History of Money
Let us consider a problem. You catch fish for your food supply, but you're tired of eating it every day. Instead you want to eat some bread. Fortunately, a baker lives next door. Trading the baker some fish for bread is an example of barter, the direct exchange of one good for another.
However, barter is difficult when you try to obtain a good from a producer that doesn't want what you have. For example, how do you get shoes if the shoemaker doesn't like fish? The series of trades required to obtain shoes could be complicated and time consuming.
Early societies faced these problems. The solution was money. Money is an item, or commodity, that is agreed to be accepted in trade. Over the years, people have used a wide variety of items for money, such as seashells, beads, tea, fish hooks, fur, cattle and even tobacco.
There are numerous myths about the origins of money. The concept of money is often confused with coinage. Coins are a relatively modern form of money. Their first appearance was probably among the Lydians, in Asia Minor in the 7th century BC. And whether these coins were used as money in the modern sense has also been questioned.
To determine the earliest use of money, we need to define what we mean by money. The early Persians deposited their grain in state or church grainaries. The receipts of deposit were then used as methods of payment in the economies. Thus, banks were invented before coins. 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. In fact, during Alexander the great’s period, the grainaries were linked together, making cheques in the 3rd century BC more convenient than British cheques in the 1980s. The Egyptians had in fact invented the first giro system.
Most early cultures traded precious metals. In 2500 B.C. the Egyptians produced metal rings for use as money. By 700 B.C., a group of seafaring people called the Lydians became the first in the Western world to make coins. The Lydians used coins to expand their vast trading empire. The Greeks and Romans continued the coining tradition and passed it on to later Western civilizations. Coins were appealing since they were durable,...