Social Studies Assignment
History of Currency
Made by: Rohab Jawed
Money, in some form, has been part of human history for at least the last 3,000 years. Before that
time, it is assumed that a system of bartering was likely used.
Bartering is a direct trade of goods and services - I'll give you a stone axe if you help me kill a
mammoth - but such arrangements take time. You have to find someone who thinks an axe is a
fair trade for having to face the 12-foot tusks on a beast that doesn't take kindly to being hunted.
If that didn't work, you would have to alter the deal until
someone agreed to the terms. One of the great achievements
of money was increasing the speed at which business,
whether mammoth slaying or monument building, could be
done.
Slowly, a type of prehistoric currency involving easily traded goods like animal skins, salt and
weapons developed over the centuries. These traded goods served as the medium of
exchange even though the unit values were still negotiable. This system of barter and trade
spread across the world, and it still survives today in some parts of the globe.
In 600 B.C., Lydia's King Alyattes minted the first official currency. The coins were made from
electrum, a mixture of silver and gold that occurs naturally, and stamped with pictures that acted
as denominations. In the streets of Sardis, circa 600 B.C., a clay jar might cost you two owls and
a snake. Lydia's currency helped the country increase both its internal and external trade,
making it one of the richest empires in Asia Minor. It is interesting that when someone says, "as
rich as Croesus",
they are referring to
the last Lydian king
who minted the first
gold coin.
Unfortunately,
minting the first
coins and
developing a strong
trading economy couldn't protect Lydia from the swords of the Persian army.
Just when it looked like Lydia was taking the lead in currency developments, around 700 B.C.,
the Chinese moved from coins to paper money. By the time Marco Polo visited in 1271 A.D., the
emperor had a good handle on both money supply and various denominations. In the place of
where the American bills say, "In God We Trust," the Chinese inscription warned, "All
counterfeiters will be decapitated."
Europeans were still using coins all the way up to the 16th century, helped along by acquisitions
of precious metals from colonies to keep minting more and more cash. Eventually, the banks
started using bank notes for depositors and borrowers to carry around instead of coins. These
notes could be taken to the bank at any time and exchanged for their face values in silver or gold
coins. This paper money could be used to buy goods and operated much like currency today, but
it was issued by banks and private institutions, not the government, which is now responsible for
issuing currency in most countries.
The first paper currency issued by European governments was actually issued by colonial
governments in North America. Because shipments between Europe and the colonies took so
long, the colonists often ran out of cash as operations expanded. Instead of going back to a barter
system, the colonial governments
used IOUs that traded as a currency. The first
instance was in Canada, then a French colony.
In 1685, soldiers were issued playing cards
denominated and signed by the governor to use
as cash instead of coins from France.
The shift to paper money in Europe increased the amount of international trade that could occur.
Banks and the ruling classes started buying currencies from other nations and created the first
currency market. The stability of a particular monarchy or government affected the value of the
country's currency and the ability for that country to trade on an increasingly international
market. The competition between countries often led to currency wars, where competing
countries would try to affect the value of the competitor's currency by driving it up and making
the enemy's goods too expensive, by driving it down and reducing the enemy's buying
power (and ability to pay for a war), or by eliminating the currency completely.
