A Brief History of Money
If there is one thing in the world today that has an ancient yet varied history, it’s money. Today, money can be a specially crafted coin or piece of paper with a denomination on it or it can be an electronic transfer of funds from one account to another account in another bank on another continent.
Most people give little thought to the idea of money. It’s a means to acquire something of value from one to another, as well as an end to amass.
In the beginning of such exchanges, instead of exchanging trinkets or coins for things of value, people simply swapped their possessions through barters. If a farmer raised wheat and needed a goat, the farmer would find someone who had a goat and needed wheat.
In this fashion, business relationships were established between individuals who raised goats, cattle, wheat and most anything one might need. Bartering for services was also the norm as a worker in the pre-money world (and even for centuries after) was paid with food and shelter by landowner.
Around 1200 B.C. money began to take a physical form. One of the first instances of using physical objects to pay for goods or services came in the form of sea shells, or cowries. Cowries are mollusk shells and were perhaps the most common form of currency at that time. People could buy goods from farmers and merchants with payments of these small shells.
Later on, metal coins made an entrance in and around Asia and took on several forms, mainly coins that were stamped with images of kings and were made primarily of common metals. In later Greece around 1000 B.C., malleable metals such as silver and gold began to be used for coins. And soon coinage became the currency of choice around the world.
Paper money entered the currency landscape sometime in the 9th century in China with paper notes imprinted with various denominations. As society developed, governments found it easier to monitor their wealth and pay for goods and services by printing money. Unfortunately, this often led to mass printing of currency, which often resulted in severe inflation and consumer chaos. Today, our dollar bills are so precious that the U.S. Treasury uses high-tech printing, special paper and special designs to protect our currency from counterfeiters.
As the value of precious metals began to be universally established, some countries began to use gold and silver as a measure of exchange. This measure required that a gold or silver coin had to contain a specific amount of gold or silver. The valuation of these coins was established by the weight of the coin compared to the current price of gold or silver.
As governments began to tie their currency to gold and silver, currencies began to stabilize around the world. Currencies also could be traded, especially as a standard valuation system was implemented. Later, during the Great Depression, the United States needed to release the dollar from the strict gold standard and made adjustments so that the dollar began to represent more gold, thereby increasing the money supply.
Ultimately, the relationship between gold and the dollar officially ended in 1971. Coins and dollar bills were still issued with their own representative denominations, but they were no longer tied to the price or a precious metal. Instead, U.S. currency is backed by the credit of the U.S. government.
Money has changed over the centuries and taken different shapes and forms and the physical use of money changing hands is dwindling and being replaced by electronic transfers of funds by way of online checks or debit cards. Some predict that we will one day become a cash-less society where assets are digitally transferred. And the trend seems to point in that direction.
After all, how often do you see someone at an airport pay for their ticket with cash? Or at a restaurant, paying for their dinner with coins?