The History of Money
In the Beginning: Barter
Barter is the exchange of resources or services for mutual advantage, and may
date back to the beginning of humankind. Some would even argue that it's not
purely a human activity; plants and animals have been bartering—in
symbiotic relationships—for millions of years. In any case, barter among
humans certainly pre-dates the use of money. Today individuals,
organizations, and governments still use, and often prefer, barter as a form
of exchange of goods and services.
9,000—6,000 BC: Cattle
Cattle, which include anything from cows, to sheep, to camels, are the
first and oldest form of money. With the advent of agriculture came the use of
grain and other vegetable or plant products as a standard form of barter in
1,200 BC: Cowrie Shells
The first use of cowries, the shell of a mollusc that was widely
available in the shallow waters of the Pacific and Indian Oceans, was in China.
Historically, many societies have used cowries as money, and even as recently
as the middle of this century, cowries have been used in some parts of Africa.
The cowrie is the most widely and longest used currency in history.
1,000 BC: First Metal Money and Coins
Bronze and Copper cowrie imitations were manufactured by China at the
end of the Stone Age and could be considered some of the earliest forms of
metal coins. Metal tool money, such as knife and spade monies, was also first
used in China. These early metal monies developed into primitive versions of
round coins. Chinese coins were made out of base metals, often containing
holes so they could be put together like a chain.
500 BC: Modern Coinage
Outside of China, the first coins developed out of lumps of silver. They soon
took the familar round form of today, and were stamped with various gods and
emperors to mark their authenticity. These early coins first appeared in
Lydia, which is part of present-day Turkey, but the techniques were quickly
copied and further refined by the Greek, Persian, Macedonian, and later the
Roman empires. Unlike Chinese coins which depended on base metals, these new
coins were made from precious metals such as silver, bronze, and gold, which
had more inherent value.
118 BC: Leather Money
Leather money was used in China in the form of one-foot-square pieces of white
deerskin with colorful borders. This could be considered the first documented
type of banknote.
800 - 900 AD: The Nose
The phrase "To pay through the nose" comes from Danes in Ireland, who slit the
noses of those who were remiss in paying the Danish poll tax.
806 AD: Paper Currency
The first paper banknotes appeared in China. In all, China experienced over 500
years of early paper money, spanning from the ninth through the fifteenth century.
Over this period, paper notes grew in production to the point that their value rapidly
depreciated and inflation soared. Then beginning in 1455, the use of paper money in
China disappeared for several hundred years. This was still many years before paper
currency would reappear in Europe, and three centuries before it was considered common.
"Potlach" comes from a Chinook Indian custom that existed in many North
American Indian cultures. It is a ceremony where not only were gifts
exchanged, but dances, feasts, and other public rituals were performed. In
some instances potlach was a form of initiation into secret tribal societies.
Because the exchange of gifts was so important in establishing a leader's
social rank, potlach often spiralled out of control as the gifts became
progressively more lavish and tribes put on larger and grander feasts and
celebrations in an attempt to out-do each other.
The earliest known use of wampum, which are strings of beads made from
clam shells, was by North American Indians in 1535. Most likely, this monetary
medium existed well before this date. The Indian word "wampum" means white,
which was the color of the beads.
1816: The Gold Standard
Gold was officially made the standard of value in England in 1816. At
this time, guidelines were made to allow for a non-inflationary production of
standard banknotes which represented a certain amount of gold. Banknotes had
been used in England and Europe for several hundred years before this time, but
their worth had never been tied directly to gold. In the United States, the
Gold Standard Act was officialy enacted in 1900, which helped lead to the
establishment of a central bank.
1930: End of the Gold Standard
The massive Depression of the 1930's, felt worldwide, marked the beginning of
the end of the gold standard. In the United States, the gold standard was
revised and the price of gold was devalued. This was the first step in ending
the relationship altogether. The British and international gold standards soon
ended as well, and the complexities of international monetary regulation began.
Today, currency continues to change and develop, as evidenced by the new
$100 US Ben Franklin bill.
The Future: Electronic Money
Digital cash in the form of bits and bytes will most likely become an
important new currency of the future.
See an article on digital cash.
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© | Updated August 2002