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History of Money

History of Money

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Published by ivaylo

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Published by: ivaylo on Jun 30, 2010
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History of money1
History of money
Numismatics
TerminologyPortalCurrency
Coins, Banknotes,Forgery
Circulating currenciesCommunity currencies
Company scrip, LETS,Time dollars
Fictional currenciesAncient currencies
Greek, Roman
 
MedievalcurrenciesByzantine
Modern currencies
Africa, The Americas,Europe, Asia, Oceania
Production
Mint, DesignersCoining, Milling,Hammering, Cast
Exonumia
Credit cards, Medals,Tokens, Cheques
Notaphily
Banknotes
Scripophily
Stocks, Bonds
The
history of money
spans thousands of years. Numismatics is the scientific study of money and its history in allits varied forms.Many items have been used as commodity money such as naturally scarce precious metals, cowry shells, barley,beads etc., as well as many other things that are thought of as having value.Modern money (and most ancient money) is essentially a token
 —
in other words, an abstraction. Paper currency isperhaps the most common type of physical money today. However, objects of gold or silver present many of money's essential properties.
 
History of money2
Non-monetary exchange: barter and gift
Contrary to popular conception, there is no evidence of a society or economy that relied primarily on barter.
[1]
Instead, non-monetary societies operated largely along the principles of gift economics. When barter did in factoccur, it was usually between either complete strangers or would-be enemies.
[2]
With barter, an individual possessing a material object of value, such as a measure of grain, could directly exchangethat object for another object perceived to have equivalent value, such as a small animal, a clay pot or a tool. Thecapacity to carry out transactions is severely limited since it depends on a coincidence of wants. The seller of foodgrain has to find a buyer who wants to buy grain and who also could offer in return something the seller wants tobuy. There is no common medium of exchange into which both seller and buyer could convert their tradablecommodities. There is no standard which could be applied to measure the relative value of various goods andservices.In a gift economy, valuable goods and services are regularly given without any explicit agreement for immediate orfuture rewards (i.e. there is no formal
quid pro quo
).
[3]
Ideally, simultaneous or recurring giving serves to circulateand redistribute valuables within the community.There are various social theories concerning gift economies. Some consider the gifts to be a form of reciprocalaltruism. Another interpretation is that social status is awarded in return for the 'gifts'.
[4]
Consider for example, thesharing of food in some hunter-gatherer societies, where food-sharing is a safeguard against the failure of anyindividual's daily foraging. This custom may reflect altruism, it may be a form of informal insurance, or may bringwith it social status or other benefits.
The emergence of money
The Sumer civilization developed a large scale economy based on commodity money. The Babylonians and theirneighboring city states later developed the earliest system of economics as we think of it today, in terms of rules ondebt, legal contracts and law codes relating to business practices and private property.
[5]
 
[6]
The
Code of Hammurabi
(
Codex Hammurabi
), the best preserved ancient law code, was created ca. 1760 BC(middle chronology) in ancient Babylon. It was enacted by the sixth Babylonian king, Hammurabi. Earliercollections of laws include the codex of Ur-Nammu, king of Ur (ca. 2050 BC), the Codex of Eshnunna (ca. 1930BC) and the codex of Lipit-Ishtar of Isin (ca. 1870 BC).
[7]
These law codes formalized the role of money in civilsociety. They set amounts of interest on debt... fines for 'wrong doing'... and compensation in money for variousinfractions of formalized law.The Shekel referred to an ancient unit of weight and currency. The first usage of the term came from Mesopotamiacirca 3000 BC. and referred to a specific mass of barley which related other values in a metric such as silver, bronze,copper etc. A barley/shekel was originally both a unit of currency and a unit of weight, just as the British Pound wasoriginally a unit denominating a one pound mass of silver.In cultures where metal working was unknown, shell or ivory jewelry were the most divisible, easily storable andtransportable, scarce, and hard to counterfeit objects that could be made. It is highly unlikely that there were formalmarkets in 100,000 BCE (any more than there are in recently observed hunter-gatherer cultures). Nevertheless,proto-money would have been useful in reducing the costs of less frequent transactions that were crucial tohunter-gatherer cultures, especially bride purchase, splitting property upon death, tribute, and inter-tribal trade inhunting ground rights ("starvation insurance") and implements.In the absence of a medium of exchange, non-monetary societies operated largely along the principles of gifteconomics.
[1]
When barter did in fact occur, it was usually between either complete strangers or would-beenemies.
[2]
 
History of money3
Commodity Money
1742 drawing of shells of the money cowry,
Cypraea moneta
Bartering has several problems, most notably the coincidence of wantsproblem. For example, if a wheat farmer needs what a fruit farmerproduces, a direct swap is impossible as seasonal fruit would spoilbefore the grain harvest. A solution is to trade fruit for wheat indirectlythrough a third, "intermediate", commodity: the fruit is exchanged forthe intermediate commodity when the fruit ripens. If this
intermediatecommodity
doesn't perish and is reliably in demand throughout the year(e.g. copper, gold, or wine) then it can be exchanged for wheat after the harvest. The function of the intermediatecommodity as a store-of-value can be standardized into a widespread commodity money, reducing the coincidenceof wants problem. By overcoming the limitations of simple barter, a commodity money makes the market in all othercommodities more liquid.Many cultures around the world eventually developed the use of commodity money. Ancient China and Africa usedcowrie shells. Trade in Japan's feudal system was based on the koku - a unit of rice per year. The shekel was anancient unit of weight and currency. The first usage of the term came from Mesopotamia circa 3000 BC and referredto a specific weight of barley, which related other values in a metric such as silver, bronze, copper etc. Abarley/shekel was originally both a unit of currency and a unit of weight.
[8]
Where ever trade is common, barter systems usually lead quite rapidly to several key goods being imbued withmonetary properties. In the early British colony of New South Wales, rum emerged quite soon after settlement as themost monetary of goods. When a nation is without a currency it commonly adopts a foreign currency. In prisonswhere conventional money is prohibited, it is quite common for cigarettes to take on a monetary quality, andthroughout history, gold has taken on this unofficial monetary function.
Standardized coinage
Greek drachm of Aegina. Obverse: Land turtle / Reverse: ΑΙΓ(INA) and dolphin. The oldest turtle coindates 700 BCA 640 BC one-third stater coin from Lydia, shownlarger.
From early times, metals, where available, have usually beenfavored for use as proto-money over such commodities as cattle,cowry shells, or salt, because they are at once durable, portable,and easily divisible . The use of gold as proto-money has beentraced back to the fourth millennium B.C. when the Egyptiansused gold bars of a set weight as a medium of exchange, as theSumerians earlier had done with silver bars . The first known rulerwho officially set standards of weight and money was Pheidon
[9]
.The first stamped money (having the mark of some authority in theform of a picture or words) can be seen in the BibliothèqueNationale of Paris. It is an electrum stater of a turtle coin, coined atAegina island. This remarkable coin [10] dates about 700 B.C.
[11]
.Electrum coins were also introduced about 650 B.C. in Lydia.
[12]
Coinage was widely adopted across Ionia and mainland Greeceduring the 6th century B.C., eventually leading to the AthenianEmpire's 5th century B.C., dominance of the region through theirexport of silver coinage, mined in southern Attica at Laurium andThorikos. A major silver vein discovery at Laurium in 483 BC ledto the huge expansion of the Athenian military fleet. Competingcoinage standards at the time were maintained by Mytilene and Phokaia using coins of Electrum; Aegina used silver.

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