The history of money and how it appeared on earth is really quite fascinating. Unlike most inventions and developments we enjoy today, which can be traced back to some sort of provenance or a source, civilisation or inventor. Money appeared in places that were, at the time, totally unconnected, and from all over the world in a remarkably similar way!
Consider the American Indians using Wampum, West Africans trading in decorative metallic objects called Manilas and the Fijian economy based on whales teeth, some of which are still legal tender; add to that shells, amber, ivory, decorative feathers, cattle including oxen & pigs, a large number of stones including jade and quartz which have all been used for trade across the world, and we get a taste of the variety of accepted currency...... Money!
There is something charming and childlike imagining primitive societies, our ancestors, using all these colourful forms of money. As long as everyone concerned can agree on a value, this is a sensible thing for a community to do.
After all, the person who has what you need might not need what you have to trade. Money solves that problem neatly: real value with each exchange, and everyone gaining from the convenience. The idea is really inspired which might explain why so many diverse minds came up with it.
Who issues money?
Wars have been fought and depressions have been caused in the battle over who issues the money; however the majority of us are not aware of this, and this is largely due to the fact that the winning side became, and increasingly continues to be, a vital and respected member of our global society, having an influence over large aspects of our lives including our education, our media and our governments.
A brief history of our precious concept of "Money"
Bartering: 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.
Metal 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.
Paper Money: Some of the earliest known paper money dates back to China, where the issue of paper money became common from about AD 960 onwards.
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 valuable.
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 century’s 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 favour of some other form of payment is illegal.
So, that is how we arrived at what we now call "money"... legal tender, dosh, spondoolies, cash, wonga et al!
Where we would all be if money hadn’t been ‘invented’. The current economic situation also bodes the question: will it all self combust? Will we go back to a barter/trade on real value system? The gold reserves have now run low and so there is no true value set against any currency or money... where will it all go?
We’ll swap you a bag of rice for a bucket of beans!