History of Money

Money is a current medium of exchange in the form of coins and banknotes. “Money originated very largely from non-economic causes: from tribute as well as from trade, from blood-money and bride-money as well as from barter, from ceremonial and religious rites as well as from commerce, from ostentatious ornamentation as well as from acting as the common drudge between economic men.”- Glyn Davies. Money acts as unit of account, a common measure of value, a medium of exchange, means of payment, standard for deferred payments, and a store of value.

Some of the earliest forms of money were not coins or paper money. In the Western hemisphere, wampum and the custom of the potlatch were ways of payment. The potlatch ceremonies of Native Americans were a form of barter that had social and ceremonial importance. Disc-shaped stones, cowrie shells, cattle, manillas, and whales teeth were forms of payment and barter in Africa and Asia.

Banking started in Ancient Mesopotamia where the rich and royal families needed secure places for the safekeeping of their grain and other possessions. Close to 2000 B.C, Chinese currencies were in use at about the same time as the earliest European coins. The use of “tool coins” developed in Asia and Europe. The ancient Greeks used iron nails as coins while the Britons used swords. These earlier forms of “coins” were easy to counterfeit because the metals used were not as rare and valuable as gold or silver.  

As time passed coins began to develop. One of the reasons for the rapid spread of coins was their convenience. Coins were acceptable at their nominal value because there was no need to weigh them and could be counted quicker than by weighing. Despite the challenge of counterfeiters, governments began to mint coins controlling coin production and the money supply.

Paper money was first seen commonly around 1000 A.D. At first paper money was backed by some sort of metal or other commodity because it had no actual value. All the way up to the 1900’s, there had been a link between paper money and gold. The break with precious metals and paper money hurt and helped the world’s economies. Around the 1990’s, a new form of money came into existence. Electronic or digital money has become an everyday commodity for people. Whether you are buying a song from iTunes or a car off eBay, it is the new form of currency.