| Abstract | In the history of money theory, a universal belief has been that monetary institution originated from barter. However, a careful review of relevant literature reveals that this taken-for-granted belief is a fallacy. In the paper, the author argues that the “barter” theory was created out of Smith’s intention to protect free market. It was purely made-up and has therefore been faced with the defiance coming from the evolutionary logic of money from the very beginning. Historically, credit system had been in existence before the birth of money commodity, indicating that credit solution was the institutional origin of monetary institution. As for the roles played by credit and trade in its evolution, they were fairly different, with the former serving as the initiating mechanism while the latter as the motivating mechanism. In light of this assumption, there is a need to reevaluate the functions played by external factors like some authoritative entities (such as government) in the emergence and development of monetary institution. Given the correctness of this brand new logic, we will be able to work out the numerous myths in the money history in China. |