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The History of Money

No matter if it is used to buy food, rent a movie, or get a haircut, money has become a necessary part of daily life. While most people today are accustomed to the use of paper money, this type of currency has not always been in existence. In fact, paper money in its current form has only been used as a form of payment for the last 200 years. Prior to the creation of this type of currency, debtors relied on the use of cattle, shells, leather, and even gold to pay their bills. To better understand what the future holds for our current styles of money, it is essential to understand its past.

The Beginning:

Cave drawings and fossil evidence suggest that the earliest humans provided goods or services in exchange for other goods or services in a process commonly referred to as bartering. While bartering is not as common as it once was, it is still used by certain organizations and governments around the world. This process is unique in that is completely devoid of any type of money.

Between 9000 and 6000 BC, humans turned to cattle as a form of currency. While the term cattle often refers to a large group of cows, it can also be used to describe sheep, camels, and other similar forms of livestock. Improvements in agricultural techniques lead to the use of grains and vegetables as forms of payment. Cattle, vegetables, and grain are still used during bartering in some underdeveloped countries.

By the year 1200 BC, the use of coins as a form of payment began increasing in popularity. Cowries, a specific type of shell formed from a mollusk native to Pacific and Indian Oceans, were especially common. While cowries were most widely used in China, evidence suggests that they were also found in some African countries. Cowries are traditionally classified as the longest and most widely used form of currency in existence.

The earliest known coins came into existence around the year 1000 BC. Chinese designers created bronze and base metal cowrie imitations, which rapidly increased in popularity. Often, these metal coins featured a hole, allowing them to be put together in a chain. The use of coins also gained momentum in Turkey, Greece, Persia, Macedonia, and Rome by the year 500 BC, where manufacturers printed the images of gods and emperors on pieces of silver and gold.

By 118 BC, advancements in the development of money increased to such a level as to allow the creation of leather money. Leather money first appeared in China, where it was cut into one-foot squares and marked with colorful borders. Many historians agree that this type of leather money is one of the first banknotes in existence. These products can still be seen at many museums around the world.

Advancements in Currency:

Paper currency, in the form in which it is currently used today, was first developed by the Chinese in the year 806. In fact, paper money flourished in China from the 9th century all the way to the 15th. Unfortunately, by this time, the excessive supply of paper notes resulted in their devaluation, leading to extreme inflation. Paper money disappeared from use in China, only to reappear several hundred years later.

Native Americans also played a significant role in the development of money. In 1500, Chinook Indians created the tradition of "Potlach," a ceremony in which participants feast and dance. Perhaps the most important part of the "Potlach," however, was the exchange of gifts from tribe members to their leaders. To out-do each other, tribes often began providing larger and more extravagant gifts, which often required significant financial requirements. Native Americans are also credited for the development of wampum. These strings of clam shell beads, first used in 1535, were often used to pay for goods and services.

Modern Money:

In 1816, England identified gold as the standard on which all items of value would be based. To ensure its success, banking officials developed guidelines which ensured that banknotes-which represented a specific amount of gold-would not experience inflation. The United States created the Gold Standard Act in 1900, which led to the creation of a centralized bank. Unfortunately, the success of the gold standard only lasted a few years. In 1930, the Great Depression led to the revision and devaluation of gold. This process was quickly repeated in England and other European countries as well.

Today, technological changes abound, resulting in significant differences in the ways that money is used. From the development of the $100 Benjamin Franklin bill to electronic transactions, the financial world is experiencing a number of advancements. Some scientists hypothesize that new forms of payment will involve the use of bits and bytes. Only time can tell when and how these changes will take place.

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