Rembrandt’s famous painting, The Prodigal Son, graces the front cover of this month’s issue of the LMR. This ancient story involves the wayward son, who upon demanding and receiving his father’s inheritance, squanders it all in riotous living. When the money runs out the prodigal son comes to his senses. Humiliated, broke and starving he repents and returns home to his father’s arms and is lovingly forgiven.
There are many by ways in which human beings have created means of exchange (currency, means of payment, money) that have worked successfully over long periods of time. There is the way that Menger explained, through discovery of a highly marketable commodity. This is the way in which precious metals gained ascendancy. Another way is through banks that have intermediated short-term (90-day) bills of exchange and provided bank notes.