||The first people didn't buy goods from other people
with money. They used barter. Barter is the exchange of personal
possessions of value for other goods that you want. This kind
of exchange started at the beginning of humankind and is still
used today. From 9,000-6,000 B.C., livestock was often used
as a unit of exchange. Later, as agriculture developed, people
used crops for barter. For example, I could ask another farmer
to trade a pound of apples for a pound of bananas.
||At about 1200 B.C. in China, cowry shells became the first
medium of exchange, or money. The cowry has served as money
throughout history even to the middle of this century.
|First Metal Money
||China, in 1,000 B.C., produced mock cowry shells at the end
of the Stone Age. They can be thought of as the original development
of metal currency. In addition, tools made of metal, like knives
and spades, were also used in China as money. From these
models, we developed today's round coins that we use daily.
The Chinese coins were usually made out of base metals which
had holes in them so that you could put the coins together to
make a chain.
||At about 500 B.C., pieces of silver were the earliest coins.
Eventually in time they took the appearance of today and were
imprinted with numerous gods and emperors to mark their value.
These coins were first shown in Lydia, or Turkey, during this
time, but the methods were used over and over again, and further
improved upon by the Greek, Persian, Macedonian, and Roman empires.
Not like Chinese coins, which relied on base metals, these new
coins were composed from scarce metals such as bronze, gold,
and silver, which had a lot of intrinsic value.
||In 118 B.C., banknotes in the form of leather money were used
in China. One-foot square pieces of white deerskin edged in
vivid colors were exchanged for goods. This is believed to be
the beginning of a kind of paper money.
||During the ninth century A.D., the Danes in Ireland had an
expression "To pay through the nose." It comes from
the practice of cutting the noses of those who were careless
in paying the Danish poll tax.
||From the ninth century to the fifteenth century A.D., in China,
the first actual paper currency was used as money. Through this
period the amount of currency skyrocketed causing severe inflation.
Unfortunately, in 1455 the use of the currency vanished from
China. European civilization still would not have paper currency
for many years.
||In 1500, North American Indians engaged in potlach, a
term that describes the exchange of gifts at banquets, dances,
and various rituals. Since the trading of gifts was so important
in figuring the leaders’ community status, potlach went
out of control as the gifts became more extravagant in an effort
to surpass others' gifts.
||In 1535, though likely well before this earliest recorded
date, strings of beads made from clam shells, called wampum,
are used by North American Indians as money. Wampum means
white, the color of the clam shells and the beads.
||In 1816, England made gold a benchmark of value. This meant
that the value of currency was pegged to a certain number of
ounces of gold. This would help to prevent inflation of currency.
The U.S. went on the gold standard in 1900.
||Because of the depression of the 1930's, the U.S. began a
world wide movement to end tying currency to gold. Today, few
nations tie the value of their currency to the price of gold.
Other government and financial institutions now try to control
||At present, nations continue to change their currencies. For
example, the U.S. has already changed its $100 and $20 banknotes.
More changes are in the works.
||Tomorrow is already here. Electronic money (or digital cash)
is already being exchanged over the Internet.
|Money is anything that is commonly accepted by
a group of people for the exchange of goods, services, or resources.
Every country has its own system of coins and paper money.
Bartering and Commodity Money
In the beginning, people bartered. Barter is the exchange of
a good or service for another good or service, a bag of rice
for a bag of beans. However, what if you couldn't agree what
something was worth in exchange or you didn't want what the
other person had. To solve that problem humans developed what
is called commodity money.
A commodity is a basic item used by almost everyone. In the
past, salt, tea, tobacco, cattle and seeds were commodities
and therefore were once used as money. However, using commodities
as money had other problems. Carrying bags of salt and other
commodities was hard, and commodities were difficult to store
or were perishable.
Coins and Paper Money
Metals objects were introduced as money around 5000 B.C. By
700 BC, the Lydians became the first in the Western world to
make coins. Countries were soon minting their own series of
coins with specific values. Metal was used because it was readily
available, easy to work with and could be recycled. Since coins
were given a certain value, it became easier to compare the
cost of items people wanted.
Some of the earliest known paper money dates back to China,
where the issue of paper money became common from about AD 960
With the introduction of paper currency and non-precious coinage,
commodity money evolved into representative money. This meant
that what money itself was made of no longer had to be very
Representative money was backed by a government or bank's promise
to exchange it for a certain amount of silver or gold. For example,
the old British Pound bill or Pound Sterling was once guaranteed
to be redeemable for a pound of sterling silver.
For most of the nineteenth and twentieth centuries, the majority
of currencies were based on representative money through the
use of the gold standard.
Representative money has now been replaced by fiat money. Fiat
is the Latin word for "let it be done". Money is now
given value by a government fiat or decree, in other words enforceable
legal tender laws were made. By law the refusal of "legal
tender" money in favor of some other form of payment is
The origin of the "$" money sign is not certain. Many
historians trace the $ money sign to either the Mexican or Spanish
"P's" for pesos, or piastres, or pieces of eight.
The study of old manuscripts shows that the "S," gradually
came to be written over the "P," looking very much
like the "$" mark.
U.S. Money Trivia
On March 10, 1862 the first United States paper money was issued.
The denominations were $5, $10, and $20. They became legal tender
by Act of March 17, 1862. The inclusion of "In God We Trust"
on all currency was required by law in 1955. The national motto
first appeared on paper money in 1957 on $1 Silver Certificates,
and on all Federal Reserve Notes beginning with Series 1963.
ERMA began as a project for the Bank of America in an effort
to computerize the banking industry. MICR (magnetic ink character
recognition) was part of ERMA. MICR allowed computers to read
special numbers at the bottom of checks that allowed computerized
tracking and accounting of check transactions.
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