I O U Part 1: A History in Coinage
Money, money, money! Money is the thing that controls veritably everything in human civilization. It became a necessity over time due to the gradual evolution of trade – the most basic of all functions within a society. “I have something you want, and you have something I want – so let’s agree upon a certain value for both, and see how much I need of what I have to exchange it with what you have.” In other words, barter – the very first and foremost basic concept of trade.
The concept of money is ancient – nearly as ancient as trade itself, and it came into existence through one of two historical theories. The first is the theory first proposed by Aristotle, and states that the concept of a coin or “I owe you” note first arose when people began developing trust for each other in a sense of trade. Because while the system of barter works quite well, there is one issue – for it to succeed, there needs to be a coincidence in wants. Essentially, for me to get rid of my grain, I need to find someone who is willing to take all of it in exchange for something I want. As that became more difficult, the need for an external currency arose.
Another theory criticizes Aristotle, and states that money didn’t come about to replace barter – it came about the second people stopped owing each other something based on occasion, but rather owing each other based on units of value. Similarly, gift economies were also quite important in pre-historic civilizations, as hunter-gatherer societies shared with each other in an effort to distribute the finds of the hunt and help keep those alive who came back empty-handed. This later contributed to the creation of a complex credit system in which people began paying each other back for previous gifts – which, in turn contributed to the concept of currency. The same theory also concludes that the barter system was still commonly used, and that currency simply arose as the concept of credit came about through said gift economies.
But what did people use back then to represent currency? Surely in prehistoric times people weren’t pounding slaters together, nor were they printing notes. No – commonly used in those times was obsidian, as raw materials for tools. Evidence suggests that obsidian was used in Anatolian trade as far back as 12000 BC, and was continually used until much, much later, at which point copper and silver replaced it.
Alternatively, grain was used as credit (hence, “grain of gold”) together with cattle. Value arose through evaluation of need – and depending on the time period, people’s needs became more and more complex, thereby changing certain object’s worth. Eventually, people’s needs became so refined that an external commodity was necessary for the facilitation of a wider market, due to the limitations of barter.
Modern day economics then began their conception within laws and codes writing in ancient Babylon and Mesopotamia, and money began being used for more than just trade – fines for unlawful infractions and debts were paid in currency, and laws were written for business and possession. Soon, money became necessary for a functioning justice system and corresponding economy.
Alongside cattle and grain, salt and cowrie-shells were used as money – until metals became preferable. 6000 BC saw the use of shekels in Mesopotamia – rings of silver, copper and bronze weighted after a specific amount of barley, and used as currency. 2000 years later, Egyptians purportedly began using golden ingots to a similar purpose. Later, metals were “clipped” into what may have been early forms of coins, breaking the value of a weight of gold, bronze, silver or other metal into smaller increments – and eventually, the first actual coin was struck in 700 BC in Aegina: although it was neither silver, nor copper, but electrum: a naturally occurring alloy of gold and silver. Later, in Lydia circa 650 BC, electrum coins were mass-produced, mixed with copper and silver.
Electrum was still used in mainland Greek coinage (and Persian coinage as well), where the term talent first arose as a word for coinage (the term later became changed in definition to mean God-given skill when it was used in a Biblical parable.)
Around the same time, coinage was produced in China and India – in China, bronze was formed into a metal disk with a hole in the middle, and strung together for trade, while in India, coins were simply produced by punching metals into disk shapes.
Over time, the most important policy in controlling the value and authenticity of a coin was the concept of Imperial mint, and the use of the touchstone to detect the authenticity of the coin’s material. Even then, coins were clipped partially to produce recycled precious metals, and the existence of copper, gold and silver coins in the world’s economy caused problems with international trade. The production of coins and their composition changed after one thing became clear – coins were a unit of value, rather than a unit of weight. From this arose the concept of seigniorage – the difference between the actual value of coin production, and the value it represented.
When the trade market began receiving an influx of commodities, the need for a bill of exchange arose – a note that determined how much a person owed another person for a service or product. Similarly, the bills were used for transporting value – as traveling with actual coins was quite dangerous. The bills could be received at one point, and then exchanged for their value in coinage at another point. Thus, a system of credit arose, which later gave way for the creation of modern day banknotes.