Philip Coggan of the Economist has written a good history for anyone who want to understand the nature of a debt crises in his new book, Paper Promises: Debt, Money, Money and The New World Order. He provides a perspective on monetary economics through reminding us that money a paper liability based on trust.
Debtor and creditor battle have gone on for centuries and you cannot separate money from this old battle. Debtors want cheap money and lots of it and creditors do want to debase their investments. They want to paid back with a real return. The people want cheap money and the wealthy creditors do not. Kings who borrow want cheap money. democracies controlled by the people want cheap money. This is why we constantly have to worry about inflation an monetary control. Monetary control can assessed through a hard currency base don gold. Paper money or a claim on other assets like gold is a recipe for excess.
Paper money was introduced by the Chinese and may have been imported to the West by Marco Polo. When inflation became a problem the Chinese switched to silver. The west was left with the problems of paper money.
Some one mentioned the philosopher's stone. To the surprise of all present, Law said he had discovered it. "I can tell you my secret, " said the financier. "It is to make gold out of paper." -John Law by H. Montgomery Hyde
Marias on the return to metal coinage after Law, "Thus ends the system of paper money, which has enriched a thousand beggars and impoverished a hundred thousand honest men."
Being on the gold standard is silly, but the potential ravages of paper money have never been controlled. Financial bubbles are always tied to loose money. Bankers, governments and debtors are all greedy but they only act on excesses through loose money. History does not tell any other story. Just ask Coggan.
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