A Brief History of Money
A Brief History of Money
You would have never paid for a pair of shoes with eggs or wheat, but that’s what ancient civilizations once used as a form of money. Money has been a part of human history for at least 5000 years. Whether represented by a metal coin, paper bill, or electronically, money usually doesn't have any value. Its value depends on the importance that people place on it, as a means of exchange or a measurement of one's wealth.
Before the concept of money, historians say people used the concept of bartering. Bartering is the exchange or trade of goods and services. For example, Egyptians used to trade linen for ivory or grain for cedarwood. Around 1200 B.C., the Chinese began using mollusk shells called cowries for money, and around 1000-45 B.C. they used bronze and copper coins, and slowly transitioned into a form of paper money. After visiting China, Marco Polo introduced the topic of paper money to Europeans, for the first time, in the late 13th century.
In 1816, the gold standard appeared in Europe. Till then, banknotes had been used for decades, but their worth was never tied to gold. Under a gold standard, the monetary unit is defined as a certain amount of gold, in ounces or grams. In 1900, the United States adopted the Gold Standard Act, which established gold as the only standard for redeeming paper money. During the Era of the Gold Standard, before World War I, the U.S. Dollar was defined as 1/20 of an ounce of gold. A gold standard can operate with or without government involvement, and historically, private mints and commercial banks were reliable providers of gold-denominated money. A dollar bill could be traded for its worth of gold.
The disadvantage to a gold standard is that there can be random shocks to the supply or demand curve of metal, which makes the purchasing power of metallic money unstable. The gold standard also did not allow for monetary expansion; the amount of money in the economy must be the same as the amount of gold. In the 1930s, under President Franklin Roosevelt, private ownership and use of gold coins were outlawed. Under today's fiat dollar standard, the currency is not redeemable in gold, silver, or any other commodity.
As of today, the currency continues to change and develop. Though the concept of credit has been around for ages, the first universal credit card was not introduced until 1950. In 2017, American consumers were carrying $1 trillion in credit card debt.
In our digital age, economic transactions continue to grow and develop. Starting in the 2000s, digital payments such as Venmo, Apple Pay, and Paypal made it easier to transfer money from accounts via smartphone. In 2009, Satoshi Nakamoto (which is a pseudonym) proposed the invention of Bitcoin. This currency is not controlled by a central bank and is not regulated, rather a decentralized network of computers keeps track of transactions. The value of a Bitcoin is determined by the bidder, like how stocks are. Users of Bitcoins are anonymous, only known by their wallet ID.
While it is true that forms of currency and money have changed throughout history, money's value and importance in an economy remain the same.
Written by Maanasa Gogula - Content Writer