History of Money

7/13/23, 11:13 AM History of money - Wikipedia
History of money
The history of money is the development over time of systems for the exchange, storage, and
measurement of wealth. Money is a means of fulfilling these functions indirectly and in general rather
than directly, as with barter.
Money may take a physical form as in coins and notes, or may exist as a written or electronic account.
It may have intrinsic value (commodity money), or be legally exchangeable for something with
intrinsic value (representative money), or only have nominal value (fiat money).
Overview
Money was invented before written history began.[1][2] Consequently, any story of how money first
developed is mostly based on conjecture and logical inference.
The significant evidence establishes many things were traded in ancient markets that could be
described as a medium of exchange. These included livestock and grain–things directly useful in
themselves–but also merely attractive items such as cowrie shells or beads which were exchanged for
more useful commodities. However, such exchanges would be better described as barter, and the
common bartering of a particular commodity (especially when the commodity items are not fungible)
does not technically make that commodity "money" or a "commodity money" like the shekel – which
was both a coin representing a specific weight of barley, and the weight of that sack of barley.[3]
Due to the complexities of ancient history (ancient civilizations developing at different paces and not
keeping accurate records, or having their records destroyed), and because the ancient origins of
economic systems precede written history, it is impossible to trace the true origin of the invention of
money. Further, evidence in the histories[4] supports the idea that money has taken two main forms,
divided into the broad categories of money of account (debits and credits on ledgers) and money of
exchange (tangible media of exchange made from clay, leather, paper, bamboo, metal, etc.).
As "money of account" depends on the ability to record a count, the tally stick was a significant
development. The oldest of these dates from the Aurignacian, about 30,000 years ago.[5][6] The
20,000-year-old Ishango Bone – found near one of the sources of the Nile in the Democratic Republic
of the Congo – seems to use matched tally marks on the thigh bone of a baboon for correspondence
counting. Accounting records – in the monetary system sense of the term accounting – dating back
more than 7,000 years have been found in Mesopotamia,[7] and documents from ancient
Mesopotamia show lists of expenditures, and goods received and traded and the history of accounting
evidences that money of account pre-dates the use of coinage by several thousand years. David
Graeber proposes that money as a unit of account was invented when the unquantifiable obligation "I
owe you one" transformed into the quantifiable notion of "I owe you one unit of something". In this
view, money emerged first as money of account and only later took the form of money of
exchange.[8][9]
Regarding money of exchange, the use of representative money historically pre-dates the invention of
coinage as well.[1] In the ancient empires of Egypt, Babylon, India and China, the temples and palaces
often had commodity warehouses which made use of clay tokens[1] and other materials which served
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as evidence of a claim upon a portion of the goods stored in the warehouses.[10] There is no concrete
evidence these kinds of tokens were used for trade, however, only for administration and
accounting.[1]
Use of metals
While not the oldest form of money of exchange, various metals (both common and precious metals)
were also used in both barter systems and monetary systems; and the historical use of metals provides
some of the clearest illustration of how barter systems gave way to monetary systems. The Romans'
use of bronze, while not among the most ancient examples, is well documented, and it illustrates this
transition clearly. First, the aes rude (rough bronze) was used. This was a heavy weight of
unmeasured bronze used in what was probably a barter system: the suitability of bronze for barter
resulted solely from the alloy's usefulness in metalsmithing, and it was bartered with the intent of
being turned into tools. The next historical step was bronze in bars that had a 5-pound pre-measured
weight (presumably to make barter easier and fairer), called aes signatum (signed bronze), which is
where debate arises as to whether this was still barter, or had become a monetary system. Finally,
there is a clear break from the use of bronze in barter into its indisputable use as money, because of
lighter measures of bronze not intended to be used as anything other than coinage for transactions.
The aes grave (heavy bronze) (or As) is the start of the use of coins in Rome, but not the oldest known
example of metal coinage.
Gold and silver have been the most common forms of money throughout history. In many languages,
such as Spanish, French, Hebrew and Italian, the word for silver is still directly related to the word for
money. Sometimes other metals were used. For instance, ancient Sparta minted coins from iron to
discourage its citizens from engaging in foreign trade.[11] In the early 17th century Sweden lacked
precious metals, and so produced "plate money": large slabs of copper 50 cm or more in length and
width, stamped with indications of their value.
Gold coins began to be minted again in Europe in the 13th century. Frederick II is credited with
having reintroduced gold coins during the Crusades. During the 14th century Europe changed from
use of silver in currency to minting of gold.[12][13] Vienna made this change in 1328.[12]
Metal-based coins had the advantage of carrying their value within the coins themselves. On the other
hand, they induced manipulations, such as the clipping of coins to remove some of the precious metal.
A greater problem was the co-existence of gold, silver and copper coins in Europe. The exchange rates
between the metals varied with supply and demand. For instance the gold guinea coin began to rise
against the silver crown in England in the 1670s and 1680s. Consequently, silver was exported from
England in exchange for gold imports. The effect was worsened with Asian traders not sharing the
European appreciation of gold altogether; gold left Asia and silver left Europe in quantities European
observers like Isaac Newton, Master of the Royal Mint, observed with unease.[14]
Stability came when national banks guaranteed to change silver money into gold at a fixed rate; it did,
however, not come easily. The Bank of England risked a national financial catastrophe in the 1730s
when customers demanded their money be changed into gold in a moment of crisis. Eventually
London's merchants saved the bank and the nation with financial guarantees.
Another step in the evolution of money was the change from a coin being a unit of weight to being a
unit of value. A distinction could be made between its commodity value and its specie value (its value
as a coin). The difference in these values is seigniorage.[15][16]
Theories of money
The earliest ideas included Aristotle's "metallist" and Plato's "chartalist" concepts, which Joseph
Schumpeter integrated into his own theory of money as forms of classification.[17] Especially, the
Austrian economist attempted to develop a catallactic theory of money out of Claim Theory.[18]
Schumpeter's theory had several themes, but the most important of these involved the notions that
money can be analyzed from the viewpoint of social accounting and that it is also firmly connected to
the theory of value and price.[19]
There are at least two theories of what money is, and these can influence the interpretation of
historical and archeological evidence of early monetary systems. The commodity theory of money
(money of exchange) is preferred by those who wish to view money as a natural outgrowth of market
activity.[20] Others view the credit theory of money (money of account) as more plausible and may
posit a key role for the state in establishing money. The commodity theory is more widely held and
much of that article is written from that point of view.[21] Overall, the different theories of money
developed by economists largely focus on functions, use, and management of money.[17]
Other theorists also note that the status of a particular form of money always depends on the status
ascribed to it by individuals and by society.[22] For instance, gold may be seen as valuable in one
society but not in another or that a bank note is merely a piece of paper until it is agreed that it has
monetary value.[22]
Money supply
In modern times economists have sought to classify the different types of money supply. The different
measures of the money supply have been classified by various central banks, using the prefix "M". The
supply classifications often depend on how narrowly a supply is specified, for example the "M"s may
range from M0 (narrowest) to M3 (broadest). The classifications depend on the particular policy
formulation used:
M0: In some countries, such as the United Kingdom, M0 includes bank reserves, so M0 is
referred to as the monetary base, or narrow money.[23]
MB: is referred to as the monetary base or total currency. This is the base from which other forms
of money (like checking deposits, listed below) are created and is traditionally the most liquid
measure of the money supply.[24]
M1: Bank reserves are not included in M1.
M2: Represents M1 and "close substitutes" for M1.[25] M2 is a broader classification of money
than M1. M2 is a key economic indicator used to forecast inflation.[26]
M3: M2 plus large and long-term deposits. Since 2006, M3 is no longer published by the U.S.
central bank.[27] However, there are still estimates produced by various private institutions.
MZM: Money with zero maturity. It measures the supply of financial assets redeemable at par on
demand. Velocity of MZM is historically a relatively accurate predictor of inflation.[28][29][30]
Technologies
Assaying
Assaying is analysis of the chemical composition of metals. The discovery of the touchstone for
assaying helped the popularisation of metal-based commodity money and coinage. Any soft metal,
such as gold, can be tested for purity on a touchstone. As a result, the use of gold for as commodity
money spread from Asia Minor, where it first gained wide usage.
A touchstone allows the amount of gold in a sample of an alloy to been estimated. In turn this allows
the alloy's purity to be estimated. This allows coins with a uniform amount of gold to be created. Coins
were typically minted by governments and then stamped with an emblem that guaranteed the weight
and value of the metal. However, as well as intrinsic value coins had a face value. Sometimes
governments would reduce the amount of precious metal in a coin (reducing the intrinsic value) and
assert the same face value, this practice is known as debasement.
Prehistory: predecessors of money and its emergence
Non-monetary exchange
Gifting and debt
There is no evidence, historical or contemporary, of a society in which barter is the main mode of
exchange;[31] instead, non-monetary societies operated largely along the principles of gift economy
and debt.[32][33][34] When barter did in fact occur, it was usually between either complete strangers or
potential enemies.[35]
Barter
With barter, an individual possessing any surplus of value, such as a measure of grain or a quantity of
livestock, could directly exchange it for something perceived to have similar or greater value or utility,
such as a clay pot or a tool, however, the capacity to carry out barter transactions is limited in that it
depends on a coincidence of wants. For example, a farmer has to find someone who not only wants
the grain he produced but who could also offer something in return that the farmer wants.
Hypothesis of barter as the origin of money
In Politics Book 1:9[36] (c. 350 BC) the Greek philosopher Aristotle contemplated the nature of money.
He considered that every object has two uses: the original purpose for which the object was designed,
and as an item to sell or barter.[37] The assignment of monetary value to an otherwise insignificant
object such as a coin or promissory note arises as people acquired a psychological capacity to place
trust in each other and in external authority within barter exchange.[38][39] Finding people to barter
with is a time-consuming process; Austrian economist Carl Menger hypothesised that this reason was
a driving force in the creation of monetary systems – people seeking a way to stop wasting their time
looking for someone to barter with.[40]
In his book Debt: The First 5,000 Years, anthropologist David Graeber argues against the suggestion
that money was invented to replace barter.[41] The problem with this version of history, he suggests, is
the lack of any supporting evidence. His research indicates that gift economies were common, at least
at the beginnings of the first agrarian societies, when humans used elaborate credit systems. Graeber
proposes that money as a unit of account was invented the moment when the unquantifiable
obligation "I owe you one" transformed into the quantifiable notion of "I owe you one unit of
something". In this view, money emerged first as credit and only later acquired the functions of a
medium of exchange and a store of value.[8][9] Graeber's criticism partly relies on and follows that
made by A. Mitchell Innes in his 1913 article "What is money?". Innes refutes the barter theory of
money, by examining historic evidence and showing that early coins never were of consistent value
nor of more or less consistent metal content. Therefore, he concludes that sales is not exchange of
goods for some universal commodity, but an exchange for credit. He argues that "credit and credit
alone is money".[42] Anthropologist Caroline Humphrey examines the available ethnographic data
and concludes that "No example of a barter economy, pure and simple, has ever been described, let
alone the emergence from it of money; all available ethnography suggests that there never has been
such a thing".[31]
Economists Robert P. Murphy and George Selgin replied to Graeber saying that the barter hypothesis
is consistent with economic principles, and a barter system would be too brief to leave a permanent
record.[43][44] John Alexander Smith from Bella Caledonia said that in this exchange Graeber is the
one acting as a scientist by trying to falsify the barter hypotheses, while Selgin is taking a theological
stance by taking the hypothesis as truth revealed from authority.[45]
Gift economy
In a gift economy, valuable goods and services are regularly given without any explicit agreement for
immediate or future rewards (i.e. there is no formal quid pro quo).[46] Ideally, simultaneous or
recurring giving serves to circulate and redistribute valuables within the community.
There are various social theories concerning gift economies. Some consider the gifts to be a form of
reciprocal altruism, where relationships are created through this type of exchange.[47] Another
interpretation is that implicit "I owe you" debt[48] and social status are awarded in return for the
"gifts".[49] Consider for example, the sharing of food in some hunter-gatherer societies, where food-
sharing is a safeguard against the failure of any individual's daily foraging. This custom may reflect
altruism, it may be a form of informal insurance, or may bring with it social status or other benefits.
Emergence of money
Anthropologists have noted many cases of 'primitive' societies using what looks to us very like money
but for non-commercial purposes, indeed commercial use may have been prohibited:
Often, such currencies are never used to buy and sell anything at all. Instead, they are used
to create, maintain, and otherwise reorganize relations between people: to arrange
marriages, establish the paternity of children, head off feuds, console mourners at
funerals, seek forgiveness in the case of crimes, negotiate treaties, acquire followers—
almost anything but trade in yams, shovels, pigs, or jewelry.[50]
This suggests that the basic idea of money may have long preceded its application to commercial
trade.
After the domestication of cattle and the start of cultivation of crops in 9000–6000 BC, livestock and
plant products were used as money.[51] However, it is in the nature of agricultural production that
things take time to reach fruition. The farmer may need to buy things that he cannot pay for
immediately. Thus the idea of debt and credit was introduced, and a need to record and track it arose.
The establishment of the first cities in Mesopotamia (c. 3000 BCE) provided the infrastructure for the
next simplest form of money of account—asset-backed credit or Representative money. Farmers
would deposit their grain in the temple which recorded the deposit on clay tablets and gave the farmer
a receipt in the form of a clay token which they could then use to pay fees or other debts to the
temple.[1] Since the bulk of the deposits in the temple were of the main staple, barley, a fixed quantity
of barley came to be used as a unit of account.[52]
Aristotle's opinion of the creation of money of exchange as a new thing in society is:
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.[53]
Trading with foreigners required a form of money which was not tied to the local temple or economy,
money that carried its value with it. A third, proxy, commodity that would mediate exchanges which
could not be settled with direct barter was the solution. Which commodity would be used was a
matter of agreement between the two parties, but as trade links expanded and the number of parties
involved increased the number of acceptable proxies would have decreased. Ultimately, one or two
commodities were converged on in each trading zone, the most common being gold and silver.
This process was independent of the local monetary system so in some cases societies may have used
money of exchange before developing a local money of account. In societies where foreign trade was
rare money of exchange may have appeared much later than money of account.
In early Mesopotamia copper was used in trade for a while but was soon superseded by silver. The
temple (which financed and controlled most foreign trade) fixed exchange rates between barley and
silver, and other important commodities, which enabled payment using any of them. It also enabled
the extensive use of accounting in managing the whole economy, which led to the development of
writing and thus the beginning of history.[54]
Bronze Age: commodity money, credit and debt

Many cultures around the world developed the use of commodity money, that is, objects that have
value in themselves as well as value in their use as money.[55] Ancient China, Africa, and India used
cowry shells.
The Mesopotamian civilization developed a large-scale economy based on commodity money. The
shekel was the unit of weight and currency, first recorded c. 3000 BC, which was nominally equivalent
to a specific weight of barley that was the preexisting and parallel form of currency.[3][56] 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,[48] legal contracts and law codes relating to business
practices and private property. Money emerged when the increasing complexity of transactions made
it useful.[57][58]
The Code of Hammurabi, the best-preserved ancient law code, was created c. 1760 BC (middle
chronology) in ancient Babylon. It was enacted by the sixth Babylonian king, Hammurabi. Earlier
collections of laws include the code of Ur-Nammu, king of Ur (c. 2050 BC), the Code of Eshnunna (c.
1930 BC) and the code of Lipit-Ishtar of Isin (c. 1870 BC).[4] These law codes formalized the role of
money in civil society. They set amounts of interest on debt, fines for "wrongdoing", and
compensation in money for various infractions of formalized law.
It has long been assumed that metals, where available, were favored for use as proto-money over such
commodities as cattle, cowry shells, or salt, because metals are at once durable, portable, and easily
divisible.[59] The use of gold as proto-money has been traced back to the fourth millennium BC when
the Egyptians used gold bars of a set weight as a medium of exchange, as had been done earlier in
Mesopotamia with silver bars.
The first mention in the Bible of the use of money is in the Book of
Genesis[60] in reference to criteria for the circumcision of a bought
slave. Later, the Cave of Machpelah is purchased (with silver[61][62]) by
Abraham, some time after 1985 BC, although scholars believe the book
was edited in the 6th or 5th centuries BC.[63][64][65][66]
1000 BC – 400 AD
First coins
From about 1000 BC, money in the form of small knives and spades
made of bronze was in use in China during the Zhou dynasty, with cast
bronze replicas of cowrie shells in use before this. The first
manufactured actual coins seem to have appeared separately in India,
China, and the cities around the Aegean Sea 7th century BC.[67] While
these Aegean coins were stamped (heated and hammered with Spade money from the Zhou
insignia), the Indian coins (from the Ganges river valley) were punched Dynasty, c. 650–400 BC
metal disks, and Chinese coins (first developed in the Great Plain) were
cast bronze with holes in the center to be strung together. The different
forms and metallurgical processes imply a separate development.
All modern coins, in turn, are descended from the coins that appear to have been invented in the
kingdom of Lydia in Asia Minor somewhere around 7th century BC and that spread throughout
Greece in the following centuries: disk-shaped, made of gold, silver, bronze or imitations thereof, with
both sides bearing an image produced by stamping; one side is often a human head.[68]
Maybe the first ruler in the Mediterranean known to have

officially set standards of weight and money was Pheidon.[69]
Minting occurred in the late 7th century BC amongst the Greek
cities of Asia Minor, spreading to the Greek islands of the Aegean
and to the south of Italy by 500 BC.[70] The first stamped money
(having the mark of some authority in the form of a picture or
words) can be seen in the Bibliothèque Nationale in Paris. It is an
Greek drachm of Aegina. Obverse:
electrum stater, coined at Aegina island. This coin[71] dates to
Land turtle. Reverse: ΑΙΓ(INA) and
about 7th century BC.[72]
dolphin
Herodotus dated the introduction of coins to Italy to the Etruscans

of Populonia in about 550 BC.[73]
Other coins made of electrum (a naturally occurring alloy of silver

and gold) were manufactured on a larger scale about 7th century
BC in Lydia (on the coast of what is now Turkey).[74] Similar
coinage was adopted and manufactured to their own standards in A 7th century one-third stater coin
nearby cities of Ionia, including Mytilene and Phokaia (using coins from Lydia, shown larger
of electrum) and Aegina (using silver) during the 7th century BC,
and soon became adopted in mainland Greece, and the Persian
Empire (after it incorporated Lydia in 547 BC).
The use and export of silver coinage, along with soldiers paid in coins, contributed to the Athenian
Empire's dominance of the region in the 5th century BC. The silver used was mined in southern Attica
at Laurium and Thorikos by a huge workforce of slave labour. A major silver vein discovery at
Laurium in 483 BC led to the huge expansion of the Athenian military fleet.
The worship of Moneta is recorded by Livy with the temple built in the time of Rome 413 (123); a
temple consecrated to the same goddess was built in the earlier part of the 4th century (perhaps the
same temple).[75][76][77] For four centuries the temple contained the mint of Rome.[78][70] The name
of the goddess thus became the source of numerous words in English and the Romance languages,
including the words "money" and "mint"
Roman banking system
400–1450
Medieval coins and moneys of account
Charlemagne, in 800 AD, implemented a series of reforms upon becoming "Holy Roman Emperor",
including the issuance of a standard coin, the silver penny. Between 794 and 1200 the penny was the
only denomination of coin in Western Europe. Minted without oversight by bishops, cities, feudal
lords and fiefdoms, by 1160, coins in Venice contained only 0.05g of silver, while England's coins were
minted at 1.3g. Large coins were introduced in the mid-13th century. In England, a dozen pennies was
called a "shilling" and twenty shillings a "pound".[79]
Debasement of coin was widespread. Significant periods of debasement took place in 1340–60 and
1417–29, when no small coins were minted, and by the 15th century the issuance of small coin was
further restricted by government restrictions and even prohibitions. With the exception of the Great
Debasement, England's coins were consistently minted from sterling silver (silver content of 92.5%).
A lower quality of silver with more copper mixed in, used in Barcelona, was called "billion".[79]
First paper money
Paper money was introduced in Song dynasty China during the 11th
century.[80] The development of the banknote began in the seventh century,
with local issues of paper currency. Its roots were in merchant receipts of
deposit during the Tang dynasty (618–907), as merchants and wholesalers
desired to avoid the heavy bulk of copper coinage in large commercial
transactions.[81][82][83] The issue of credit notes is often for a limited
duration, and at some discount to the promised amount later. The jiaozi
nevertheless did not replace coins during the Song Dynasty; paper money
was used alongside the coins. The central government soon observed the
economic advantages of printing paper money, issuing a monopoly right of
several of the deposit shops to the issuance of these certificates of
deposit.[84] By the early 12th century, the amount of banknotes issued in a
single year amounted to an annual rate of 26 million strings of cash
coins.[85] Earliest banknote from
China during the Song
In the 13th century, paper money Dynasty which is known
became known in Europe through the as "Jiaozi"
accounts of travelers, such as Marco
Polo and William of
Rubruck. [86] Marco Polo's
account of paper money
during the Yuan dynasty is the
subject of a chapter of his
book, The Travels of Marco
Polo, titled "How the Great Silver coin of the Maurya Empire,
Kaan Causeth the Bark of known as rūpyarūpa, with symbols
Trees, Made into Something of wheel and elephant. 3rd century
Like Paper, to Pass for Money BC
All Over his Country." [87] In
medieval Italy and Flanders,
because of the insecurity and impracticality of transporting large
sums of money over long distances, money traders started using
The taka was widely used across promissory notes. In the beginning these were personally
South Asia during the sultanate registered, but they soon became a written order to pay the
period. amount to whoever had it in their possession.[88] These notes can
be seen as a predecessor to regular banknotes.[89]
Trade bills of exchange
Bills of exchange became prevalent with the expansion of

European trade toward the end of the Middle Ages. A flourishing
Italian wholesale trade in cloth, woolen clothing, wine, tin and
other commodities was heavily dependent on credit for its rapid
expansion. Goods were supplied to a buyer against a bill of
exchange, which constituted the buyer's promise to make payment
at some specified future date. Provided that the buyer was
reputable or the bill was endorsed by a credible guarantor, the
seller could then present the bill to a merchant banker and redeem
it in money at a discounted value before it actually became due.
The main purpose of these bills nevertheless was, that traveling
with cash was particularly dangerous at the time. A deposit could
be made with a banker in one town, in turn a bill of exchange was The French East India Company
handed out, that could be redeemed in another town. issued rupees in the name of
Muhammad Shah (1719–1748) for
These bills could also be used as a form of payment by the seller to Northern India trade. This was cast
make additional purchases from his own suppliers. Thus, the bills in Pondicherry.
– an early form of credit – became both a medium of exchange
and a medium for storage of value. Like the loans made by the
Egyptian grain banks, this trade credit became a significant source for the creation of new money. In
England, bills of exchange became an important form of credit and money during last quarter of the
18th century and the first quarter of the 19th century before banknotes, checks and cash credit lines
were widely available.[90]
Islamic Golden Age
At around the same time in the medieval Islamic world, a vigorous monetary economy was created
during the 7th–12th centuries on the basis of the expanding levels of circulation of a stable high-value
currency (the dinar). Innovations introduced by Muslim economists, traders and merchants include
the earliest uses of credit,[91] cheques, promissory notes,[92] savings accounts, transactional accounts,
loaning, trusts, exchange rates, the transfer of credit and debt,[93] and banking institutions for loans
and deposits.[93]
Indian subcontinent
In the Indian subcontinent, Sher Shah Suri (1540–1545), introduced a silver coin called a rupiya,
weighing 178 grams. Its use was continued by the Mughal Empire.[94] The history of the rupee traces
back to Ancient India circa 3rd century BC. Ancient India was one of the earliest issuers of coins in the
world,[95] along with the Lydian staters, several other Middle Eastern coinages and the Chinese wen.
The term is from rūpya, a Sanskrit term for silver coin,[96] from Sanskrit rūpa, beautiful form.[97]
The imperial taka was officially introduced by the monetary reforms of Muhammad bin Tughluq, the
emperor of the Delhi Sultanate, in 1329. It was modeled as representative money, a concept pioneered
as paper money by the Mongols in China and Persia. The tanka was minted in copper and brass. Its
value was exchanged with gold and silver reserves in the imperial treasury. The currency was
introduced due to the shortage of metals.[98]
Tallies
The acceptance of symbolic forms of money meant that a symbol could be used to represent
something of value that was available in physical storage somewhere else in space, such as grain in the
warehouse; or something of value that would be available later, such as a promissory note or bill of
exchange, a document ordering someone to pay a certain sum of money to another on a specific date
or when certain conditions have been fulfilled.
In the 12th century, the English monarchy introduced an early version of the bill of exchange in the
form of a notched piece of wood known as a tally stick. Tallies originally came into use at a time when
paper was rare and costly, but their use persisted until the early 19th century, even after paper money
had become prevalent. The notches denoted various amounts of taxes payable to the Crown. Initially
tallies were simply a form of receipt to the taxpayer at the time of rendering his dues. As the revenue
department became more efficient, they began issuing tallies to denote a promise of the tax assessee
to make future tax payments at specified times during the year. Each tally consisted of a matching
pair – one stick was given to the assessee at the time of assessment representing the amount of taxes
to be paid later, and the other held by the Treasury representing the amount of taxes to be collected at
a future date.
The Treasury discovered that these tallies could also be used to create money. When the Crown had
exhausted its current resources, it could use the tally receipts representing future tax payments due to
the Crown as a form of payment to its own creditors, who in turn could either collect the tax revenue
directly from those assessed or use the same tally to pay their own taxes to the government. The tallies
could also be sold to other parties in exchange for gold or silver coin at a discount reflecting the length
of time remaining until the tax was due for payment. Thus, the tallies became an accepted medium of
exchange for some types of transactions and an accepted store of value. Like the girobanks before it,
the Treasury soon realized that it could also issue tallies that were not backed by any specific
assessment of taxes. By doing so, the Treasury created new money that was backed by public trust and
confidence in the monarchy rather than by specific revenue receipts.[99]
1450–1971
Goldsmith bankers
Goldsmiths in England had been craftsmen, bullion merchants, money changers, and money lenders
since the 16th century. But they were not the first to act as financial intermediaries; in the early 17th
century, the scriveners were the first to keep deposits for the express purpose of relending them.[100]
Merchants and traders had amassed huge hoards of gold and entrusted their wealth to the Royal Mint
for storage. In 1640 King Charles I seized the private gold stored in the mint as a forced loan (which
was to be paid back over time). Thereafter merchants preferred to store their gold with the goldsmiths
of London, who possessed private vaults, and charged a fee for that service. In exchange for each
deposit of precious metal, the goldsmiths issued receipts certifying the quantity and purity of the
metal they held as a bailee (i.e., in trust). These receipts could not be assigned (only the original
depositor could collect the stored goods). Gradually the goldsmiths took over the function of the
scriveners of relending on behalf of a depositor and also developed modern banking practices;
promissory notes were issued for money deposited which by custom and/or law was a loan to the
goldsmith,[101] i.e., the depositor expressly allowed the goldsmith to use the money for any purpose
including advances to his customers. The goldsmith charged no fee, or even paid interest on these
deposits. Since the promissory notes were payable on demand, and the advances (loans) to the
goldsmith's customers were repayable over a longer time period, this was an early form of fractional
reserve banking. The promissory notes developed into an assignable instrument, which could
circulate as a safe and convenient form of money backed by the goldsmith's promise to pay.[102]
Hence goldsmiths could advance loans in the form of gold money, or in the form of promissory notes,
or in the form of checking accounts.[103] Gold deposits were relatively stable, often remaining with the
goldsmith for years on end, so there was little risk of default so long as public trust in the goldsmith's
integrity and financial soundness was maintained. Thus, the goldsmiths of London became the
forerunners of British banking and prominent creators of new money based on credit.
First European banknotes
The first European banknotes were issued by Stockholms Banco, a

predecessor of Sweden's central bank Sveriges Riksbank, in 1661.[104]
These replaced the copper-plates being used instead as a means of
payment,[105] although in 1664 the bank ran out of coins to redeem notes
and ceased operating in the same year.
Inspired by the success of the London goldsmiths, some of whom became 100 USD banknote
the forerunners of great English banks, banks began issuing paper notes
quite properly termed "banknotes", which circulated in the same way that
government-issued currency circulates today. In England this practice continued up to 1694. Scottish
banks continued issuing notes until 1850, and still do issue banknotes backed by Bank of England
notes. In the United States, this practice continued through the 19th century; at one time there were
more than 5,000 different types of banknotes issued by various commercial banks in America. Only
the notes issued by the largest, most creditworthy banks were widely accepted. The scrip of smaller,
lesser-known institutions circulated locally. Farther from home it was only accepted at a discounted
rate, if at all. The proliferation of types of money went hand in hand with a multiplication in the
number of financial institutions.
These banknotes were a form of representative money which could be converted into gold or silver by
application at the bank. Since banks issued notes far in excess of the gold and silver they kept on
deposit, sudden loss of public confidence in a bank could precipitate mass redemption of banknotes
and result in bankruptcy.
In India the earliest paper money was issued by Bank of Hindostan (1770– 1832), General Bank of
Bengal and Bihar (1773–75), and Bengal Bank (1784–91).[106]
The use of banknotes issued by private commercial banks as legal tender has gradually been replaced
by the issuance of bank notes authorized and controlled by national governments. The Bank of
England was granted sole rights to issue banknotes in England after 1694. In the United States, the
Federal Reserve Bank was granted similar rights after its establishment in 1913. Until recently, these
government-authorized currencies were forms of representative money, since they were partially
backed by gold or silver and were theoretically convertible into gold or silver.
1971–present
In 1971, United States President Richard Nixon announced that the US dollar would not be directly
convertible to gold anymore. This measure effectively destroyed the Bretton Woods system by
removing one of its key components, in what came to be known as the Nixon shock. Since then, the
US dollar, and thus all national currencies, are free-floating currencies. Additionally, international,
national and local money is now dominated by virtual credit rather than real bullion.[8]
Payment cards
In the late 20th century, payment cards such as credit cards and debit cards became the dominant
mode of consumer payment in the First World. The Bankamericard, launched in 1958, became the
first third-party credit card to acquire widespread use and to be accepted in shops and stores all over
the United States, soon followed by the Mastercard and the American Express.[107] Since 1980, credit
card companies have been exempt from state usury laws in the United States, and so can charge any
interest rate they see fit.[108] Outside America, other payment cards became more popular than credit
cards, such as France's Carte Bleue.[109]
Digital currency
The development of computer technology in the second part of the twentieth century allowed money
to be represented digitally. By 1990, in the United States, all money transferred between its central
bank and commercial banks was in electronic form. By the 2000s most money existed as digital
currency in banks' databases.[110] In 2012, by number of transactions, 20 to 58 percent of transactions
were electronic (dependent on country).[111] The benefit of digital currency is that it allows for easier,
faster, and more flexible payments.[112]
Cryptocurrencies
In 2008, Bitcoin was proposed by an unknown author/s under the pseudonym of Satoshi Nakamoto.
It was implemented the same year. Its use of cryptography allowed the currency to have a trustless,
non-fungible and tamper resistant distributed ledger called a blockchain. It became the first widely
used decentralized, peer-to-peer, cryptocurrency.[113][114] Other comparable systems had been
proposed since the 1980s.[115] The protocol proposed by Nakamoto solved what is known as the
double-spending problem without the need of a trusted third-party.
Since Bitcoin's inception, thousands of other cryptocurrencies have been introduced.
See also
Numismatics
portal
Money portal
Axe-monies
Central bank
Commissary notes
Money creation
Monetary reform
History of banking
History of coins
History of the rupee
History of the United States dollar
Manillas
Trade beads
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Further reading
Alvarado, Ruben, Follow the Money: The Money Trail Through History (http://wordbridge.net/word
press/?page_id=106), Wordbridge 2013.
Bowman, John S. Columbia Chronologies of Asian History and Culture. (Columbia UP, 2000).
ISBN 0231110049
Dean, Austin. China and the End of Global Silver, 1873–1937 (Cornell UP, 2020).
Del Mar, Alexander. (1885). A History of Money in Ancient Countries from the Earliest Times to the
Present (https://books.google.com/books?id=LZ_RA9LMzF0C&q=earliest+history+of+money).
London: George Bell & Sons. ISBN 0-7661-9024-2
Ebrey, Patricia Buckley, and Anne Walthall. East Asia: A Cultural, Social, and Political History.
(Boston: Houghton Mifflin, 2006) ISBN 0618133844
Eichengreen, Barry. Golden Fetters: The Gold Standard and the Great Depression, 1919–1939
(Oxford UP, 1992).
Eichengreen, Barry J., and Marc Flandreau, eds. The gold standard in theory and history
(Psychology Press, 1997).
Ferguson, Niall. The Ascent of Money - Financial History of the World (2009) online (https://archiv
e.org/details/ascentofmoneyf00ferg)
Gernet, Jacques (1962). Daily Life in China on the Eve of the Mongol Invasion, 1250–1276.
Stanford: Stanford University Press. ISBN 0-8047-0720-0
Jacob Goldstein (2020). Money: The True Story of a Made-Up Thing. Hachette Book. ISBN 978-
0316417198.
Irigoin, Alejandra. "The end of a silver era: the consequences of the breakdown of the Spanish
Peso standard in China and the United States, 1780s-1850s." Journal of World History (2009):
207–243. online (https://www.jstor.org/stable/40542758)
Jevons, W. S. Money and the Mechanism of Exchange. (London: Macmillan, 1875), .
Kwarteng, Kwasi. War and Gold: A Five-Hundred-Year History of Empires, Adventures, and Debt
(2014) online (https://archive.org/details/wargoldfivehundr0000kwar)
Menger, Carl, "On the Origin of Money" (https://cdn.mises.org/On%20the%20Origins%20of%20M
oney_5.pdf)
Richards, R. D. Early history of banking in England. London: R. S. King (1929).
Sehgal, Kabir (2015). Coined: The Rich Life of Money and How Its History Has Shaped Us (http
s://archive.org/details/coinedrichlifeof0000sehg). Grand Central Publishing. ISBN 978-
1455578528.
Vilar, Pierre. A History of Gold and Money, 1450 to 1920 (1960). online (https://archive.org/details/
historyofgoldmon0000vila_c6t2)
Weatherford, Jack. The History of Money. (New York: Crown Publishers, 1997).
The History Of Money For Kids (https://educounting.com/the-history-of-money-for-kids/)
External links
The Marteau Early 18th-Century Currency Converter (http://www.pierre-marteau.com/currency/co
nverter.html) A Platform of Research in Economic History.
Historical Currency Conversion Page (http://www.history.ucsb.edu/faculty/marcuse/projects/curren
cy.htm) by Harold Marcuse. Focuses on converting German marks to US dollars since 1871 and
inflating them to values today, but has much additional information on the history of currency
exchange.
Gold in US Geological Survey (https://pubs.usgs.gov/of/2002/of02-303/OFR_02-303.pdf)
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7/13/23, 11:13 AM History of money - Wikipedia

Prehistory: predecessors of money and its emergence

Gifting and debt

Hypothesis of barter as the origin of money

Bronze Age: commodity money, credit and debt

Maybe the first ruler in the Mediterranean known to have

Herodotus dated the introduction of coins to Italy to the Etruscans

Other coins made of electrum (a naturally occurring alloy of silver

Roman banking system

Medieval coins and moneys of account

First paper money

Trade bills of exchange

Bills of exchange became prevalent with the expansion of

Islamic Golden Age

First European banknotes

The first European banknotes were issued by Stockholms Banco, a

Since Bitcoin's inception, thousands of other cryptocurrencies have been introduced.

69. Full text of "The earliest coins of Greece proper" (https://archive.org/stream/earliestcoinsofg00gar

90. Davies, Glyn, ‘’A History of Money’’ (http://projects.exeter.ac.uk/RDavies/arian/llyfr.html),

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