A brief history of money!

Money, money, money!

Money is probably the one human invention that has had the most profound impact on our society. It is very hard, almost impossible, to imagine our lives without ... "money".

Money and economics

Money is the lifeblood of our economies. It facilitates the exchange of goods and services and helps in carrying on trade smoothly. Our present advanced economic system would not function without money!

Money and finance

Money is the raw material of our complex and powerful financial industry which deals with how to deliver money through debts to individuals, businesses, and governments, and how they then spend or invest that money.

Money and society

Money is the principal measure of wealth, and consequently organizes and divides society. Money impacts our morality, our status, and our relationships. Money drives our society, creates opportunities, or opens and closes doors. Unfortunately, money has also become a very effective instrument of control and power!

Money and scarcity

Money changes us and defines how we think, and how we behave. The lack of money or financial volatility dominates our mindset and favors short-term decisions, leaving us with less buffer stock and more vulnerable to external events in the future. We get stuck in scarcity and debt traps, difficult to escape.

Money and happiness

Money can provide us with security and quality of life which is important for our well-being. However, the dogged pursuit of money itself can also become a compulsive and addictive behavior. Money and happiness have an enriching but often conflicting relationship.

Money can increase our short-term happiness by giving us more control over how we spend our time. Tom Rath.

What is money?

Before explaining how we can make something so magical and powerful as money, let us have a quick look at its origins and complex history. 

Etymology

The word "money" refers to the surname of the Roman goddess Juno. The temple of Juno Moneta (literally Juno the "Warner" or "Adviser") on Capitoline, one of Rome's seven hills, was the place where the mint of Ancient Rome was located.

From this temple, "moneta" quickly gained the meaning "mint", and soon after extended to the concept of "money" in general.

Functions

Money can be seen as any item or verifiable record that is "generally" accepted as payment for goods and services and repayment of debts. The main functions of money are distinguished as:

1. a medium of exchange for goods and services

2. a unit of account to define price and value

3. a store of value or asset that can be saved

4. a standard of deferred payment for debt management.

Definition

Money can thus be defined as any item, commodity, or verifiable record, accepted by general consent, that fulfills these different functions.

Consequently, any kind of money is a social contract created as a result of a consensus on an alterable game rule or agreement to use something as a medium of exchange.

Money is a social technology. Felix Martin

History of money

The history of "money" is much older than the word. Money —in some form or another— has been part of human societies for at least the past 5,000 years. Before that time, a system of reciprocity and redistribution was largely used.

Gift economies

"Non-monetary" societies operated exchanges primarily along the principles of gift culture, generalized reciprocity, and redistribution. Valuables such as goods and services were not sold, and exchanges were not driven by an individual's self-interest but were organized to serve the interests of society.

Barter trade

Bartering is the direct or explicit trade or exchange of goods and services. Though the use of barter-like methods or reciprocal exchange between societies may date back to at least 100,000 years ago, it was mostly used marginally and more specifically for trade between strangers or potential enemies.

Commodity money

Societies around the world eventually developed the use of commodity money that gains its value primarily in virtue of the substance it is made of, the potential use, or its intrinsic beauty. Most forms of money throughout history have been commodity currencies such as salt, shells, gold, cocoa beans, tobacco, barley, animal skins but also large stones and so many others.

Coins

The use of metal as money can be traced back to Babylon, prior to 2000 BC. However, the first official currency is believed to be minted in Lydia (today west Turkey) around 600 BC as a mixture of silver and gold, stamped with pictures representing different denominations.

Coins became a popular form of money and parts of Europe used coins as their sole form of currency until the 16th century. And while coins started as a commodity currency, made of a precise amount or weight of precious metals backing them. Over time they lost their intrinsic value and became just a unit of value for exchanges.

Paper money

Paper notes are a also kind of representative money, meaning they represent something of value supporting the face value but have little or no value of their own.

In the seventh century, Chinese merchants started issuing receipts of deposits which later inspired the Yuan dynasty of China to be the first to move from coins to paper money around 1260.

In medieval Europe, Italian and Flemish merchants started issuing promissory notes, easier and safer to carry around than large sums of coins. The notes were accepted because they could be taken to the issuer at any time and exchanged for their face value in metals.

Toward the end of the Middle Ages and with the further expansion of European trade, bills of exchange became prevalent. Goods were supplied to a buyer against a bill of exchange, which constituted the buyer's promise to make payment at some specified future date.

Since the 16th century, money was being issued, borrowed, and changed by goldsmiths, money traders, and other private agents acting as financial intermediaries. Soon, they started issuing notes far in excess of the gold and silver they kept on deposit. Modern private banking, based on money as credit, was founded.

Quote. Bernard Lieftaer

Modern money

FIAT money

Coins are a type of commodity currency.

Payment cards

Digital money

Coins are a type of commodity currency.

Quote. Bernard Lieftaer

The future of money

Cashless, without the coins and notes

Centralized digital money

New forms of money

Quote. Bernard Lieftaer

Takeaways

The history of money is about the development throughout time of systems that fulfill the functions of money.

Monei is an international group of money arquitects.

Knowledge center and support for the implementation of complementary currencies and special-purpose-money. 

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