How did money come about?

On Jun 25, 2022

Money is the blood of the state, said the English philosopher Thomas Hobbes, without them there are no economic relations. Money is the object of study of many humanitarian disciplines, such as: economics, history, sociology. Each of them considers this phenomenon from its own perspective.

Before the emergence of a universal exchange unit, there was barter – the exchange of objects: what a person currently has for what he would like to receive. But society has steadily evolved and become more complex. Relations were established first between tribes, then between states, between regions far from each other. Subsistence farming no longer met the requirements of the time and the development of the economy. In the end, and in different parts of the world, there is a need for a certain unified unit of exchange. For a while, such a thing was cattle and grain – something that everyone needs. But this is not the most convenient measure. After a while it stopped being used. True, for the sake of truth, in some African tribes this currency is still in use.

For centuries, the role of money could be played by various objects that had a certain value for the people, for example: bronze and iron rods (Greek Sparta), cowrie shells (China, Africa), stones with holes (New Zealand), skins of fur animals (Ancient Russia) etc. Pieces of metal – this was the most common material for making the original exchange material. The first money was made from copper, bronze, iron, silver. For the first time, gold was used for this purpose in Assyria (a state in Mesopotamia).

Sooner or later, everyone had to come to a certain common standard – size, weight and quality, since it is very troublesome to weigh ingots and determine their price every time before a deal. This is how coins arose and found their application all over the world. The history of coinage is studied by a specific discipline – numismatics.

There are several centers from where coins, as a general measure, began to spread. One of these is Lydia (a state located on the territory of Asia Minor, in modern Turkey). The treatise "History" of the Greek scientist Herodotus is a written source confirming that the first coins are associated with this Asia Minor state. Archaeologists conducting excavations in this region agree with him. They all associate this monetary innovation with the reign of King Ardis, who was in power in Lydia in the 7th century BC. Already a few generations after Ardis, the last of the Mermnad family, King Croesus, reigned. His name has become a symbol of wealth and luxury, has become a proverb: "Rich as Croesus." He was the first to establish the quality of the metal (98% gold) needed to make coins. Before him, coins were made from electrum, an alloy of gold and silver.

Coin of Croesus

Soon, coins began to be widely used in Greece, where they were made mainly of silver, since there are practically no deposits of gold in this region. Like a measure of weight, the coin was called a drachma (it weighed 4.4 g) and was originally very expensive: for one drachma you could buy a ram, for 5 – a bull. But later the drachma fell in price: it turned out to be easier to mint coins than to raise bulls, so after a hundred and fifty years the bull cost 50 drachmas. The drachmas were small, as the sources describe, and were often worn behind the cheek in the mouth.

Inflation led to the fact that there were coins in 4 drachmas – tetradrachms, on which they began to depict animals. Depending on the policy, a seal or an owl, or a turtle could be minted there – each state cast its own local symbols. And when money became even cheaper and enlarged, their surface often represented a chased drawing of some mythological scene. In the IV century BC. the Greeks began to use double-sided coinage, thus the coin had an obverse and a reverse. Instead of territorial symbols, they began to depict the profiles of statesmen.

Mints, which issued money centrally, minted by order of the ruler or the state, there were also private courtyards. The first such mint appeared in Ancient Rome.

The second area of origin of coins is China. There, the first money from bronze and copper began to be cast in the 5th century BC. They could be different in form: in the form of hoes, knives, shovels, musical instruments.

Approximately in the III century BC. round coins appear with a square hole in the middle. The hole had a practical use: coins could be strung on a rope and carried around without the risk of losing them. There was also a symbolic meaning: the circle represented the celestial power Yang, which was connected with the earthly energy Yin, it was reflected in the quadrangular shape of the hole. Such coins are still talismans, believed to attract wealth. They are popular in China and among all the many fans of the Feng Shui teachings in the world. They were cast according to this pattern until the beginning of the 20th century. This money from China came to neighboring states.

Finally, the third independent center for the emergence of minted money is Ancient India. It was formed at about the same time, and maybe earlier. Archaeological finds of hoards of the first Indian coins date back to the 6th-5th centuries. BC. The first coins were made of silver, most often, they did not adhere to a certain appearance during their manufacture: they could be round or oval, or rectangular, or irregular in shape. Initially, the coins were devoid of any image. Later, drawings and patterns appeared on them.

In many states there were non-coin periods in history when, for various reasons, metal mining stopped or it did not come from abroad. For example, in Russia or in England in the Middle Ages. Then the country again returned to natural exchange.

As for paper money, the primacy in this innovation also belongs to China, where they began to pay with the help of paper symbols in the 8th century. The reason for this is often cited as the inconvenience of using metallic money. The economy developed rapidly, sometimes coins had to be transported by carts to secure any transaction. In China, this problem was solved with the help of paper. In Europe, paper money found its use only in the 17th century.

China's first paper money

At first, paper money was backed by precious metals, which was indicated on banknotes. That is, they put real money with real value in the bank, in return they received a receipt about how much of it a person has stored there. This receipt could pay for the transaction. This process determined the name of paper money – a banknote from the English "bank note" – an entry in a bank. As early as the beginning of the 20th century, any banknotes could be converted into gold at will. But already in the second half of the 20th century, currencies were no longer backed by precious metals, they became fiat – guaranteed by the state on terms of trust.

Today, more and more people use cashless payments. Such terms as electronic money, virtual currency, cryptocurrency have appeared in the lexicon. Perhaps the time is not far off when real metal or paper money will be of interest exclusively to historians and collectors.