Barter, Bills and Banknotes: The 5,000 Year History of Money

Barter, Bills and Banknotes: The 5,000 Year History of Money


A long time ago, people did not buy or sell with money. Instead they traded one thing for another to get what they wanted or needed. This exchange of goods or services is called barter. At the beginning this was sufficient, but with the evolution of societies, certain needs made the creation of a more stable and more efficient way of trading imperative. Many cultures around the world eventually developed the use of money whose value was based on the value of the material from which it was made. This type of money is known as “specie money” and its value is guaranteed by the precious metal it contains.

A white slave market

A white slave market (public domain). Slaves could be either bought or traded.

The first coins were originally manufactured from copper and then iron because these were strong materials used to make weapons. The monetary value of currencies was based on the value of the metal from which they were made. Coins were convenient because they could be counted rather than weighed. Coins were a trusted and efficient medium of exchange because they helped to significantly boost trade in the ancient world.

The first type of coin was used around 3000 BC in Mesopotamia and was called siglos or shekel. The shekel was an ancient unit of money and weight used to define both a specific weight of barley and equivalent amounts of materials such as bronze and copper. The great importance of formalizing the role of money in civil society was even mentioned in Hammurabi‘s law code created around 1760 BC. Mesopotamian civilization developed a large-scale economy based on commodity money. The Babylonians and their neighboring city-states later developed the earliest system of economics as we think of it today, in terms of rules on debt, legal contracts, and law codes relating to business practices and private property.

Silver shekel issued by King Darius I of Persia ca. 500–490 BC, obverse: the king of Persia firing his bow.

Silver shekel issued by King Darius I of Persia ca. 500–490 BC, obverse: the king of Persia firing his bow. (CC by SA 2.5 / Jastrow)

In 700 BC the Greek king Pheidon of Argos was the first ruler known to have officially set standards of weight and money and to have coins made from a rather useless and decorative metal like silver rather than of iron. King Pheidon coined silver coins in Aegina, in the temple of the goddess of wisdom and war Athena Aphaia, and developed currencies with turtles on them. (Turtles are a symbol of capitalism today.) Turtle currencies were accepted and widely used as an international medium of exchange until the days of the Peloponnesian War, when the Athenian drachma replaced them.

According to Herodotus, the first gold coins of the Grecian age were struck in Lydia, in Asia Minor, around 700 BC, under King Croesus, but it was not until 390 BC when King Philip II of Macedonia issued the first gold currencies. The Lydian coins were made of a weighed amount of precious metal and were stamped with the image of a lion.

Hoard of ancient Greek coins, 6th – 4th century BC

Hoard of ancient Greek coins, 6th – 4th century BC (public domain)

Even in ancient times the excessive importance given to money was recorded by Livy, who mentions a temple that was built and consecrated to the worship of Hera Monitas, hence the English “money,” in Rome around 413 BC. The temple contained the mint of Rome for four centuries.

The first paper money or banknotes were first used in China during the Song Dynasty, between 600 and 1455. These banknotes, known as Jiaozi, had been used since the seventh century AD. In Europe the first banknotes were issued by Stockholms Banco in 1661 and used alongside coins. it did not work well, and had to be stopped because the banks kept running out of coins to pay on the notes. But in the 1690s, the Massachusetts Bay Colony printed paper money and here the use became more common.

Ming Dynasty (1368–1644) banknote

Ming Dynasty (1368–1644) banknote (public domain)

Using coins as money based on the value of the material from which they are made eventually led to representative money. This happened because gold and silver merchants or banks began to issue receipts to depositors redeemable for cash value, which were tabulated. Ultimately, these receipts were widely accepted as payment and began to be used as money.

The convenience of transactions provided by the issuance of banknotes allowed notes used for exchange to become a widespread and commonly accepted business practice. This monetary system, where the means of exchange is paper that can be converted into preset, fixed quantities of gold, replaced the use of gold coins as money between the seventeenth and nineteenth centuries in Europe.

In the early twentieth century almost all countries adopted this system for which certificates were issued, and there was a predetermined amount of gold for redemption.

After World War II and the Bretton Woods Conference, most countries adopted “Fiat money,” whose value was determined according to the US dollar. In turn, the US dollar was determined by reference to gold. In 1971, the US government ended the convertibility of the dollar into gold, leading many countries to follow its example, and the majority of the money worldwide stopped being backed by gold reserves.

Money, in whatever form it is found, has proved a necessary evil from its creation, and there is no more apt definition of its origin than Aristotle’s: “When the inhabitants of one country became more dependent on those of another, and they imported what they needed, and exported what they had too much of, money necessarily came into use.”

Top image: Gustav Bauernfeind: ‘Market in Jaffa’, Gemälde von 1877 (public domain)

By Theodoros Karasavvas

References:

The History of Money by Mary Bellis. About Money.

Money in Classical Antiquity by Sitta von Reden, Albert-Ludwigs-Universität Freiburg.

History of Money from Ancient Times to the Present Day by Glyn Davies

The History of Money. Nova

The history of money: from barter to bitcoin. By Rebecca Burn-Callander. The Telegraph.

Comments

This was an interesting article. Two things caught my attention first was how the author stated that the metal could be used to make weapons, and the second was in an earlier comment utilizing coins in leu of actual animal rescources. I was wondering if the ancient babalononyn cuniform was and could have had scrolls that acted as the Doomesday book in england?

Troy Mobley

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Congratulations.

I logged in to hopefully participate in some discussion about "Portable Assets". Coining or promissory notes came about because it was more portable and less assets were lost during transit.

First Coining was hard to smelt, forge and duplicate with fraud in mind. But imagine that you are an uneducated Sheep or Goat herder and decided to move to another location. All you owned was a herd and a piece of property.

But all the potential buyers were also herders like yourself and had nothing to trade but like kind assets. Property cannot be moved and there are great risks in moving not only your own herd...but the additional stock you just received in barter for the property you just sold long distances.

To move stock long distances unfortunately will result in normal losses of stock. anywhere from 25% to 100% was not uncommon depending on seasonal weather that year. To transfer these assets into coin was much more portable and was at less risk of any losses while in transit to purchase a new herd and property at the new location.

At first only the elite rich and educated were able to take advantage of Promissory notes as portable assets because most times it required a seal that was also very hard to duplicate. But more importantly education was strictly regulated with even death as a penalty for practicing education without proper bloodline or cleric permission granted.

So to write or honor a Note could cost you your life and assets both. Portable coins were soon accepted as the preferred safe portable public exchange in this scenario. But here is the important thing we have now forgotten. Metal coining was only as valuable as the human effort and costs involved in coining it.

A great example of coining that went haywire and lost value because of exploitation and devaluation would be huge stone disks "Fey" or also called "Rai" from the island of yap that represented assets and credit to be borrowed against. It was valuable at first because of how dangerous the journey and effort was to personally go quarry it and bring it back to Yap.

Then someone came along who could mass produce it and bring it back to yap in mass. This immediately devalued it and made it worthless. This is exactly what our governments are allowing banks to do on every continent. This coinage absolutely needs to once again be backed by precious metals which requires actual effort and risks to create..

http://economistsview.typepad.com/economistsview/2005/09/yapping_about_m...

My father bought a brand new 1966 Chevell Super Sport for $3,600. It would now be compared to a car that costs $50,000. The difference? The car was not cheap at the time but the Dollar was backed by hard tangible metals and the Dollar it's self could purchase more product per Dollar.

Thank you for the great Topic!

 

1964 the Minimum wWge was $1.25..I was in college & working 3 part-time jobs to get thru. Gas was 25 cents and a Corvette was $3300. The pay was 5 90% silver quarters, IF you made MW.
FF to 2016..those same circulated 5 quarters from `1964, if you kept some( I did) can be taken to a coin shoppe and the nice man will give you 18 Federal Reserve Notes(pieces of paper) for those 5 quarter coins. Notice please that 1. the FRNs are not legal notes bks they promise to pay nothing to anyone at any time and at no specific place. 2. the "minimum wage" in 2016 is..what..$7.50?? LOL that shows how inflation and gvt [email protected] folks..the MW is less than 1/2 of what it was..in buying power..as compared to 1964!!!

Currency backed by metals is stable. Someone explained it to me this way while back…

In ancient Roman times one ounce of Gold would buy you a decent Horse. In the mid 1800’s an ounce of Gold would still buy you a Horse at the face value of $20.00. Even right now one ounce of Gold would buy you a horse at $1,200.

Yep, the Wool is being pulled over our eyes for sure.

 

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