We love it when we’ve got it, and we lament it when we haven’t. In any case, it’s rare to come across an individual who doesn’t appreciate the value of money.
But have you ever given thought to where the coins and notes in your pocket come from?
By this, we’re not talking about those oh-so-sophisticated machines down at the Royal Mint. Instead, we’re talking about the actual historical origins of money.
Here’s a brief overview of how the whole thing got started:
Trade via barter
Before money was invented, all business transactions had to take place by way of bartering. It was the case of swapping commodities of equal value with interested parties, which, for obvious reasons, was an imperfect and complicated system. Particularly given how different people assign different values to different commodities.
Eventually, it became clear that some rudimentary form of currency needed to be introduced.
Something that satisfies six essential requirements:
- Scarceness: For a form of currency to be viable, it has to be something that isn’t readily available. Rarity has always been a desirable trade for materials and commodities.
- Counterfeit proof: It’s also useless to have a form of currency that’s easy to duplicate. If you could print 100% authentic cash at home, you probably would.
- Portability: Trading commodities for commodities is one thing, but it’s not as if you can carry your livestock, your car, or your home around in your pocket. Hence, portability is key.
- Durability: Money tends to be exposed to pretty harsh treatment during its lifespan, calling for the use of a robust material to maximise durability.
- Divisibility: One of the biggest problems inherent in the bartering system is the fact that most standard commodities and assets aren’t divisible. Owing change in the form of half a goat presents a variety of problems.
- Desirability: Of course, for a form of currency to be deemed viable, it also needs to be in some way desirable. Precisely why most forms of historic currency have been rare, sought-after, and generally quite pretty to look at.
The dawn of modern currency
At some point in time, common sense brought about the use of precious metals to make coins. At the very dawn of modern currency, it was the quantity of the precious metal used to create the coin that determined its value.
Evidence suggests that the first coins produced as a form of currency emerged approximately 600 years ago in ancient Turkey. The Greeks followed suit approximately 100 years later, around the same time as the Chinese. Coins were crafted and introduced as a form of currency by the Romans after another century or so, which was around the same time the Celts in England introduced coin-based currency.
Denominations, materials, and manufacturing techniques may have evolved beyond recognition, but the same basic premise of exchanging coins for commodities underpins the way the world does business today.
The future of money
Some economists believe it’s only a matter of time until cryptocurrency takes over and wipes physical money off the face of the earth. A distinct possibility, but something that’s unlikely to happen in our own lifetimes.
Cryptocurrencies like Bitcoin may have enormous potential, but for the time being, they are simply too volatile and controversial to mount a global takeover. For a variety of reasons, people in general simply aren’t ready to permanently quit the cash-based currency system just yet.
So while you can expect to hear a lot more about cryptocurrency going forward, you can rest assured that the coins and notes in your pocket will hold their value for now.