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The History Of Money

Updated on October 22, 2011

In old age, before the money was not invented People used to exchange goods, services or resources. When they need something, some goods or any other services, they used to give some good or services in exchange for the goods or services required. Today, every country has its own system of paper money and coins.

Old System of Money

In the beginning people used to do bartering. Barter is exchange of goods and services. For example, people used to exchange goods and services in exchange of goods and services. There was no concept of coins or even paper money.

The actual problem used to arise when one of the persons involved in exchange could not agree that goods or services being exchanged are worth to the services or goods being given in exchange. To solve this problem we humans came up with the idea of commodity money. 

The commodity is the basic and most important items which were used by everyone. In the past the items, such as salt, tea, tobacco and cattle were used by everyone and hence were used in place of money.

However, the idea of using salt or tobacco as money had its own problems. Carrying the heavy bags of tobacco and salt for exchange of goods and services were not easy and besides it was hard to store large amount of money this way because most of these commodities are perishable. 

Paper Money and Coins

The revolutionary idea of using coins as money was at first introduced in 5000 BC. By the 700 BC the Lydians became the first ones in the western world to implement on the idea of using coins as money.

Countries were soon to pick up on the idea and many countries started using money as the means of money. The coins were made from steel because it was readily available and could be recycled.

Coins were given certain values and it made it a lot easier to compare the cost of items that people wanted. Some of the earliest paper money introduced belongs to China. The use of paper money became common in China from the year 960 AD. 

$50 U.S. gold certificate
$50 U.S. gold certificate

Introduction of Representative Money

The introduction of representative money was brought by government. The idea was that the material of which money has to be used does not have to be itself very valuable.

The idea was backed up by government and banks.

It was promised by the government that some amount of silver or gold will be exchanged by representative money.

For the most part, in the nineteenth and twentieth century most of the currencies were based on representative money.

U.S Currency.
U.S Currency.

Fiat Money

Fiat is a Latin word which means “let it be done”. The representative money has now been successfully replaced by Fiat money. The laws were made which stated the money in some other form will not be acceptable. Money is now given value by government.

History of U.S Money 

The first paper money ever issued by US was in the year 1862. The money was denominated in the currency notes of $5, $10 and $20. “In God We trust” was included on all currency notes in the year 1955.   


Money Travels

When Europe shifted to Paper money the amount of international trade increased to a great amount. Many Banks started buying currencies from different nations and created first ever currency market.

The factors like monarchy, current government and stability of conditions in a country affects the currency of a certain country and its ability to trade in an international market.

Electronic Banking

The bank of America wanted to computerize the banking industry and thus ERMA started a project to achieve this goal. MICR (magnetic link character recognition) was also a part of ERMA. MICR allows the computer to read special numbers at the bottom of checks that allows accounting of check transaction and computerized accounting.

The competition between the countries often enrages currency wars. Often countries competing with each other try to make competitors goods too expensive so that other countries may not buy from them or they try to reduce buying power of an enemy so that he may not be able to buy weapons for warfare. Sometimes competitors also try to destroy each others currency completely.

Even though, many steps have been taken regarding this issue but still money has a great impact on how we do business today. 


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