A brief history of money

When we think of money, most people probably automatically think of the Euro notes and coins that they use on a daily basis.

But the concept of money has been in existence for thousands of years. While some people think that money replaced barter at some point, this is not entirely accurate. Money and currency is defined as that which serves as:

  1. A unit of account
  2. A store of value
  3. A medium of exchange

Today, societies all over the world use money as all three and commerce within countries rely on local currency to allow trade in both goods and services to take place.

However, since pre-Christian times, money has evolved as a medium of exchange. In some societies, people used salt, shells and even grain as a means of trade.

4,000 years BC, ancient Egyptians used various metals as a basis for trade, these included Gold as well as Silver.

The first known ruler that used pre-set weights for the use of money was the ruler Pheidon, ruler from Argos, Greece.

Following this, the first known money to carry official stamps originated from ancient Greeece…it is ironic that it is also Greece where the Euro today faces one of its greatest challenges.

Throughout the ages, money continued to evolve with more and more complex versions of it being introduced by Governments and traders.

In the middle ages, Italian traders used a variant of money in the form of trade bills of exchange  in place of carrying precious metals with them between towns.

In the 12th Century, the English monarchy issued wooden sticks that came to serve as a form of early currency.

But, it was not until the 1600’s that the development of the modern day currency began to take shape where traders would deposit their gold with London goldsmiths for safe keeping and were issued with a certificate in return. Certificates were issued on the basis that depositors would be repaid their gold on demand…in other words, when they presented their original deposit certificate with the goldsmith.

Money and gold remained linked right up to the middle of the last Century when governments decided that the link could no longer be supported and abandoned the so-called gold standard.

Today, the money you carry in your pocket is based on trust in the Government (or bank) that backs it. In terms of the Euro, we assume that the value of the €20 will buy us €20 worth of goods an services, which it does as any trader is more than happy to accept it as payment for a new CD…or whatever you wish to buy.

So, next time you head out on the town, think of that money in your pocket as part of a long history of world trade.

Written by Frank Conway.

Leave a Reply

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out / Change )

Twitter picture

You are commenting using your Twitter account. Log Out / Change )

Facebook photo

You are commenting using your Facebook account. Log Out / Change )

Google+ photo

You are commenting using your Google+ account. Log Out / Change )

Connecting to %s

%d bloggers like this: