Most of us take money for granted - not necessarily earning money, but using our money to buy the things that we need or want. We’ll hand over a little cash, swipe a card or fill out a check – and never think about how it all came to be.
Money can be defined as any “identifiable object of value that is generally accepted as payment for goods and services and repayment of debts in a market”
As you know from reading around our blog and knowledge center, money has come in many forms, including gold and silver coins. Today, we trade pieces of paper issued by a central bank. Current laws on the books require Americans to use this paper currency, as the dollar bill says, “…for all debts, public and private.”
If we go back farther in time, other items of value like cattle, grain, shells, beads and countless others were used to barter or trade.
A timeline from the PBS show Nova provides us a glimpse of what prior civilizations used as “money.” As you’ll likely surmise, the differences between a few thousand years ago and today are vast, just as striking though…the similarities.
The History of Money – A Timeline
10,000+ years ago – Like we said above, barter was the first method of trade and pre-dates money. Barter involves the exchange of resources and/or services for mutual benefit between 2 or more parties. Barter has also survived throughout the ages, and is still a popular form of trade throughout the world. The A&E series Barter Kings is certainly proof of this.
9000 – 6000 BC (Cattle) - Cattle, which can include cows, sheep, camels and other livestock, are considered to be the first form of what’s considered money, which you can argue is a “standardized” form of barter. And as many cultures began farming, items like grain and other vegetable and plant products also became standard.
1200 BC (Cowrie Shells) – These shells of a mollusk are widely available in shallow areas of the Pacific and Indian Oceans. China was the first area of the world to use these shells as money, but their use did spread to many other civilizations. In fact, many areas of Africa used cowrie shells as currency up until the mid-20th century.
1000 BC (First coins) – Near the end of the Stone Age, China began making imitation cowries out of bronze and copper, which are base metals. These are considered by many to be the earliest form of metal coins.
500 BC (Modern coins) – In other parts of the world, round coins were developed out of lumps of silver and stamped with different gods and emperors depending on the location. The earliest silver coins came out of modern-day Turkey, but techniques were further refined by the Greek, Persian, Macedonian, and Roman empires.
100 BC – 1800 AD (Various other items are used for money) – Even though coinage as we know it began around 500 BC, other items were used as money too. Leather in the form of white deerskin (1-foot square pieces) was popular in China. There were also a few obscure forms of money that might be called “brutal” by some. The phrase “To pay through the nose” for example, comes from Danes in Ireland, who slit the noses of those who didn’t pay Danish poll taxes.
Other forms of money from this time include:
- Potlach – From Native American cultures, a “potlach” was a ceremony where gifts were exchanged, and other festivities held.
- Wampum – A form of money originating from Native Americans, wampum consisted of strings of beads made from clam shells.
806 AD (The first paper money) – Paper banknotes first appeared in China and were used from around the 9th to 15th century. Over time, production of paper notes continued to grow to the point where their value rapidly depreciated. Around 1455, paper money disappeared in China for several hundred years. It re-emerged in Europe a few decades later, but it was another 3 centuries before it was considered common.
1792-1816 AD (The Gold Standard) – Although the U.S. began tying its currency to precious metal with the 1792 Mint and Coinage Act, 1816 is considered the seminal year, which is when gold was adopted as the official standard of value in England. Guidelines were developed to allow for a fixed, non-inflationary production of banknotes that represented a specific amount of gold.
1930s AD (The Great Depression and the End of the Gold Standard) – The coming of the Great Depression brought major changes in money and is considered the beginning of the end for the gold standard. The first step was revising the gold standard, which involved confiscating individual gold holdings and increasing its price, which essentially devalued the paper currency that represented the gold. By the 1970s, the dollar was completely delinked from gold.
(Read our blog post “Closing the U.S. Gold Window – 40 Years of Worldwide Paper Money” for more background on what many consider a major event in the history of paper money and the U.S. dollar)
Present day and the future – Since the early 1970s, the U.S. and most of the world have used a paper-based currency whose value is regulated by a central bank. International monetary regulations are complex at best and downright impossible to understand at worst. Many feel this standard has brought unbridled monetary expansion, eroding value, stagnant wages and more.
While the future is always uncertain, gold coins and other precious metals have become more popular investments. Many investors also buy junk silver and other coins for barter in case the need arises.
The history of money can be explained in many ways. It’s fascinating to think about how our forbearers went about trading for things they needed. It’s clear that what we call money hasn’t really been in use for that long. While “paper currency” has been around for centuries, it was tied in some way to a precious metal. Never before has money been completely un-tethered from a resource or metal.
Join the conversation
Where do you think money is headed? Will the completely paper-based system survive? Or will we see a return to a currency tied to gold or another metal?
Have you ever bartered? If so, what did you trade?