The History of Money
Money is, by extension, something that everyone completely understands and accepts as part of modern society. As far as the majority of us are concerned, currency is the true way to trade in the modern society we have built. However, it was not always the case. In the past, money was a mere idea – we used to rely on bartering and the like. But, what’s the history of money? How did we go from trading ideas to trading currency?
For millions of years we relied on bartering for goods and services, and we still use bartering today to an extent. Governments, for example, still tend to trade with other governments in a barter-style system, rather than trading cash only to then hand it back over. It’s a form of trading that pre-dates anything we use today outside of this, though, and was a far more simplistic – yet challenging – model to use in comparison to money.
By around 9000BC, we had begun to move away from the bartering system. A very powerful investment, then, became livestock. Sheep, camels, cows and the like all became a form of currency. As agriculture became increasingly more powerful over the next three millennia, too, we also began to trade vegetables and plants as a form of currency. Essentially, food was the earliest form of money!
Fast forward another couple of millennia, and by 1200BC we are now dealing with cowries. Cowries are mollusk shells which were easily found in China and the Pacific Ocean, and became the earliest form of ‘coin’ that was used. Indeed, cowries maintained a popularity until relatively recently in some parts of Africa. It is, without doubt, the longest-used form of money out of them all.
It’s importance to the financial industry should not be underestimated, because it still has a recent history itself. The next two centuries, though, in the push towards 1000BC, saw amazing change in the way that we used money in the world.
We make our first movement towards the very first metal coins that were used. The age of Bronze and Copper had reached its peak, and imitations of cowries made from both metals were beginning to spread like wildfire.
The Chinese manufactured these coins as the Stone Age ground to a halt. Indeed, metal imitation cowries were the first of the metal coins that were used by humanity – that we know of, at least. Another aspect of this, though, was ‘tool money’. This was the act of creating knives and spades from these metals and instead trading them – a mix of both bartering and currency, really. This soon spread and before long it was being used as a primitive form of coin currency.
Made from base metals, these coins tended to have holes in the middle so that they could be kept together and chained up to avoid theft or loss.
The coin currency was now beginning to come into full flow, as the world woke to the idea of currency more than trade. The modern age of coinage, though, did not begin until around 500BC. This was when we finally moved on from the primitive world of cowrie coinage, into something far more sophisticated.
The first coins outside of China to be developed were made from silver, a metal which was readily available. Before long, for ease of use, they had taken on the rounded coin shapes of today and began to be stamped with famous insignia to mark where they came from. The first stamps to be put onto coins were marks of the old Gods and Emperors. It was a sign of true authenticity within the coin, and made the first step towards ‘real’ money and ‘fake’ money being a thing.
The first of these modern-style coins first appeared in Lydia, which today would have been part of Turkey. This was spotted by travelers and others involved in the nation, and before long this style of currency was being copied by other nations. The nearby Greeks first copied it, as did the Persians, Macedonians and even later on the Roman Empires.
Each took hold of these wonderful forms of coinage and made their own kind of currency from them. Unlike the Chinese, who used base metals for their coinage, these new coins were made from more precious metals such as silver, bronze and even gold. This added more value to the coin and was the first important steps towards a tiered currency system like we have today.
By 118BC, we had even began to start introducing leather money! Leather money was a Chinese design, and were typically small one-foot-square pieces of deerskin. The borders of the “note” were made to be colorful to symbolize what it was. It was, arguably, the first form of bank note that was ever created by man.
By 800AD, we had even begun to create financial terminology. For example, the famous term “Pay through the nose” came into being by this point. It was used by Danish people who were spending time in Ireland, who literally slit the nose of those who would not pay the devious Danish poll tax. This created one of the first times that coinage and currency was being used for financial muscle and violence – a threat over those without. While there might not be the same vicious undertone to the term today, it’s historical precedent still exists.
By 806AD, the creation of paper money was well underway, too. China created the leather money, and soon followed it up with paper money. China started in the ninth century and began to work through to the fifteenth century using paper money; genuine pioneers in the financial markets. Paper notes began to become such a common creation that, over time, the value of paper money began to fall through. The value of money became less and less, and the first signs of inflation being a thing had started to fester in the markets.
By 1455, paper money had essentially vanished due to the drastic consequences it would have for society if it stuck around. It took another three centuries before you would hear of paper money being a common thing once again.
In North America, currency took a far more unique form – Potlatch. From the old Chinook Indian customs, Potlatch was a ceremonial event whereby gifts and rituals were exchanged and performed. The gift-giving was a massive part of the tribal initiation (and ascension) process. Before long, it spiraled out of control and tribes began to become grandiose and materialistic, in a bid to outdo one another.
By the 1800s, money had changed entirely. England made Gold the official standard of value in their currency in 1816. The ‘Gold Standard’. At this time, non-inflationary bank notes were produced which represented certain gold values. This was the first time that money and gold had become so clearly and obviously linked.
By 1900, the United States followed and the Gold Standard Act came into being. This was the beginning of what is known today as the Central Bank, and arguably the beginning of the road to which has led us to the current financial climate.
The Depression of the 1930s, for example, was the first massive stumbling block in the financial utopia we thought was being created. It marked the death of the Gold Standard in essence, and was the slow steps towards what has become the current financial climate that we live in today.
Gold became quickly devalued in the new financial era, and this was the first steps towards the relationship of gold and typical currency ending. This is the beginning of the complex and utterly challenging world of financial, international currency and monetary regulation. It was also probably the first real signs of finance creating a system that was never intended – and, indeed, impossible to control.
Currency is changing all the time today – with paper money becoming more and more diverse as time goes on. Add in the power of electronic banking, financial loans, credit cards and the entire credit industry, and we have something that outstrips anything we ever thought would exist.
So, what does the financial future of man hold? From the outset, a massive change is coming. Electronic money and a cashless society was once a pipedream, left for fantasy novels and those who lived in dreams.
Today, though? The reality of a financial world without any kind of physical cash is becoming increasingly likely. It could be the future that helps us move away from a society that’s so battered by the scars of poor fiscal policy and catastrophic choices across the global financial markets worldwide.
However, one thing is for sure; the future of money is going to be just as exciting as the history of money. The only hope is that, as time goes on, the next step in the history of money does not have to be as catastrophic as the past was.