Three Most Important Events in the History of Money

Money has been around since ancient times. Indeed, the monetary system was not as developed and advanced as it is now. There were indeed no banking accounts, electronic transfers, stocks and shares, but the nature of money and its purposes remained the same. If we look even thousands of years back, we will see that loans, credits, and even interest rates existed and were used by the people with the same meaning and purpose as now. Nowadays we have different coins and currencies which vary from country to country, in ancient times, clay tokens, gold and silver were used with almost the same purpose as paper money is used today.

Although famous economists such as Karl Marx and Friedrich Engels envisaged a world without money and communists supported their ideas that had followers until the late 1970s, money is still part of our life. Karl Marx blamed money for compromising moral and social values and wrote “the bourgeoisie has torn away from the family its sentimental veil, and has reduced the family relation to a mere money relation”(3). The ideas of a moneyless society enforced by Karl Marx and many of his followers were written on thousands of pages, none of them proved applicable in practice and the entire nations such as the Soviet Union and North Korea failed to implement them in practice.

Before analyzing the historical events dealing with the origin of money, I would like to briefly touch upon my attitude regarding the moneyless society. We know that there are still tribes living far in the jungles without money. They are practically hunter-gatherers in the 21 century. The book, “the ascent of money” describes members of the Nukak-Maku tribe that had no concept of money whatsoever. Their lives were poor, nasty and short and they were engaged only in finding food for the day. For thousands of years, evolution stopped for them, because when the only thing on your mind is how to get the food, there is no place for development and evolution and higher ideas. It is recorded that from 40 to 60 percent of male deaths in the tribes are caused by violence. Some societies indeed settle down in remote villages where they attempt to lead a cash-free life engaging in barter like primitive societies, however, this isolates them from the rest of the world and narrows their minds. Whether we want it or not, money is an integral part of our life and rather than engage in utopic concepts, we need to better understand how the entire monetary system works and operates and what it is based on.

In my opinion, the three most important events relating to money deal with

  1. What preceded the money and how did the money appear?;
  2. From precious metals to worthless paper and banknotes;
  3. How money has changed people’s attitude to life and consumption.

The first thing that needs to be considered in the history of money is when people began to realize that they can’t provide themselves with everything, and if one is a hunter, the other may be a fisher or a basket maker and the desire to own items or things that you don’t have promoted the very first form of goods exchange known as barter. Barter was the first primitive form of exchange between the people before money came into use. Interestingly, nothing could be bought or sold, only exchanged and bartered. To get fish, one needed to offer the owner a commodity that would be in his interests, the one that he would be willing to accept as barter for fish. Currently, some groups are advocating the use of commodity exchange instead of money. In my opinion, this is a most primitive form and accepting it would mean going thousands of years back. Using barter and exchange had many obstacles. It is not practical to carry around bags of rice or baskets of fish. Money that we have today is durable, and commodities, especially eatable, may perish soon.

The barter had its disadvantages and money had to be made available as a medium of exchange making it easier to calculate and value and conduct various economic deals (Ferguson, 2009). Money expanded trade and removed the limitations of barter exchange. People could travel to remote geographical areas and make deals, buy and sell items. All of this was impossible with barter exchange because traveling far with bags of rice or baskets of fish was not practical.

For those studying the history of money, it is essential to know where the first money appeared. Numa Pompilius, the Roman Emperor is believed to have given the order to make the first coins and the first coins were named nummi in Latin which is reminiscent of the Emperor’s name (Keynes, 1930). If one thinks of inflation as the phenomenon of our current days, history shows examples that depreciation of money took place in Europe and lasted from 1540 to 1640 (Ferguson, 2009). Rulers of the 16th century were probably first faced with what is known as ‘inflation today. The abundance of precious metals led to significant decline in their value. As rulers made more money to pay for the wars they were waging, the cost of food and other goods rose as well (Ferguson, 2009). Money has been strongly associated with metal and precious metal contained value in itself. A turning point, in my opinion, in the history of money came when banknotes or paper money was introduced. A Banknote which is a worthless piece of paper is what represents the concept of money applied today. It is believed that banknotes first appeared in the 7th century in China (Ferguson, 2009). With banknotes, a third party appeared between the buyer and the seller, a guarantor who ensured the value printed on the paper bill.

A major event in the history of money is a consumer-driven economy and obsession with credits. Indeed, the concept of money today and hundreds of years ago is the same, it serves to buy things. However, the attitude to money has changed dramatically over the centuries. People used to take loans and credits in ancient times, but the magnitude of credit obsession is now bigger than ever. People have begun to treat money differently, and many of them lost touch with the ability to rationally value it. As Louis Hyman notes “The logic of that world turned upside down in the 1920s as a new market intermediary, the finance company, positioned itself between the shop and the bank” (41). Since the 1930s consumer economy emerged in the US and spread around the world.

People now can buy everything ranging from cars to mobile phones without the need to pay immediately. Businesses, with assistance from banks, were booming because customers could now get more and buy houses and goods they could not afford (Smith, 1776). The banking sector brought about a dramatic shift in how people view and treat money. The concept of ‘get the item that you want now and pay later’ led to a huge financial bubble when banks no longer could ensure the credits they offered to the people. Perhaps, this should be a reminder that low-interest loans are not so good for the economy because when the money is easily-accessible, people lose touch with financial reality and borrow more than they need. Another thing that made money more intangible is electronic or virtual money. The real money in the hands of Americans makes up only 11 percent of all the money used in the US (Ferguson, 2009).

My thinking about money and its concept have changed during the term. I believe that people’s attitude to money is now governed by banks and financial institutions. The consumer economy is convenient for businesses and companies, when people want more, businesses thrive which is why saving is not encouraged.

It was much easier to handle financing in the past, the materials studied throughout the term made me reflect on the wide range of financial instruments available nowadays. People may invest in stocks, shares, buy bonds, securities, and try to find luck in the stock exchange. These options are accessible even to amateurs who willingly engage in financial schemes in which they have little or zero-knowledge. Many books were and will be published dealing with the issue of money. Some writers may view it with humor and portray people who are trying their best to become poor and lose money (Leacock, 1989). Others will attempt to present expert knowledge. The history of money is a multi-faceted subject, and new concepts and notions will come to surface with time.

Works Cited

Ferguson, Niall. The Ascent of Money: A Financial History of the World. London: Penguin Books, 2009. Print.

Hyman, Louis. “The Politics of Consumer Debt U.S. State Policy and the Rise of Investment in Consumer Credit, 1920–2008.” The ANNALS of the American Academy of Political and Social Science. 644.1 (2012): 40-49. Web.

Keynes, J. Maynard. A Treatise on Money: The Pure Theory of Money and the Applied Theory of Money. San Diego: Harcourt, Brace & Co, 1930. Print.

Leacock, Stephen. Arcadian Adventures with the Idle Rich. Toronto: New Canadian Library, 1989. Print.

Marx, Karl, Friedrich Engels, Samuel Moore, and David McLellan. The Communist Manifesto. Oxford: Oxford University Press, 1992. Print.

Smith, Adam. The Wealth of Nations. Washington: CreateSpace Independent Publishing Platform, 2014. Print.

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