The History of Money

History ofMoney

In the beginning, trading or bartering was the way of life.

Bartering predates the use of money. As a matter of fact, money derived from bartering.

Even today, individuals, governments, and institutions use bartering as a form of exchanging goods and services.

The use of livestock, shells, and beads were later used as money.

Money is any commodity that satisfies the following: Medium of exchange (item accepted for

exchange) Store of value (value stored over time) Unit of Account (common measure of

goods/services)

Portability (easily transported) Durability (lasts when handled) Divisibility (divisible into smaller units) Limited Availability ( available in limited

supply.

Croesus, king of Lydia, created the first gold and silver coins in 561 B.C.

Charlemagne standardized Medieval coins when he conquered most of Europe in 800 A.D.

In 806 A.D., the Chinese started issuing paper currency, but it led to inflation.

Gunpowder, musket balls, corn, and hemp served s commodity money. It was used to settle debts and make purchases.

Some colonies established fiat monies such as wampum (shells used by Narragansett Native Americans).

In Europe during the 1600’s, goldsmiths’s notes can be used as evidence of ability to pay. It mark the first use of banknotes in England.

A monetary standard where basic currency unit is equal to and exchanged for a specific amount of gold.

Advantages: People feel secure about their money Prevents government from printing too much

paper currencyDisadvantages: Gold stock don’t grow fast enough to support

economy Price of gold likely to change

The colony of Massachusetts was the first colony to issue paper currency in the US.

When George Washington was president, the Spanish peso was used. He assigned Benjamin Franklin and Alexander Hamilton to establish a money supply for the new country.

During the Revolutionary War, congress issued “Continentals”. Due to oversupply, they were worthless.

Continental Congress chartered a national bank in 1781.

Second Bank of the US charted in 1816. Design of U.S. currency made in 1863. “In God We Trust” first appeared on

currency in 1955. Dollar bills redesigned to make

counterfeiting more difficult.

http://www.pbs.org/newshour/on2/money/history.html

http://library.thinkquest.org/28718/history.html

http://projects.exeter.ac.uk/RDavies/arian/llyfr.html

http://www.wdfi.org/ymm/kids/history/default.asp