Money is a fundamental part of our daily lives, and its history is intertwined with the history of humankind itself. Let's take a brief look at how money has evolved . Join us.
The evolution of money: from constant nomadism to bartering surpluses
It can be said that the history of the evolution of money is also the history of the evolution of humankind. The different stages through which the understanding of monetary exchange, saving, and the physical storage of profits passed ultimately became symbolic of the level of development of a large part of our species' civilizations, from the earliest times.
And the progressive abstraction with which human gains were understood was parallel to the abstraction with which institutional, philosophical or religious contents were integrated.
Social classes, the effective power of certain circles and influence over private and public affairs have historically been based on this order of accumulation and exchange to the point of becoming consubstantial with the human essence.
Quevedo's famous verse, which personified money as a powerful knight capable of conquering even the most stubborn wills, was entirely relevant in the 17th century and remains so in the 21st. Despite the opposition of the great spiritual traditions that see it as an earthly element of unbearable temptation, money continues to sustain the world to unprecedented levels, for better or for worse.
Now, where did this closed order that continues to articulate our existence begin? We could even go back to the time when man was heading out of prehistory. Until now, an economic system of regulated exchange was unnecessary and inconceivable: nomadic human groups lived by hunting daily, consumed immediately, without the possibility of keeping what they had gained and without generating surpluses with future value.
The change comes with the definitive settlement through agriculture and livestock. The population increase forced to create methods of drying, smoking and salting to preserve the food gathered for times of scarcity. And part of these conserved resources were then available for commercial exchange for other products needed in the growing cities.
Barter was the first established exchange format and undoubtedly meant a major social advance. But the limitation of exchanges was too pronounced in this system, as well as irregular.
Nobody could assign a fixed value to animal or agrarian merchandise and it depended entirely on the interlocutor. The only way to make the transaction possible was to find someone interested in the merchandise that was being offered and who also offered the merchandise that was being sought.
These difficulties, over decades and centuries, paved the way for a more stable trading system. We were beginning our journey toward money. You might also be interested in the origin of open-air markets.
The kingdom of Lydia: first coins and reference values
The first step in refining bartering and continuing the evolution of money was to try to establish a product that could serve as a reference value against which to value all others. This could be an ox, a goat, or small bags of salt, the latter forming the basis of the etymology and practice of wages.
Gradually, everything led to the use of rare, extremely durable, and incorruptible materials, such as gold and silver ingots. These ingots began to be weighed according to a fixed unit called the shekel , providing a necessary standard for trade, which was still based on weight rather than quantity.
But, although a more or less fixed reference value had been reached, the functionality of the methods to specify them and their transport capacity continued to be improved.
In the end, everything was based on a balance for each trading partner, not available everywhere and also susceptible to fraudulent manipulation. Lugging around a mass of bullion everywhere on trade trips wasn't the height of practicality either. The need for coins began to be acute to lighten and energize exchanges in various places in the ancient world.
Origin
The invention came from what would now be the country of Turkey and was then called Lidia. The sovereigns of Lydia, particularly the semi-legendary King Gyges, used their vast deposits of gold and silver located in their mines and in the fluvial course of the Pacífico River, where King Midas of mythological history bathed, to make and mint the first world coins in the XNUMXth century BC. C. The intention was to make it easier for royal institutions to receive taxes.
Made of a gold and silver alloy called electrum , it weighed 4,75 grams and displayed a roaring lion on one side, the traditional emblem of the monarchy. The other side was depressed into a square shape, evidence of the forced impression of the lion on the other side. The object's crudeness and small size contrasted sharply with its usefulness: the lion finally served as a guarantee of the correct weight and value, eliminating the need for scales for each piece.
Soon the other empires took over the example of Asia Minor, firmly controlling the minting of coins to provide a uniform mercantile mechanism throughout their territories. The printed lion began to be replaced by other symbols depending on the nature of the power that put the piece into circulation, from augur staffs and plants to the effigy of the highest ruler.
One of the first faces to be recorded on a coin was that of Alexander the Great, in another of his acts of egocentric self-divinization. The material of its composition continued to be gold and silver for a long time in antiquity, due to its already mentioned durability and guarantee against possible forgeries.
If you have a particular interest in traditional monetary mechanisms, you might find it helpful to visit this other article on our website dedicated to explaining the main characteristics of credit . Follow the link!
The appearance of commodity money: foundations of trust backed by the Treasury
The use of coinage spread throughout Greco-Roman civilization primarily through its two most widespread denominations, the Greek drachma and the Roman denarius , both made of silver. The latter Roman coin ultimately gave the word "dinero" (money) its Hispanic etymology.
The term coin also comes from the Latin world, from the appellation moneta (epithet meaning unique or the one who warns ) applied to the goddess Juno, whose temple was used to mint the pieces for circulation.
But with the arrival of critical circumstances in each of these empires and city-states, shortages of the precious metals required to mint the heavy coins of the past often arose. The production of coins of the same style, but from much more affordable materials such as bronze, copper, or iron, then began. A new stage in the evolution of money had just begun.
Evidently, the value that had been attached to the drachma, denarius and other denominations was much greater than the new container of current material. How to ensure that the physical support of the currency continues to adequately represent the value that the State assigned to it? Well, making sure that each piece was backed by the gold and silver treasure that the institutions of the territory kept in their coffers.
The world was thus taking another step in the evolution of money and toward monetary abstraction. Value was no longer in people's hands, but far away, in state repositories, while the coin only retained its worth as a representation of the government edict that endorsed it. This constituted the emergence of commodity money, an effective symbol of a distant value that transcends the individual. This format had several incarnations that eventually moved away from the metallic medium.
Paper money: certificates of value and security
Another element in the evolution of money that would appear was the now ubiquitous paper currency. The first examples of paper assuming the former role of metal coins as a store of value come from the Asian continent, around the medieval period of the 11th century.
A first model was implemented by the Mongol Empire under the iron rule of Emperor Kublai Khan. His system was modern to an unusual degree: the primitive, large bills represented the gold deposit in a Mongolian bank. This paper commodity money then resembled a cross between a bill and a contemporary check.
The gold standard was also practiced by the Ming and Yuan dynasties, also through the issuance of certificates legalized by the government seal that guaranteed their status as representatives of the treasury of the bank coffers. The paper money system would not stay in Asia.
Between the fifteenth and sixteenth centuries, European goldsmiths began to protect gold and silver in safes from those who could not safely transport their income through paths full of bandits, theaters of war or ships exposed to pirate attack. To assure the customer of his ownership of the stored precious metal, they also issued paper certificates. Over the decades, this also gave rise to the banknote backed by a central authority.
Between the XNUMXth and XNUMXth centuries, England gave the world the first check system, rapidly evolving the traditional and informal process of the promissory note until it became a method with a legal basis, being imitated by France, the rest of Europe and later America.
And precisely from American lands came the element that was missing in the modern economy, the credit card, launched for the first time by the Western Union entity. We then traveled the full path from ox to ingot, from ingot to coin, from coin to paper and from paper to plastic.
From fiat money to Bitcoin: the latest transformations in the evolution of money
The mid-1944th century saw a radical mutation in our modern understanding of money. The convertibility of the dollar with respect to gold and of most currencies with the dollar, already established since 1971, took a step forward with Richard Nixon's decision in XNUMX to pass the gold standard to a better life.
With which the value of the North American currency, of weight so important that it determines practically all the others, is determined solely by the confidence of the group that handles it in its viability and wealth. Without this, it is nothing more than paper or digits, with no reservation to support it. This system is called fiat money.
All of our current money is based on this trust system. In the security that the community feels that the currency in question can be received as a means of payment by all the members of said community. All the formats indicated above, in metal, paper or plastic, depend on this act of trust and its daily administration by the Central Banks of each country or continent.
The proposal of the Bitcoin cryptocurrency has been based on this notion to embark on the last great transformation of money, perhaps the most radical to date. This system is also based on the fiduciary concept of mutual trust, but with a crucial variation: there is no network of central banks to control the value or flow of currencies.
It is a total decentralization of the course of this type of digital currencies, with all users being at the same time beneficiaries, producers and administrators of consumption through the so-called block chain. This is a kind of electronic accounting book, well encrypted, where all financial movements executed by users are recorded in the form of a network of equal communication nodes, without hierarchies or controls from above.
This feature naturally raises concerns about illegal activities that may be incurred by those who pay or collect in Bitcoin. But undoubtedly it also opens a stimulating time in which the common citizen should not depend on state or private banking entities to define the value of their transactions. It is practically a territory of systematic anarchy, if both concepts can coincide in a sentence.
Accepted more and more by different companies and platforms, the Bitcoin system constitutes the last ethereal mutation of the currency created by the human being, the last digital limit until now of a path of enormous and amazing length that goes back to the exchange of bovines, seeds of wheat or bags of salt.
The following video features an engaging cartoon that illustrates much of the history of money we've discussed here. Simple yet effective, it can be a great resource for introducing this aspect of human history to young children in a concise way. This concludes our article on the evolution of money throughout the ages. Until next time, and best of luck with your finances and reading!