THE priesthood of finance – ratings agencies, market makers, fund managers, the high priests of economics enthroned in treasuries, central banks and the IMF – all wail the same lament: "Greece will fall", they moan.

They say collapse will send tremors across the gridwork of money and power that gives form to the Western world, cracks will open and the wave of damage will lead to years of economic misery.

It is, according to Bank of England governor Mervyn King: "Undoubtedly the biggest financial crisis the world has ever faced."

The high priests of finance disagree over the best way to react to the crisis ... but none seems ready to tackle the truth at its heart: recession and depression are problems with the system of money and not of a scarcity of wealth.

The very concept that money equals wealth is a myth. Money is merely wealth's measure, a medium of exchange and a means of storing wealth. But the system of money is called into question when central bank heads, with a few strokes on a computer terminal, magic into existence tens or hundreds of billions of pounds, euros or dollars. King himself announced on Wednesday that the UK's central bank would pump £75 billion into the economy in the next three months.

In truth, money can be anything declared to be legal tender by a government and, in the past, an array of convenient tokens have proved suited to the task.

The earliest forms of money were the curled cowry shells of the ancient world. Rice grains, feathers, semi-precious stones and glass beads have all served as local currency.

Even cigarettes have found themselves enlisted as currency. Issued by the Red Cross to soldiers in PoW camps during the second world war, they served well as a means of exchange, although heavy smokers suffered as they traded too much of their food for cigarettes, while cigarette tampering to extract tobacco led to inflation.

However, precious metals, such as gold and silver, are perhaps the most enduring form of tender. A local goldsmith would mint coins of consistent weights that were then traded for goods and services. The goldsmith also served as an early form of bank because his vault was a safer place to store wealth.

The goldsmith would issue a receipt and these receipts were traded, giving rise to paper money. At the same time, the goldsmith also loaned his own store of gold to willing borrowers at interest.

Observing that clients storing their gold very rarely made withdrawals, these first-generation bankers began using it for loans surreptitiously. The danger in this practice was that in times of crisis, war perhaps, the demand for gold would quickly rise and the banker would find himself in the midst of a bank run.

Systemic collapses of this type were widespread because Europe was expanding into the New World and nation states jostled for power. However, although bank runs were unwelcome, governments were finding advantage in the much larger amounts of money that entered circulation. The practice of lending more than was held on deposit was eventually legalised in the 17th century under licence and overseen by regulation. The system is known as fractional reserve banking and is still in use today.

The impulse of the banker to devise means of generating greater profits is central to the evolution of our modern money system. In more recent times regulated restrictions on deposit banks led to the establishment of non-banking financial institutions. These include investment banks, hedge funds, money market funds and insurers.

It is here the alphabet soup of investment products, such as collateral debt obligations and special interest vehicles, are traded; where subprime mortgages were sliced, diced and packaged, sold and resold.

This system, known as the shadow banking system, is deeply implicated in the current global economic crisis because many high-street banks operate large non-banking operations. It is an opaque world and at $16 trillion, according to a report in the Financial Times, has become larger than the traditional banking sector at $13trn.

Governments, too, have a hand in the creation of the money crisis we face today. Their demands for resources to fund their wars or win elections led to the evolution of fiat money – money that only has value because a government or monarch decrees it to be legal tender.

In mediaeval England, King Henry I introduced a system of tally sticks around 1100AD. This was a fiat system that lasted for 726 years. The tally was a stick of polished wood with notches of different sizes representing different denominations cut into them. The stick was then split. The king kept one half and would spend the other half of the stick into the economy. The system worked only because the sticks could be used later to pay the king's taxes.

Fiat systems stand in opposition to money systems, which are convertible into gold or silver. The key feature of a gold standard, which links the value of money to the value of gold, is it imposes monetary discipline on central banks and governments. It provides long-term price stability, limits the ability of governments to cause inflation by printing money and prevents governments using inflation as a means to reduce debt.

Since President Richard Nixon moved the US dollar off the gold standard in 1971 each of the five main reserve currencies (the US dollar, yen, euro, pound sterling, and the Swiss franc) have been fiat currencies.

Problems arise when governments issue too many notes or too many zeros in a computer database. As a result of the first world war, many governments were using fiat money systems to cover the cost of the war and the subsequent reconstruction. Money printing went into overdrive, leading to hyperinflation in the Weimar Republic, where wheelbarrows of money were needed to buy everyday items. Money is not wealth. Less so when it is administered through the fractional reserve and fiat systems we have today. That becomes clear when the system collapses.

But follow the money and you will find wealth. Witness the increase in farmland values, which in the UK have risen 10% in the last year and trebled over the last decade, making it one of the highest-earning asset classes. It no doubt explains why most buyers are reportedly City of London professionals investing their bonuses.

If the worst were to happen, if the global financial system did collapse, we could find ourselves awakening to a world where we had suddenly become locked out of our bank accounts, factories or even eventually our homes. Our savings, pensions and ISAs may carry Government guarantees but the money would be worthless. Doubtless, we would exhaust our rage on the emotionless ATM. Once the Wii, the iPad and the plasma screens had been sold for pennies to the pound, once the silverware was hawked and the SUVs abandoned … what future then?

In the last 30 years southeast Asia, Russia and Argentina have all suffered banking crises where the middle classes were reduced to penury. As many grandparents will testify, such events have lasting impacts.

Yet, the day after any crash, the sun will still rise, the land beneath our feet will remain firm and the rain will still fall. We will not awake to find our skills and strengths have been repossessed. In Scotland, we have an abundance of natural resources much of which, from the tides that wash our shores to the winds that batter our coasts, has yet to be exploited. What is left of our oil and gas will still lurk beneath the sea. The wealth of our nation will persist, even if the money is gone.

The current economic crisis will, sooner or later, be resolved. At the top table of global finance a deal will be thrashed out. The game of brinkmanship at play will be over, whether or not the West is willing to relinquish any of the privilege it enjoys. Of the five reserve currencies, the dominant one – the dollar – will come under the greatest pressure to abandon or share that status.

As the dominant reserve currency you can pay for things by writing cheques, and no-one cashes them. It is the modern equivalent of gold. Being the dominant reserve currency also allows you to spend more than you earn without suffering the fate of nations such as Zimbabwe, which had to cope with hyperinflation when its treasury failed to balance its books. The US has not balanced its books for decades.

The US holds the reins of the World Bank, Europe controls the International Monetary Fund. Emerging nations would argue these privileges cannot continue to be justified given the profligacy of the many Western economies.

The problem for us, the ordinary voter and taxpayer who gets landed with the eventual bill, is whether our representatives at the negotiating table sincerely reflect our interests? The history of money is littered with subterfuge on the part of commercial bankers seeking greater profits and governments driven to find resources to develop vote-winning initiatives, or fight wars. Indeed, the banking world and the realm of government are tightly bound together by money.

THIS year in the US the finance, insurance and real estate sectors spent $237m on lobbying and employ 11,674 lobbyists to work in around Capitol Hill. In the UK, it was revealed last week that the Tory Party depends on half of its £12m income from donations from the City of London and banking.

That banking interests have grown too powerful is becoming ever clearer. Mervyn King may be right when he says this is the biggest financial crisis the world has ever faced .. but it is also the greatest opportunity the world has ever had.

History tells us that when the financial system collapses it has to be rebooted. There is no better way to regulate our affairs other than by means of money.

Calls for a new international reserve currency to be established have been made. This proposal would see a new currency known as "special drawing rights" administrated by a reconstituted International Monetary Fund that better reflects the relative economic strengths of the world's nations as they exist today. An IMF, in short, that reflects the shift in power from West to East.

The opportunity we are presented with is to recognise the failings of the system now in its death throes; to acknowledge the corrosiveness of speculation and greed that lies at the heart of the banking system.

The opportunity is to provide the resources needed to meet the challenges we face, be it global warming or the demands of an ever-growing population. The real danger is that the myth of money will fool us into believing we have no wealth.