History of Money

WHAT IS MONEY?

Money is generally accepted mean of payment. But money was not always the same form as the money today, and is still developing. The use of money is as old as the human civilisation. In this essay we will go into the money of the past, present and future. WHAT FORMS OF PAYMENT WAS USED BEFORE THE COINAGE SYSTEM?

What is bartering?

Barter is the exchange of resources or services, when the both sides of bartering are satisfied. For example, an apple grower who needs shoes simply has to find a cobbler. In a pure barter system the apple grower would have to find not just any cobbler but one who wants apples at that time. The most important improvement of early barter was first the tendency to select one or two particular items in preference to others. These preferred barter items became partly accepted because of their qualities in acting as media of exchange. Of course, they still could be used for their primary purpose of directly satisfying the wants of the traders concerned. These preferred items were for example seashells or cowries, beads, tea, fish hooks, fur, cattle and even tobacco, amber, drums, eggs, feathers, gongs, hoes, ivory, jade, kettles, leather, mats, nails, oxen, pigs, quartz, rice, salt, thimbles, vodka, wampum, yarns, and zappozats (decorated axes).
Bartering may date back to the beginning of humankind. Barter among humans certainly pre-dates the use of money. Today individuals, organisations, and governments still use, and often prefer, barter as a form of exchange of goods and services.

What products were used as money?

In 9000 - 6000 BC particularly cattle, and plant products such as grain, came to be used as money in many different societies at different periods. Cattle are probably the oldest of all forms of money and were still used for that purpose in parts of Africa in the middle of the 20th century. Obviously there were very practical reasons for the association between cattle and wealth but anthropological evidence from Africa in very recent times shows that when cattle are regarded as a form of money, not only health cattle but also scrawny ones will be valued to the detriment of the environment supporting them and their owners.

What was the system of transacting in Mesopotamia when the writing was invented?

The main use, and probable motivation for development of writing, is for keeping accounts. The coinage was an abstract instrument, the value of which was derived from a physical merchandise.

Each person had his clay tablet, where were written all the transactions of him.

What was the system of transacting in Babylon and ancient Egypt?

Babylonians deposited their grain in state or church granaries. The receipts of deposit were then used as methods of payment in the economies. Thus, banks were invented before coins. The people brought their excess products to the temples of the walled cities and there, the priest-accountants opened an account for each person, with clay tablets, recording the deposit of their products in the temple's store-houses and establishing a quantity of abstract money corresponding to the merchandise deposited. Subsequently, if these same people wished to acquire other types of products from the temple, the inverse procedure was followed. For each transaction, a document made of baked clay was created, with the name of the buyer, the merchandise exchanged and the quantity of monetary units involved. This is what we call an «Invoice-cheque».
Ancient Egypt had a similar system, but instead of receipts they used orders of withdrawal - thus making their system very close to that of modern checks. What was used as money in China in 1200 BC?

The Chinese character for "money" originally represented a cowrie shell (a shell of a mollusc that was widely available in the shallow waters of Pacific and Indian Oceans). Cowries have been used as money in many different places at different periods. In parts of Africa they were used for this purpose as recently as the middle of the 20th century.

What were the manillas?

Manillas were ornamental metallic objects worn as jewellery in west Africa and used as money as recently as 1949. they were adopted for use as money in many ancient societies and civilisations.

What about the whales teeth?

Whales teeth were "tambua" (from which our word "taboo" comes) meaning that they had religious significance, as did the fei stones of Yap which were still being used as money as recently as the mid 1960s.

What does it mean "to pay through nose"?
This phrase comes from Danes in Ireland, who slit the noses of those who were remiss in paying the Danish poll tax. (800 - 900 AD)

What did Kirghizs use as money recently?

Until well into the present century the Kirghizs used horses as their main monetary unit with sheep as a subsidiary unit. Small change was given in lambskin.


THE HISTORY OF COINS

What was the reason of using of coins?

The barter system which was common before the coinage came in to play the primary role in history of trading, did not seem to be the right one for acquiring the goods that people needed at the time.

People started to use other means of payment instead of the goods itself they could exchange for another goods. They used the material such as seashells, beads, tea, fish hooks, fur, cattle and even tobacco. The real coinage as a replacement of the older barter system and as a mean of payment was taken in the real life in the seventh century BC. Where were the coins invented?

People who made and used the coins for the first time in the history of the human race were seafaring people of the old Lydia – the modern western Turkey. At first, there was a design only on one of the sides. In most cases the design depicted an animal. The other side of the coin had a punch mark. It was made of the electrum – the naturally occurring alloy of gold and silver. These coins were handmade. Each coin, or better to say metal, was placed between two dies and then the design was engraved by pressing the dies with a hammer. They were the world’s first true coins because they were made of a scarce metal and were of a consistent weight. Coinage then quickly spread out. Within some hundred years the design was engraved on both sides.

What were the coins in ancient Greece and Roman Empire like?

Coins began to be used in ancient Greece as well as in the Roman Empire. Coins of these times had a magnificent artistic value. The best engravers worked on the production of the coins. Some of the dies were even signed by a master engraver. The designs depicted the ideally proportioned human body. This concept was typical for Greek classical art. Alexander the Great (336-323 BC) spread out the concept of coinage through the lands he conquered. His successors founded the great Hellenistic empires. They introduced the concept of the realistic depiction on their coinage. Romans continued with this concept. In some cases they depicted the progression of the emperor from childhood to maturity. As the Romans became dominant the coins were produced in numerous amounts. Later in the first century BC, their coins depicted the emperor, his name and a title on the obverse side and gods or colonies they had conquered on the other side. By the fall of the Rome in the fifth century AD, the artwork on the coinage became a little bit cartoonish. This is thought as the end point of the ancient coins.

What was the influence of Christianity on the design of coins?
The rise of Byzantine Empire in the east heralded the beginning of the medieval age. God was worshipped by Christians and the church became the main force in the empire. The depiction on the coinage became stylised as well.

The designs on the coinage were related to Christianity. The Judeo Christian religions are well represented by coins, too. Many other cities and kings mentioned in the Bible appeared on coins. How were the coins produced?

By 550 BC the coinage was established in all the important trading centres of the known world of that times. Machine made coins did not appeared in Japan until 1870 and 1889 in China. Except these oriental lands, the coins were handmade until 1500. The Italians then invented devices for making round metal coins with designs on them.

What about coins and Slovakia?

Slovakia has also its own mint. It is situated in the town called Kremnica. The surroundings and the natural sources which were found there predetermined this place to be the right one to establish a mint. The oldest mines were dug out in the eighth and ninth century. That means that the gold could be mined since mentioned time. The first written mention about Kremnica is in the form of privileges issued by Karol Robert from Anjou in 1328. He gave an approval of a regal town for the local settlement and he called down skilled miners and specialists interested in processing the gold from other countries of the Central Europe. The aim of this step was to realise a monetary reformation to make the country stronger. He also decided to establish a mint there because the amount of gold found in the mines was abundant. The gold and silver which was mined there and striking coins was profitable so the town became richer than before. This important step predetermined this town to be one the famous ones in the history of Slovakia. The mint is still functioning and it is the only one in Slovakia. It produces all kinds of coins – coins used for payment (Slovak crowns are also made there) and memorable coins, used, for example, to commemorate important dates in the history of Slovakia. This mint also produces various products made of scarce metals. It is also known abroad and some other countries have their coins done there, too. Coins, as a mean of payment and as a solution for the barter system which was not so effective, seem to be one of the most important inventions in the history of the world. This invention has been influencing people for many years. However in the world where the technological progress belongs to the main motivations for making our lives even more comfortable, faster and easier, the meaning of coins has not lost the importance and will not for many years.

Simply, the coinage, itself, is a masterpiece of art and it also indicates the nation’s culture and history. HISTORY OF BANK NOTES

After year 600 Chinese as the first nation introduced during yhe T'ang Dynasty paper money in little amount. China experienced over 700 years of early paper money, spanning from the 7th throug the 15th century. During Ming Dynasty the Chinese placed the emperor's seal and signature of the treasures on a crude paper made from mullberry bark. This was the first attempt in history to avoid the falsificating paper money. Over whole period from 7th to 15th century, paper notes grew in production to the point that their value rapidly depreciated and inflation soared. Then beginning in 1455, the use of paper money in China disappeared for 700 years. People in Mongolia were the second who began to use paper money in eleventh century. Paper notes appeared much later in Europe, in 1661 in Stockholm, Sweden.
150 years after notes spread to Europe, people needed to number them. This was done at first by stamps. In 1809 Englishman Joseph Bramah invented a machine for numbering of notes and offered it to National Bank of England.

Watermark

The 1st watermark came into existence by chance in Fabiano's paper factory in Italy in about 1260. There was a little wire projecting from a die for pressing the water out of paper. On the place, where the wire was pressed, the paper was thiner and more diaphausus against the light. The manufactures realized that they can make different shapes of wire pressed to the paper. The first patterns (usually of cross shape) were used as quality mark of paper factories. Later, watermark was used as very important item to avoid falsification of bank notes.

Destroying of bank notes

Coins are much more durabily than notes and so can stay longer in circulation. The notes of lower value go from hand to hand very quickly so their lifespan is not longer than few months. Every country has to destroy their notes. This is usually done by two ways: burning them by the temperature of 2000 degrees of Celsius, cutting them into little squares of 1x1 mm.
In august 1963 by Great train robbery a group of thiefs stole notes commited to destroying in value of 2.6 mil pounds. In fact they stole notes which weren't existing anymore.
In 1988 Australia brought out new ten-dollar note made from plastic material which is impossible to damage in everyday use.

History of slovak bank notes

Slovak republic began to write its history in 1993 so it needed new designed coins and bank notes.

Slovakia has got the bank notes of these values: 20, 50, 100, 200, 500, 1000 and 5000 crowns. The illustrator, Jozef Bubak, chose famous people from national history to front sides and places related to them to back sides of the notes. For example: on 20-crown note there's Pribina on the front side and Nitra City on the back side, on 50-crown note there are Cyril and Method on the front side and the village of Drazovce, on 100-crown note there's Madonna of Majster Pavol on the front and Levoca City on the back and so on.
At the beginning 5000 and 200-crown note didn't exist. 5000-crown note was given into circulation in 1994 and 200-crown note in 1995.

E-MONEY

What is e-money?

E-money is form of money that does not exist physically, but only as an information stored in a chip of smart card or on hard disk of your computer.

How it is possible?

E-money is possible due to the public-key cryptography and digital signatures. The basic principle is that both bank and customer have pair of keys (public and private). Public-keys are available to everyone and private-key is known only by its owner. What ever is encrypted by private key can be only decrypted by matching public key (and vice versa). Customer uses his private key to encrypt a request for specific amount o e-money and sent it to his bank. The bank uses customers public key to verify the sender of this request, subtract specified value from his account, and gives him “coin” signed by banks private-key. Customer gives this coin to merchant (who can verify the signed “coin” using the banks widely published public key). Merchant gives the “coin” back to the bank which pays him the specified sum and remembers the ID of the coin to prevent double (or triple or more) spending of the same money. This is only very simplified model, in praxis e-money is divided into identified (we know whose money it was originally) and unidentified money (this can be spent anonymously) and also many other sophisticated cryptographic methods are used.

What are the advantages of e-money?

1. The physical handling and transfer of hard cash represents up to 40% of banks' expenditures this would be eliminated by the use of e-money.
2. E-money eliminates the concept of change and allows micropayments (Transactions less than few tenths of crowns and purchases in units of hellers, their realisation fee would be actually higher than the amount of transaction.).
3. Paper money is easier to forge.

E-money is nearly impossible to forge and can be easily located if lost or stolen.

What are the disadvantage of e-money?

Main disadvantage of e-money is that today no common e-money exists. Every company issues and accepts only its own e-money. As these companies are forming alliances it can be supposed that once the common e-money will exist.

What are the possibilities for paying for goods ordered via Internet?

The first one, used mostly in the US, is sending credit card information over the Internet in plain (not encoded) form. This method brings very high risk of misusing this information, and today this type of payment is considered mad. With the introduction of SSL protocol (Secure Socket Layer) its security was increased because of encoding of content sent through Internet. Despite this big improvement of security, the consumers are often concerned about sending important information on-line. A second type of a credit card-based system uses an ID number to purchase goods, rather than sending the actual credit card number on-line. The ID number is obtained by pre-registering a credit card number with a third party who is responsible for maintaining the integrity of that information.

What are the disadvantages of credit card-based systems?

They are not widely used in Slovakia, and they are not useful for making micropayments. (Transactions less than few tenths of crowns and purchases in units of hellers, their realisation fee would be actually higher than the amount of transaction.)

What about e-money and Slovakia?

In Slovakia is used mostly COD (Cash On Delivery) system which doesn’t have much in common with e-money, but there are also several services (provided especially by banks) that in connection with internet banking enables you to pay for goods online.

EURO

What’s the ECU?

It’s common European currency, which is based on group of currencies of countries, which are members of the European Union. National currencies are represented proportionally to their economic power. The parts, which belong to the countries, are changed every 5 years. It is currency in which are defined debts and credits inside European Union. It’s also used as reserve in banks in member countries.

What’s EURO?

Euro started its function on 1.1.1999. It’s common European Union currency. There’s fixed ratio between Euro and European Union national currencies. There’s equation between ECU and EURO: 1 ECU = 1 EURO.

How will EURO begin its carrier?

The European Central Bank (ECB) was established on 1 June 1998. It is based in Frankfurt am Main, Germany, and aims to maintain price stability and to conduct a single monetary policy across the euro area.

It is the ECB that is responsible for managing the development and introduction of the euro.
Very important date is 1 January 1999, when the exchange rates of the participating currencies were irrevocably set. Euro area Member States began implementing a common monetary policy, the euro was introduced as a legal currency and the 11 currencies of the participating Member States became subdivisions of the euro. Greece has since joined (1 January 2001) and so there will be 12 Member States introducing the new euro banknotes and coins.
On 1 January 2002, it will become a physical reality across Europe when the new euro banknotes and coins are introduced. They are printed now yet, but before few weeks there were stolen some EURO notes before their official opening. From 1.1.2002 to 30.6.2002 you’ll be able to use EURO and also national currencies. But after this date national currencies won’t be valid. But also after this date there’ll be possibility to change them without any payments. It’ll be able to do it in national bank of that country. Which countries are participating EURO?

12 members of the European Union: Belgium, Germany, Greece, Spain, France, Ireland, Italy, Luxembourg, The Netherlands, Austria, Portugal, Finland. Other 3 members of European Union, Denmark, Sweden and the United Kingdom are not currently participating in EURO. They’re still using their own currencies.

What about EURO notes?

7 EURO notes exists. Their sizes and colours differ. Their values are 500, 200, 100, 50, 20, 10, 5 Euros. On the top side there are windows and gates, which are symbols of openness of Europe. There are also coins. Their values are : 2, 1 Euros and 50, 20, 10, 5, 2, 1 cents. Every country will decorate the coins and notes witch their own way. And they will be valid in whole European union. So if you’ll have 1-EURO coin, which was made in Germany witch German decorations on it, you will be able to pay with it also in other countries, for example in Portugal. Who’s responsible for EURO?

It is the ECB that is responsible for managing the development and introduction of the euro.

What’s Eurosystem?

Together the ECB and the euro area national central banks are known as the Eurosystem.