Who Invented Money?

The other day, my nephew complained about the necessity to go to school, and why did we need money? Me too I hated school and I also hated that I needed money to live. I understand where he comes from. But, where does the money come from?

Who created money?

With a subject like that, you know that the answer won’t be a single person. It’s too old. Money was always here, in a way. Before there was money, people exchanged goods. Nothing more was needed until communities started to grow.

Between 5000 and 4000 years ago, certain bronze objects were—in a way—standardized, they were the same weight, researchers found. It was deduced that those objects were used to help trade. It’s the oldest currency in the books.

Then came the coins, around 650 B.C. in Ionia—situated in what is now Turkey. Those coins marked with the head of a lion were made of an alloy of gold and silver called Electrum. Before that, shells were mostly in use, particularly in China. After Ionia, the neighboring Lydia led by King Croesus started to mint coins in pure gold and pure silver.

Coins changed everything, they introduced a new form of order in organized society. After the Lydians, new coins appeared in the Mediterranean region, notably in Greek cities, then the Romans followed. With the metal money, it became easy to trade with outside communities.

At that time, China also started to use coins, they were made of bronze. For a long time, their shape was not round, which changed in the late 3rd century B.C. by the first emperor of China, Shi Huangdi.

Who Invented Paper Money?

For a very long time, money was a synonym of coins. But it was heavy to carry around a large amount. During the reign of Emperor Zhenzong (968-1022), the Chinese started using paper money made from the bark of mulberry trees. This paper money didn’t replace the coins, it was used alongside it, as it was mostly used as credit notes.

The concept of paper money was introduced during the 13th century in Europe by travelers. Marco Polo described with admiration how Kublai Khan’s money system worked.

He makes his money after this fashion. He makes them take of the bark of a certain tree, in fact of the mulberry tree, the leaves of which are the food of the silkworms, these trees being so numerous that whole districts are full of them. What they take is a certain fine white bast or skin which lies between the wood of the tree and the thick outer bark, and this they make into something resembling sheets of paper, but black. When these sheets have been prepared they are cut up into pieces of different sizes. All these pieces of paper are issued with as much solemnity and authority as if they were of pure gold or silver; and on every piece a variety of officials, whose duty it is, have to write their names, and to put their seals. And when all is prepared duly, the chief officer deputed by the Khan smears the seal entrusted to him with vermilion, and impresses it on the paper, so that the form of the seal remains imprinted upon it in red; the money is then authentic. Anyone forging it would be punished with death. (source)

It was the same as Emperor Zhenzong’s paper money, made from a black sheet derived from the bark of mulberry trees. It was also signed by multiple officials and, with a seal smothered in bright red vermilion, authenticated by Emperor Kublai Khan himself who preferred to keep his silver and gold for himself. Paper was only valuable if it said so.

There were multiple attempts at introducing banknotes in Europe during the 17th century. First in Sweden, then in France, but assuring their values was difficult, and they failed. The limitation of precious metals progressively helped to change that during the 18th century. That led England to introduce the Gold Standard in 1816. This allowed for a non-inflationary production of standard banknotes which was the equivalent of a certain amount of gold—in the USA, the Gold Standard Act was officially enacted in 1900.

And now, monetary systems are way more complex than that. Things changed with the Great Depression of the 1930s, and it will continue to evolve. Money is not a tangible thing anymore.

Whatever the form, there was basically always money (and now, there’s Cryptomoney).