History of Money
This week, we talk about the history of money.
- Barter system has been in existence since 6000 BC
- Earliest forms of barter system had livestock trade (sheep, cattle, vegetables, grains)
- It was first recorded in Egypt
- Mesopotamia to Phoenicians and the Babylonians improved the system
- Goods were exchanged for food, tea, weapons, and spices. Even human skulls were used. Salt was a very important trade commodity that Roman soldiers were paid with it.
- Middle ages, Europeans traded crafts and fur for silks and perfumes.
- Musket balls, wheat, and deer skins were used by colonial americans
- The invention of money did not kill barter system. But it made it organised.
- Barter system came back during the great depression of 1930s in a form similar to that of banks.
- No certification of proof to show legitimacy of the person you are dealing with
- It depends on trust
- Possible exchange of bad commodities
- Need a double coincidence of wants
- No common measure of value
- Storage issues high
- No need of money
- Flexibility that anything can be traded.
- Does not have to be material items. You can exchange skills
Coin & Paper Currency
- Currencies has been in existence for almost 3000 years
- Chinese started using goods cast made from bronze (cutlery, arrows, spades, daggers)
- They started using coins to avoid being impaled
- First known minted currency was a roaring lion coin created by King Alyattes in Lydia (present Western Turkey)
- It was made using a mixture of silver and gold which is called Electrum
- Chinese came up with paper currency in 700 BC (Tang and Song Dynasty). These notes in the beginning where only temporarily valid.
By 1271 AD, the currency system in China was thriving. The government had took over shops which print currency and made state-issued currency. It was the time when Marco Polo visited the place.
Medieval Islamic world build a monetary system during 7th - 12th centuries (Dinar). They are the first to use credit, cheques, savings account, transactional accounts, exchange rates, promissory notes, banking institutions for loans and deposits, etc.
- Manilla rings were used in West Africa since 15th century for slave trade.
- Metal coins and Archimedes Principle - To test its purity
- Europeans used coins up until the 16th century. And it was not until 1661, Europeans (Swedes) started using paper currency.
- European paper notes could be exchanged at any banks for gold or silver coins
- More than the government, it were the banks and private institutions who used to regulate the printing of currency
- First issuance of currency happened in colonial North America so that the traders do not run out of money.
Paper currency improved international trade and also lead to conflicts between empires.
- Impact of World Wars lead the countries involved to print currency out of proportion leading to inflation. The Great Depression of 1930s is a result of this.
- Gold is set as the standard for printing currency.
- Mobile and virtual currency - The move towards digital banking
- Invented in 2009 by the the pseudonymous Satoshi Nakamoto, Bitcoin has become the gold standard of virtual currency.
- American - "In God we trust", Chinese - "All counterfeiters will be decapitated"
- Currency helped improve Lydia's economy, but they were conquered by the Persians not long after.
- In 1685, plating cards were signed and issued as currency by the governor for soldiers in France.
- Coins made out of a mixture of metals were used in India.