LESSON 1.3.

Origin of Money
LESSON OBJECTIVES:
At the end of the lesson, the students should be able to:
1. trace the origin of money;
2. give examples of items used as money;
3. explain the meaning of mint and minting; and
4. discuss the role of China, Lydia, Canada, and France in the development of money.

Though trade was done through barter, people started confronting some problems with
the system. In order to exchange an item, the seller must have the specific good the buyer
needs and vice versa. This was not always possible. Another major drawback was lack of a
common value to measure the value of goods. So people started stacking certain valuable
things that were acceptable for a majority. They included salt, metal, farm animals, and the
like. Materials, like shells, feathers, and animal teeth, were also used as money. This was made
possible after they agreed upon specific values for these materials and use the same for trade.
However, it became difficult to carry and use these materials. So, traders wanted something
that was not perishable and easy to carry as a medium of exchange. This led to the use of
metal pieces as money.

It is believed that the first recognizable metal coins appeared in China, during 1000 BC. The
earliest currency of China of the eighth century BC consisted of miniature hoes and billhooks
(pruning implements), with inscriptions indicating the authority. Sometime around 770 BC,
miniature replicas of tools and weapons cast in bronze were used by the Chinese as a medium
of exchange. The small bronze celts (prehistoric tools resembling chisels) and bronze rings
frequently found in hoards in Western Europe probably played a monetary role. Even in
modern times, such mediums of exchange as fishhook currency have been known. Due to
impracticality, these tiny daggers, spades, and hoes were eventually abandoned for objects in
the shape of a circle. These objects became some of the first coins.

Around 700 BC, the Chinese moved from coins to paper money. By the time Marco Polo
(the Venetian merchant, explorer, and writer who travelled through Asia along the Silk Road
between AD 1271 and 1295) visited China in approximately AD 1271, the emperor of China had
a good handle on both the money supply and various denominations

Although China was the first country to use coins, the first region of the world to use an
industrial facility to manufacture coins (a mint) that could be used as currency was in Europe, in
the region called Lydia (now western Turkey). Minting is the process of making a coin by
stamping metal. In 600 BC, around the time China started using paper money, Lydia's King
Alyattes minted the first official currency, non-standardized coins from electrum (a naturally
occurring alloy of gold and silver) that did not have a standardized value. King Croesus (son of
King Alyattes) (reigned 560-546 BC) produced a bimetallic system of pure gold and pure silver
coins. The Croeseid, anciently Kroiseioi stateres, was a type of coin, either in gold or silver,
which was minted in Sardis by the king of Lydia, Croesus, from around 550 BC. Croesus is
credited with issuing the first true gold coins with a standardized purity for general circulation,
and the world's first bimetallic monetary system While these coins were in circulation, it was
the issuing of the Croeseid that changed the way that people did trade. Lydia's currency helped
the country increase both its internal and external trading systems, making it one of the richest
empires in Asia Minor. Today, when someone says, "as rich as Croesus," they are referring to
the last Lydian king who minted the first gold coin (italgoldrefinery.com 2021).

The foundation deposit of the Artemisium (temple to Artemis) at Ephesus shows that
electrum (which the Greeks called "white gold") coins were in production even before Croesus,
possibly under King Gyges. The coins were stamped with pictures that acted as denominations.
They were stamped on one side with the facing heads of a lion and a bull; this type was later
transferred to the bimetallic series of pure gold and pure silver. The early electrum coinage
consisted of small thick, bean-shaped pieces, with a device stamped in relief on one side, the
other being roughly impressed. Their intrinsic value fluctuated according to their gold and silver
content, but the weight of the unit was fairly steady at about seven to eight grams, and the
types stamped on them were the guarantee of authority.

The Bank of Canada (bankofcanada.ca 2021) had the following account of the history of the
Canadian dollar:

The European colonial governments in North America issued the first paper currency.
Because shipments between Europe and the North American colonies took so long, the
colonists often ran out of cash as operations expanded. Instead of going back to a barter
system, the colonial governments issued IOUS (promissory notes) that traded as a currency. The
first instance was in Canada (then a French colony).

According to Adam Shortt, the great Canadian economic historian, the first regular system
of exchange in Canada involving Europeans occurred in Tadaoussac in the early seventeenth
century, where French traders bartered each year with the Mantagnals people (also known as
the Innu) trading weapons, cloth, food, silver items, and tobacco for animal pelts, especially
those of the beaver. The first colonial settlement at Quebec on the St. Lawrence River was
established by Samuel de Champlain in 1608. The beaver pelt was the one universally accepted
medium of exchange in the infant colony, although wheat and moose skins were also employed
as legal tender. As the colony expanded and its economic and financial needs became more
complex, coins from France came to be widely used.

Silver and copper coins designed especially for the colonies was minted in 1670 due to the
inability to keep coins in circulation in French colonies in the Americas. These coins could not be
circulated in France. While apparently intended only for the West Indies, a small number of
these coins are believed to have circulated in Canada. The West Indies are a chain of islands in
the Caribbean Sea and Atlantic Ocean divided into three groups: The Bahamas, the Greater
Antilles, and the Lesser Antilles. The West Indies are stretched from the Bahamas in the north,
all the way south to the northern shores of South America. During the mid-1600s, Spanish
dollars (piastres) began to circulate in the French colonies owing to illegal trading with English
and Dutch settlers to the south, who used them extensively. Full-weighted Spanish dollars were
stamped with a fluer-de-lys and were valued at four livres, while light coins, depending on their
weight, were stamped with a fleur-de-lys and a Roman numeral with the lightest coin assigned
a value of only 3 livres. These over-stamped Spanish dollars represent the first distinctive
Canadian coins.

Figure 1.1 shows the Spanish dollar piasters.

In 1685, the colonial authorities in New France found themselves short of funds. Jacques
de Meulles, Intendant of Justice, Police, and Finance came up with the temporary issuance of
paper money printed on playing cards. Card money was purely a financial expedient initially,
but was later acknowledged as a medium of exchange. The first issue of card money occurred
on June 8, 1685 and was redeemed three months later. These cards were readily accepted by
merchants and the general public and circulated freely at face value. Card money was next
issued in February 1686. Because of another revenue shortfall, the colonial authorities reissued
card money in 1690. The following year, with yet another issue of card money, the Governor,
Louis de Buade, Comte de Frontenac, acknowledged the useful role that card money played as
a circulating medium of exchange in addition to being a financing tool. The cards served as
money in Canada, just as coin did in France.

Transporting gold and silver across the Atlantic was risky and to attract and retain fresh
supplies of coin, coins were given a higher value in the French colonies in Canada than in
France. In 1717, all debts and contract in Canada became payable in monnoye de France. Below
are some sample images of the monnoye de France.
 Figure 1.2. Monneye de France

The livre (French for "pound" and the name of both units of account and coins) was the
currency of the Kingdom of France and its predecessor state of West Francia from 1781 to
1794. Figure 1.3 shows a sample image of a French livre.

Figure 1.3. French Livre

Copper coins were introduced in 1722, but they were not well received by merchants.
Notes issued by private individuals based on their own credit standing also circulated as money,
which continue periodically well into the nineteenth century. The government, once again short
of funds, also issued promissory notes called ordonnances and treasury notes called acquits,
which began to circulate as money. In March 1729, card money, which were strictly limited,
were legal tender for all payments and replaced the ordonnances in circulation. Legal tender
means currency, such as coin and paper money, that are declared by law to be valid and
sufficient for the payment of debts, and meet a financial obligation, including tax payments,
contracts, and legal fines or damages. By the early 1750s, the distinction between card money
and treasury notes had largely disappeared and by 1757, the government had discontinued
payment in specie; all payments were made in paper. A rapid increase in the amount of paper
in circulation during the late 1750s led to rapid inflation. Inflation means increase in prices,
reducing the purchasing power of money.

On October 15, 1759, the French government suspended payment of bills of exchange
drawn on the Treasury for payments of expenses in Canada until three months after peace was
restored. Paper money traded at a sharp discount and ultimately became worthless following
the British conquest in 1760. Gold and silver, which had been hoarded, came back into
circulation. Settlement of the paper obligations issued by the colonial authorities in Canada was
included in the Treaty of Paris, signed in February 1763, which ended the war between Great
Britain and France.

The advent of paper money led to an increase in international trade. Today, physical
currency is not required, as electronic money is widely used for monetary transactions. In fact,
we now have digital/virtual currencies or cryptocurrencies.

LESSON SUMMARY
1. It is believed that the first recognizable metal coins appeared in China, during 1000 BC.
The earliest currency of China of the eighth century BC consisted of miniature hoes and
billhooks (pruning implements), with inscriptions indicating the authority.
2. Sometime around 770 BC, miniature replicas of tools and weapons cast in bronze were
used by the Chinese as a medium of exchange. The small bronze celts (prehistoric tools
resembling chisels) and bronze rings played a monetary role. Due to impracticality,
these tiny daggers, spades, and hoes were eventually abandoned for objects in the
shape of a circle. These objects became some of the first coins.
3. Around 700 BC, the Chinese moved from coins to paper money. By the time Marco Polo
(the Venetian merchant, explorer, and writer) visited China in approximately AD 1271,
the emperor of China had a good handle on both the money supply and various
denominations.
4. The first region of the world to use an industrial facility to manufacture coins (a mint)
was in Europe, in the region called Lydia (now western Turkey). Minting is the process of
making a coin by stamping metal. In 600 BC, around the time China started using paper
money, Lydia's King Alyattes minted the first official currency, non-standardized coins
from electrum (a naturally occurring alloy of gold and silver) that did not have a
standardized value.
5. King Croesus (son of King Alyattes) of Lydia (reigned 560-546 BC) produced a bimetallic
system of pure gold and pure silver coins. The Croeseid, anciently Kroiseioi stateres, was
a type of coin, either in gold or silver, which was minted in Sardis by King Croesus, from
around 550 BC. Croesus is credited with issuing the first true gold coins with a
standardized purity for general circulation, and the world's first bimetallic monetary
system.
6. The foundation deposit of the Artemisium (temple to Artemis) at Ephesus shows that
electrum (which the Greeks called "white gold") coins were in production even before
Croesus, possibly under King Gyges.
7. The European colonial governments in North America issued the first paper currency in
Canada (then a French colony). Instead of going back to a barter system, the colonial
governments issued IOUS (promissory notes) that traded as a currency.
8. According to Adam Shortt, the great Canadian economic historian, the first regular
system of exchange in Canada involving Europeans occurred in Tadaoussac in the early
seventeenth century, where French traders bartered each year with the Mantagnais
people (also known as the Innu) trading weapons, cloth, food, silver items, and tobacco
for animal pelts, especially those of the beaver.
9. The first colonial settlement at Quebec on the St. Lawrence River was established by
Samuel de Champlain in 1608. The beaver pelt was the one universally accepted
medium of exchange in the infant colony, although wheat and moose skins were also
employed as legal tender. As the colony expanded and its economic and financial needs
became more complex, coins from France came to be widely used.
10. Silver and copper coins designed especially for the colonies was minted in 1670. These
coins could not be circulated in France. While apparently intended only for the West
Indies, a small number of these coins are believed to have circulated in Canada.
11. The West Indies are a chain of islands in the Caribbean Sea and Atlantic Ocean divided
into three groups: The Bahamas, the Greater Antilles, and the Lesser Antilles.
12. During the mid-1600s, Spanish dollars (piastres) began to circulate in the French
colonies These over-stamped Spanish dollars represent the first distinctive Canadian
coins.
13. The livre (French for "pound" and the name of both units of account and coins) was the
currency of the Kingdom of France and its predecessor state of West Francia from 1781
to 1794.
14. In 1685, Jacques de Meulles, Intendant of Justice, Police, and Finance came up with the
temporary issuance of paper money printed on playing cards. Card money served as
money in Canada, just as coin did in France.
15. In 1717, all debts and contract in Canada became payable in monnoye de France.
16. Copper coins were introduced in 1722, but they were not well received by merchants.
Notes issued by private individuals based on their own credit standing also circulated as
money. The government issued promissory notes called ordonnances and treasury
notes called acquits, which began to circulate as money.
17. In March 1729, card money was legal tender for all payments and replaced the
ordonnances in circulation. Legal tender means currency, such as coin and paper money,
is valid and sufficient for the payment of debts. A rapid increase in the amount of paper
in circulation during the late 1750s led to rapid Inflation. Inflation means increase in
prices, reducing the purchasing power of money.
18. On October 15, 1759, the French government suspended payment of bills of exchange
drawn on the Treasury for payments of expenses in Canada until three months after
peace was restored. Paper money traded at a sharp discount and ultimately became
worthless following the British conquest in 1760. Gold and silver, which had been
hoarded, came back into circulation.
 19. Settlement of the paper obligations issued by the colonial authorities in Canada was
included in the Treaty of Paris, signed in February 1763, which ended the war between
Great Britain and France.
20. The advent of paper money led to an increase in international trade. Today, physical
currency is not required, as electronic money is widely used for monetary transactions.
In fact, we now have digital/virtual currencies or cryptocurrencies.

KEY TAKEAWAYS
1. The first recognizable metal coins appeared in China, during 1000 BC.
2. Sometime around 770 BC, the small bronze celts (prehistoric tools resembling chisels)
and bronze rings played a monetary role.
3. Objects in the shape of a circle became some of the first coins.
4. Around 700 BC, the Chinese moved from coins to paper money
5. The first mint, an industrial facility to manufacture coins, was established in Lydia (now
western Turkey).
6. Minting is the process of making a coin by stamping metal.
7. In 600 BC, around the time China started using paper money, Lydia's King Alyattes
minted the first official currency, non-standardized coins from electrum (a naturally
occurring alloy of gold and silver).
8. King Croesus (son of King Alyattes) of Lydia is credited with installing the world's first
bimetallic monetary system of pure gold and pure silver coins, the Croeseid (anciently
Kroiseioi stateres), around 550 BC.
9. The foundation deposit of the Artemisium (temple to Artemis) at Ephesus shows that
electrum (which the Greeks called "white gold") coins were in production even before
Croesus, possibly under King Gyges.
10. The European colonial governments in North America issued the first paper currency in
Canada (then a French colony). Instead of going back to a barter system, the colonial
governments issued IOUS (promissory notes) that traded as a currency.
11. The first regular system of exchange in Canada involving Europeans occurred in
Tadaoussac in the early seventeenth century, where French traders bartered each year
with the Mantagnais people (also known as the Innu) trading weapons, cloth, food,
silver items, and tobacco for animal pelts, especially those of the beaver.
12. The first colonial settlement at Quebec was established by Samuel de Champlain in
1608.
13. The beaver pelt was the one universally accepted medium of exchange in Quebec,
although wheat and moose skins were also employed as legal tender. As the colony
expanded and its economic and financial needs became more complex, coins from
France came to be widely used.
14. Silver and copper coins, apparently intended only for the West Indies, was minted in
1670, believed to have circulated in Canada, but could not be circulated in France.
 15. The West Indies are a chain of islands in the Caribbean Sea and Atlantic Ocean divided
into three groups: The Bahamas, the Greater Antilles, and the Lesser Antilles.
16. During the mid-1600s, Spanish dollars (piastres) represent the first distinctive
Canadian coins.
17. The livre (French for "pound") was the currency of the Kingdom of France and its
predecessor state of West Francia from 1781 to 1794.
18. In 1685, Jacques de Meulles, Intendant of Justice, Police, and Finance came up with the
card money, which served as money in Canada, just as coin did in France, but it was
only in March 1729 that card money became legal tender and replaced the
ordonnances in circulation.
19. Legal tender means currency, such as coin and paper money, is valid and sufficient for
the payment of debts.
20. Inflation means increase in prices, reducing the purchasing power of money.
21. In 1717, all debts and contract in Canada became payable in monnoye de France.
22. Copper coins were introduced in 1722, but they were not well received by merchants.
Notes issued by private individuals also circulated as money.
23. The government issued promissory notes called ordonnances (replaced later by card
money) and treasury notes called acquits, which began to circulate as money.
24. Bills of exchange drawn on the Treasury were used for payments of expenses in
Canada.
25. Settlement of the paper obligations issued by the colonial authorities in Canada was
included in the Treaty of Paris, signed in February 1763, which ended the war between
Great Britain and France.
26. The advent of paper money led to an increase in international trade.

DISCUSSION QUESTIONS
Instruction: Answer the following questions comprehensively.
1. Trace the origin of money.
2. Give examples of items used as money.
3. Explain the meaning of mint and minting.