Where does money come from?
At first it sounds simple enough, but think about it and it might get challenging
Solution 1
The classic answer is banks. About a third of people think that money when deposited is stored safely in the vaults, no doubt from exposure to the concept in cartoons. The majority have a slightly more nuanced perception: that banks give your money out as a loan to other people. One step further is that they are capable of lending more than is deposited in them, just as long as their reserves supply the average withdrawal rate. Many economists tend to draw the line there, they say that through loans plus inflating the value of the reserves, that money is created, after all; it doesn’t matter about having ‘real’ money, only useable money.
Solution 2
The other traditional answer is “adding value”. Whilst the paints and the canvas cost almost nothing, the Red Vineyard by Van Gogh is worth tens of millions of pounds.
Whilst some look at it, on a simplistic level as wealth creation, it really isn't. What you must remember is that a painting is only worth what someone will pay for it. In 1890, the same work sold at a public exhibition to Vincent’s friend’s sister for £2000 in today’s money. With commodities, there can never be an intrinsic value, so it is consequently impossible to add to it.
I would suggest a different answer:
Solution 3.
Take a village with only the simplest of agricultural equipment: it costs a significant portion of someone’s toil in order to buy food. Once you introduce a tractor into the mix, the amount of work involved, as well as the prices, drop. With all this spare time, people are naturally drawn to the world of commodities; to make and consume them. This drastically increases the quality of life, and hence wealth of a society. This is not too dissimilar to what happens today with innovations in computing, mining and of course, agriculture.
