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The History of Money: from Cattle to Bitcoin

Most people take money for granted. Sure there have been some ups and downs in economic cycles but money has remained the same.

Or has it? To get a better perspective on how money functions, and its past successes and failures, we need to look at the role money has played through out history.

The earliest known type of currency was cattle in 9000 BC. This page will look at the important milestones of how money has been utilized, its effects upon society, and the means by which it has been manipulated.

money_cattle.jpg

The History of Money

9000 – 1 BC

  • Cattle and crops were used as money. The barter system was the first functioning economy.

3000 BC

  • Around this time writing became about to aid in maintaining records.

3000 – 2000 BC

  • Due to the risk of theft and loss, cattle, grains, and other valuables, probably including metals, were placed in the temples in Babylonia, Mesopotamia.

2600 BC

  • The Egyptians used slave labor to build the pyramids. Slavery was essential as there was no functioning currency.

2250 – 2150 BC

  • In Cappadocia the purity and weight of silver allowed their usage as money.

1792 – 1750 BC

  • In Babylon the Code of Hammurabi is created to govern the money lenders and banks.

1200 BC

  • In China the cowrie shell was adopted as currency.

1000 – 500 BC

  • In China small metallic tools were used as currency.

640 BC

  • In Lydia (now Turkey) coins are being made of electrum – a mix of gold and silver.

600 – 650 BC

  • Rough coins were produced in China of common metals.

650 – 550 BC

  • Athens, Corinth, and Aegina begin minting silver coins.

550 BC

  • In Lydia the separation of silver and gold in electrum is achieved.

546 BC

  • Persia begins minting gold coins.

407 BC

  • Sparta frees the slaves from the mines and Athens silver supply dries up.

406 BC

  • Citizens of Athens begin saving their silver coins and removing them from circulation as they are replaced by bronze coins.

390 BC

  • When the Romans are attacked by the Gauls, they build a monument to Moneta, Goddess of Warning. This word grandfathered money and mint.

336 – 323 BC

  • Alexander the Great pays his enormous army half a ton of silver a day. Alexander sets the rate of exchange of silver to gold at ten to one.

275 BC

  • Rome is using bronze bars as money.

269 BC

  • Rome begins minting silver coins.

218 – 201 BC

  • The Romans begin changing the purity and weight of their silver coins. Inflation begins.

200 BC

  • The first credit is issued on Delos, a Greek isle, as it becomes a financial center.

118 BC

  • China is using leather as currency with a rate pegged to base metal.

30 BC – 14 AD

  • Augustus Ceasar regulates the financial system and introduces pure gold, silver, brass, and copper coins.

30 AD

  • Jesus Christ has had enough of the money lenders conducting business around temples and he tips their tables over.

54 – 68 AD

  • Nero begins making the gold and silver coins less pure.

250 AD

  • A roman coin is now only 4% silver.

260 – 268 AD

  • The Roman financial system breaks down.

270 – 275 AD

  • New coins are minted by Aurelian of very pure gold. The value of them is increased. Inflation follows.

301

  • Diocletian issues orders to control prices and wages. This fails.

306

  • Constantine mints a new coin, the Solidus, which is pure gold and will last for 700 years.

410

  • The Visigoths defeat Rome and the banking system is destroyed.

435

  • Britain stops using coins.

604 – 616

  • Gold coins are minted in London for ornamental purposes.

630

  • The Saxons mint large numbers of gold coins.

675

  • The Saxons stop using gold and now use only silver and base metals.

752

  • The Denier, the forerunner to the British Penny, is minted in silver.

765

  • The silver British penny is widely adopted.

789 - @1090

  • Britain faces Viking invasions.

806 – 821

  • Emperor Hien Tsung in China issues the first paper notes as coin shortages develop.

928

  • The Statute of Greatley imposes a national currency upon England.

978 – 1016

  • Aethelred II the Unready has 75 mints producing 40 million pennies to pay off the Vikings to stop attacking them.

1020

  • China is printing massive amounts of money and inflation soars.

1095 – 1270

  • The Crusades require large financial money transfers and the banking system resurfaces.

1100 – 1135

  • Britain’s silver coins are debased.

1124

  • The owners of the Mints have their right hands cut off. The silver quality goes back up.

1158

  • King Henry II reforms the monetary system and it performs well for 400 years.

1160

  • Emperor Kao Tsung reforms the Chinese monetary system as the paper money is worthless.

1160 – 1200

  • England uses the Tally Stick – a notched stick to record payments. It is split in two and put back together to ensure the payment is correct.

1166

  • China goes into hyperinflation.

1215

  • In England the Magna Carta is signed. The King can now raise taxes as he wishes.

1232 -1253

  • Italy mints gold coins in Florence, called the Florin. This design will become widely copied.

1236

  • The Mongols begin circulating paper money.

1260

  • Kublai Khan begins circulating paper money.

1275 – 1292

  • Marco Polo travels through China and discovers paper money.

1280

  • King Edward I mints new coins. At this point in time a penny is worth a day’s wages.

1294

  • Persia begins issuing paper money. Two months later no one will accept it.

1299

  • The Statute of Stepney on Bad Money forbids the importation of debased coins. Silver bullion and coin exports are restricted.

1344

  • The penny is reduced in size and weight.

1348 – 1350

  • The Black Death causes an economic collapse.

1351

  • The penny is further reduced in size.

1401 onwards

  • Banks are founded.

1440

  • Gutenburg invents the printing press and changes history.

1448

  • China is in hyperinflation.

1455

  • China abandons paper money after 500 years.

1455 – 1485

  • Counterfeiting of British coins is a problem.

1489

  • King Henry the VII creates the gold sovereign and supports gold and silver as money.

1500 – 1540

  • The Spaniards bring tons of gold back from South America. The Aztec civilization is dying.

1532

  • The Incas society ends as Pizzaro conquers them. The Incas didn’t use money although they had lots of precious metals.

1597

  • China is imports 345,000 kilograms of silver from Spain. No more paper money for China.

1619

  • Tobacco is used in Virginia as currency.

1633 – 1672

  • Goldsmith’s in Britain allow people to deposit their gold in the Goldsmith’s safes. The Goldsmith’s give them a paper IOU.

1634 – 1637

  • Tulips are used as currency in Holland. Three years later they are worthless.

1660

  • The Goldsmith’s IOU’s become bank notes.

1672

  • Copper coins are minted in Britain.

1704

  • Promissory notes payable to the bearer are issued by Goldsmith’s.

1727

  • In Virginia tobacco becomes legal tender.

1764

  • American Colonies are forbidden to issue paper money.

1766

  • Benjamin Franklin fails to persuade Britain to allow the use of paper money in America.

1770

  • Rhode Island goes into hyperinflation over notes they have printed. Nobody wants them.

1775 – 1783

  • The American Continental is printed to finance the American Revolution. Hyperinflation begins shortly after and the phrase “ It’s not worth a Continental” is born.

1789

  • The US Constitution allows the use of gold and silver to pay debt. Paper money is not allowed.

1794

  • The US Mint is formed and begins minting coins.

1795

  • Hyperinflation has begun in France.

1796

  • France withdraws paper money and issues gold based currency.

1798

  • The Rothschilds move into Britain.

1800 - 1860

  • Uganda experiences hyperinflation in its cowrie shell currency.

1816

  • A gold standard is created by the Privy Council and a new gold sovereign is minted.

1834

  • The US Coinage Act revalues silver to gold and silver starts disappearing from circulation.

1837

  • The US economy goes into a depression, which will last six years, caused by the uncontrolled expansion of the banking system.

1848

  • The California Gold Rush enables the mints to produce fine gold coins and moves them towards a gold standard.

1851

  • The Australian Gold Rush begins around Ballarat, Victoria.

1857

  • A world wide financial crisis begins due to global investment. Banks in Germany are allowed to fail and after a few months the economy improves.

1861 – 1865

  • The US Civil War results in the Confederate currency becoming worthless.

1873 – 1886

  • Britain enters its Great Depression. Doubts are raised as to the efficacy of the gold standard.

1881

  • Postal Orders are introduced in Britain. These are used as currency in competition to bank notes for ten years.

1890

  • China mints silver coins.

1907

  • World wide banking crisis begins in New York. Hundreds of banks are allowed to go under.

1914

  • Britain withdraws gold coins from circulation. The gold standard is temporarily over for Britain.

1917

  • The US National Debt goes from 1 billion dollars to 25 billion dollars during World War I.

1925

  • Britain returns to the gold standard, as Milton Keynes states that silver is over valued.

1928

  • France returns to the gold standard.

1928 – 1929

  • The stock market is booming in the US. The Federal Reserve watches but does nothing to moderate it.

1929

  • On the 24th of October the stock market crashes. The Federal Reserves easy money policy which fueled the boom has now reduced credit.

1929 – 1930

  • The Great Depression - many banks and businesses go under. The Gross Domestic Product is down by 50%.

1931

  • Britain ceases to be on the gold standard.

1931

  • Japan ceases to be on the gold standard. For the next 9 years Japans economy is strong.

1933

  • Hitler takes the position of Chancellor and realigns the economy and financial system.

1933

  • The US Federal Deposit Insurance Corporation (FDIC) is formed to ensure that in case of a bank closure, that customers funds will be insured.

1934

  • The US Gold Reserve Act raises the price of gold (in US dollars) from $20.67 an ounce to $35.00 and ounce.

1934

  • The US Silver Purchase Act enables the US Government to purchase large amounts of silver bullion. This raises the price of silver world wide and China abandons the silver standard.

1935

  • The US Banking Act reorganizes the Federal Reserve and shifts power towards Washington, formerly the power was in New York.

1935 – 1980

  • Cattle are used as currency in parts of Africa. Nigeria continues using cowrie shells until World War II.

1936

  • France abandons the gold standard.

1932 – 1941

  • Japans economy is running strong.

1939

  • World War II begins and Keynesian economics are used to finance the war effort by Britain. By 1945 Britain has become significantly in debt, whereas before 1939 they were a creditor.
  • The US economy GDP rises under low interest rates. By 1946 the national debt is 269 billion dollars. It was only 16 billion in 1930.
  • Germany has close to zero percent inflation by using the assets of conquered countries to finance the war effort.

1944 – 1971

  • The Bretton Woods Agreement creates the International Monetary Fund (IMF) and the World Bank. The US Dollar is set as the Worlds Reserve Currency and all other currencies are tied to it.

1944 – 1946

  • Hungary experiences the greatest hyperinflation ever. In 1946 their gold coin (the pengo) has increased in value 130 trillion times relative to their paper currency.

1945 – 1948

  • Germany enters hyperinflation. Common items such as tobacco, food, and chocolate are used as currency.

1948

  • Germany abolishes the Reichmark and introduces the Deutschmark. Wage and price controls are implemented.

1949

  • Britain devalues their pound against the US dollar. It goes from $.30 to $2.80. Other countries follow this precedent and devalue their currency.
  • Japan imposes economic reforms, The US provides supplies and assistance and abandons the war reparation payments that Japan must pay.

1950 – 1970

  • Japan’s economy takes off and increases by over 9% per year. In the 1960 it was over 10% a year.

1956

  • Milton Friedman publishes his ‘Restatement of the Quantity Theory’ which goes against Keynesian economics and the modern monetary system develops.

1959

  • Nigeria has its first Central Bank. Cowrie shells as currency are no longer used.

1963

  • The US Silver Purchase Act is repealed.

1965 – 1987

  • US Banks expand internationally.

1965

  • Islands in the central Pacific are still using Fei Stones as currency.

1967

  • Britain devalues the pound again to $2.40 US.

1968

  • The US for the first time has a trade deficit.

1969

  • The IMF makes international trade independent of the supply of gold by enabling special drawing rights.

1970

  • US banks in Britain have more in deposits than British banks do.

1971

  • The Bretton Woods Agreement is abandoned to allow international trade with no relation to the price of gold.

1971

  • Britain changes its monetary system away from pence and shillings to a fractional currency where a pound is worth 100 new pence.

1973

  • Britain, Ireland, and Denmark join the European Economic Community (EEC).

1973

  • The US leaves the gold standard.

1973 – 1974

  • Britain enters a banking crisis. Sixty banks are either bailed out or receive some form of assistance.

1974

  • OPEC raises the price of oil drastically and world trade is reduced. Developed countries fare better than undeveloped countries. Japan’s economic growth slows considerably.

1976

  • Britain switches from Keynesian economics to Milton Friedman’s monetarism after reaching 25 % inflation.

1978 – 1980

  • OPEC increases the price of oil to double what it was in 1978. Interest rates rise and industrial countries go into severe recession.

1979 – 1990

  • Margaret Thatcher promotes Milton Friedman’s monetarisms and as inflation rises and the manufacturing sectors are damaged, the financial centers are strengthened.

1979

  • The City of London becomes one of the primary financial market centers as Britain does away with all foreign exchange controls.

1980

  • The third world begins going into considerable debt. As interest rates rise in future years, they become deeply indebted and unable to get ahead on their loans.

1980

  • Poland can not pay its debts and as rescheduling of obligation is enacted, bankers remove their money from eastern Europe as it is considered high risk.

1982

  • Mexico struggles with a debt crisis from loans made by the IMF, the Bank for International Settlements, the Federal Reserve, and the US Government. Bankers withdraw money from South America as its considered high risk.

1984 – 1990

  • Foreign banks expand in the US.

1984

  • The modern ATM is exempted from being classed as a branch of a bank.

1987

  • On the 16th of October the Wall Street Stock Exchange crashes followed by the London Stock Exchange crashing on Monday.

1987

  • Japan has the largest trade surplus of any country in history. The trade surplus is 87 billion dollars.

1988 – 1990

  • Britain experiences a housing boom as easy credit is granted.

1988

  • Fifteen countries have a debt that exceeds their Gross National Product.

1990

  • The Berlin Wall is torn down and East and West Germany and reunified.

1990

  • The Japanese banks are now the world’s largest.

1991

  • The Soviet Union dissolves and the new countries form their own currencies.

1992

  • The European Union (EU) creates a unified banking and financial system. There is talk of a unified currency for Europe.

1994

  • The Sumitomo Bank in Japan declares a loss. This is the first Japanese bank to declare a loss in fifty years.

1995

  • 90% of all financial transactions in the US are done electronically.

1999

  • The Euro, a common currency for the European Union is created.

2002

  • The Euro notes and coins are adopted and replace the European countries national currencies.

2006

  • The US has experienced a housing boom as easy credit and low interest rates have led to property investing and increased home ownership. The peak house prices were reached in 2006.

2007

  • In the US the subprime mortgage industry is facing significant delinquencies.
  • The countries largest mortgage lender, Countrywide, has a marked increase in foreclosures. They report their first loss in twenty five years – 1.4 billion dollars.

2008

  • Bear Stearns experiences massive losses due to investing in mortgage securities. JPMorgan Chase buys them out.
  • Fannie Mae and Freddie Mac are taken over by the US Government.
  • Merrill Lynch is purchased by Bank of America.
  • Lehman Brothers files for bankruptcy.

The Dow Jones industrial index falls below 10,00 for the first time in four years.

  • The Troubled Asset Relief Program (TARP) is enacted by the US Government and 600 billion dollars are printed and passed on to the too-big-to-fail banks providing federal aid to enable them to stay in operation.
  • Quantitative Easing begins in the US, Europe, China, Japan, and many other countries. This is ongoing to this day.
  • Bitcoin is described in a technical paper by Satoshi Nakamoto. This is a decentralized open source peer to peer electronic payment system.

2009

  • The Irish Government nationalizes the Anglo Irish Bank.
  • Home prices in the US have plummeted 28% from where they were at in 2006.
  • The Bitcoin network is established and the first Bitcoins (BTC) are issued.

2010

  • Lawsuits are pending against all major loan underwriters and originators.
  • One out of every eleven residential mortgages is behind on their mortgage payments.
  • Investigations begin by State Attorneys into the false signatures (robosigning) of foreclosure documents that number in the thousands.
  • More than one million homes in the US are repossessed in 2010 alone.
  • Greece, Ireland, Portugal, Spain, and France, are in significant debt.
  • The first famous transaction of Bitcoin was the purchase of a pizza for 40,000 Bitcoin.

2011

  • Quantitative Easing continues in the US, Europe, Japan, China, and other countries.

2011

  • Wikileaks begins accepting Bitcoins as their payment processor – Paypal refuses them service.
  • Devcoin is created. The Devcoin Project is unique in that it is an ethically inspired project based on the BitCoin crypto-currency and created to help fund open source projects created by programmers, hardware developers, writers, musicians, painters, graphic artists and filmmakers.

2012

  • BitPay has over 1000 merchants using its payment processing system.

2013

  • Cyprus banks take a bank holiday and bank deposits are stolen and the Cypriots lose a significant portion of their deposited money depending upon which bank they had their deposits, and the amount of the deposits. One IT company posted a screen capture of their bank account showed an 85% confiscation.
  • In the days following the Cyprus bank theft, the price of Bitcoin soars from $45 to $265.
  • Major Bitcoin Exchanges experience sever Distributed Denial of Service (DDOS) attacks.
  • Bitcoin experiences volatility and attracts world wide interest and venture capital.
  • The US Government establishes regulatory guidelines for decentralized virtual currencies such as Bitcoin with the Financial Crimes Enforcement Network (FinCen).
  • Alternate cryptocurrencies attract mainstream interest. With the speculation/news that some of them might be listed on Mt Gox (the world’s largest bitcoin exchange), prices rise.

The future of money is up to us

This article has traced the history of money throughout recorded history, from cattle, to gold and silver, paper money, and up to bitcoin. With the global financial system experiencing severe stress, we may revert back to silver and gold, with digital currencies such as bitcoin alongside traditional stores of value. The future is up to us.

References

1. The History Of Money: From Barter To Banknotes http://www.investopedia.com/articles/07/roots_of_money.asp

2. History of Money from Ancient Times to the Present Day http://projects.exeter.ac.uk/RDavies/arian/llyfr.html

3. The History of Money from Bartering to the Credit Card https://www.hostmerchantservices.com/articles/the-history-of-currency-from-bartering-to-the-credit-card/

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