A Brief History of Money

I had the opportunity to make short presentation on the history of money this last week. Below is the main slide from the presentation as well as an outline of the information provided. I did not have enough time to practice as much as I would like, but overall the presentation went pretty well.

What is money? [Slide]

What is Money?

  • Medium of exchange
  • Unit of measurement
  • Store of value

A Brief History of Money:

  • Bartering
    1. Direct trade of goods and services
    2. Skins, salt, weapons became common exchange units
  • Weapons and cutlery as a unit of exchange
    1. China 1100 BCE
    2. Miniatures representing real items
      1. Cutting edges replaced with circles
      2. Simplified to first pseudo-coins
  • First coins minted in Lydia (western turkey) in 600 BCE
    1. Electrum (natural alloy of silver and gold)
    2. Trite was stamped with picture of a lion
      1. Reports of value vary may have been as high 10 sheep/11 goats or as low as three jars of wine
  • About that same time China began printing the first notes (paper money)
    1. Inscribed with “All counterfeiters will be decapitated”
  • Precious metals formed the basis of money
    1. Durable, limited supply, portable, high replacement cost, and easily divisible
    2. Paper notes could be traded in for a set amount of metal (gold-standard)
  • Over time banks develop – loans, credit, interest
  • 1600 CE – British empire banking system
    1. Distances and lack of available cash made checking, IOUs necessary.
    2. Currency markets developed between countries
  • 20th century – Credit cards, debit cards, and fiat money
    1. Credit cards evolve from dinner cards
    2. Fiat money
      1. Gold standard ended by Nixon in 1971
      2. Money’s worth based on faith in the government to honor it
    3. Debit cards make money electronic
  • 21st century – mobile payments, virtual currency

Sources and References:

Asmundson, Irene., & Oner, Ceyda. (2012). Back to Basics-What Is Money? Without it, modern economies could not function. Finance and Development49(3), 52. http://www.imf.org/external/pubs/ft/fandd/2012/09/basics.htm

Beattie, Andrew. (2010). The history of money: From barter to banknotes. http://www.investopedia.com/articles/07/roots_of_money.asp

Davies, Glyn. (2010). History of money. University of Wales Press.

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