market. For still more it was a chance to punish David Cameron and George Osborne. But supreme among the causes was the desire to reduce immigration.

For years, as the government repeatedly missed its target to limit net migration to "tens of thousands", the EU provided a convenient scapegoat. The free movement of people allegedly made this ambition unachievable (even as non-European migration oustripped that from the continent). When Cameron, the author of the target, was later forced to argue that the price of leaving the EU was nevertheless too great, voters were unsurprisingly unconvinced.

But though the Leave campaign vowed to gain "control" of immigration, it was careful never to set a formal target. As many of its senior figures knew, reducing net migration to "tens of thousands" a year would come at an economic price (immigrants make a net fiscal contribution of £7bn a year). An OBR study found that with zero net migration, public sector debt would rise to 145 per cent of GDP by 2062-63, while with high net migration it would fall to 73 per cent. For the UK, with its poor productivity and sub-par infrastructure, immigration has long been an economic boon. 

When Theresa May became Prime Minister, some cabinet members hoped that she would abolish the net migration target in a "Nixon goes to China" moment. But rather than retreating, the former Home Secretary doubled down. She regards the target as essential on both political and policy grounds (and has rejected pleas to exempt foreign students). But though the same goal endures, Brexit is forcing ministers to reveal a rarely spoken truth: Britain needs immigrants.

Those who boasted during the referendum of their desire to reduce the number of newcomers have been forced to qualify their remarks. On last night's Question Time, Brexit secretary David Davis conceded that immigration woud not invariably fall following Brexit. "I cannot imagine that the policy will be anything other than that which is in the national interest, which means that from time to time we’ll need more, from time to time we’ll need less migrants."

Though Davis insisted that the government would eventually meet its "tens of thousands" target (while sounding rather unconvinced), he added: "The simple truth is that we have to manage this problem. You’ve got industry dependent on migrants. You’ve got social welfare, the national health service. You have to make sure they continue to work."

As my colleague Julia Rampen has charted, Davis's colleagues have inserted similar caveats. Andrea Leadsom, the Environment Secretary, who warned during the referendum that EU immigration could “overwhelm” Britain, has told farmers that she recognises “how important seasonal labour from the EU is to the everyday running of your businesses”. Others, such as the Health Secretary, Jeremy Hunt, the Business Secretary, Greg Clark, and the Communities Secretary, Sajid Javid, have issued similar guarantees to employers. Brexit is fuelling immigration nimbyism: “Fewer migrants, please, but not in my sector.”

The UK’s vote to leave the EU – and May’s decision to pursue a "hard Brexit" – has deprived the government of a convenient alibi for high immigration. Finally forced to confront the economic consequences of low migration, ministers are abandoning the easy rhetoric of the past. Brexit may have been caused by the supposed costs of immigration but it is becoming an education in its benefits.

George Eaton is political editor of the New Statesman.