Humans use money every day, whether it be in small interactions like buying a candy bar or in large exchanges like buying a home. Money is an essential part of life, and a person’s income usually determines their status in society. However, before money was as common as it is today, its role in society was slightly different. Money has changed a lot over the world’s history, and it will only continue to do so.
The concept of money dates back to prehistoric times, but as money systems evolved, bartering became a prominent means of exchanging goods. Bartering is a direct exchange of goods or services between two parties. In the written work from “Britannica Money”, by the editors of Encyclopedia Britannica, an official encyclopedia that has been a source of reliable information for over 250 years, it states, “Barter is common among traditional societies, particularly in those communities with some developed form of market.” Bartering was especially effective in societies with goods already in circulation. Even though bartering and trade were very practical for their time, the introduction of money was so impactful that it made the bartering system seem almost obsolete.
Money was originally developed to assign comparable values to different items, and as it does today, it often determines a person’s societal status. A system of money was very efficient because it was an easier system to follow than trading two completely different items for each other. It was accepted by society because it was easy to carry, sort, and distribute, and because others accepted it, providing a common medium of exchange. Precious metals such as gold and silver were first used in trade around 4500 years ago in Mesopotamia and Egypt, and the first coins were made from round lumps of these metals that were flattened into small metal discs. Coinage first appeared in Asia Minor, India, and China, and it was officially invented in the Greek kingdom of Lydia in the 7th century BCE.
After coinage first appeared in the 7th century BCE, paper money was introduced in China about 1,200 years later. According to the article, “The History of Paper Money in China” by John Pickering, an American linguist who served as the president of the American Academy of Arts and Sciences, “It was in the Chou [Shoo] country, which is now the province of Sze-tchhouan, that they introduced for the first time a real paper money currency, that is to say, paper bills (assignats) substituted for silver, and not guaranteed by any pledge whatever.” Because paper money was not yet the official currency in China, it was initially accepted as a replacement for coins because coins were too heavy for merchants to carry. They were actually called “coupons”. Chinese paper money gradually spread to other regions through trade on the Silk Road.
In 1661, the first European note was distributed in Sweden, and by the 1730s, money was quickly evolving. During the American Revolution, Benjamin Franklin designed an ingenious plan to give banknotes a nearly impossible-to-copy design. This was the result of the British government’s attempts to undermine the American economy. Then, in 1861, Congress authorized the issuance of the first official paper currency as an emergency fund for the Civil War. US money was originally called “greenbacks” because of its soon-to-be iconic color.
As money evolved, more advanced ways of handling it emerged. Although the idea of credit originated thousands of years before paper money was even considered, the first widely popular charge card was introduced in 1950. Eventually, companies such as American Express and Discover developed more advanced charge cards, which were later replaced by credit cards. Charge cards still existed, but they grew far less common than traditional credit cards.
Credit cards were only possible because of banks. Banks allowed people to take out loans, or, in other words, borrow money that they would later repay to the banks over a certain period of time. If the loan couldn’t be repaid on time, depending on the amount taken out, the person would have to pay additional interest. In some cases, banks go to a person’s employer and take money out of their paycheck, or for larger loans, banks could take a person’s collateral, or a valuable possession of theirs that they allow the bank to take if they don’t pay back a loan. However, banks needed a way to determine whether the person to whom they gave money was responsible enough to repay them, which is why credit scores are important. Credit scores range from 300 to 850, with 300 being poor and 850 excellent. Whenever credit cards are used, a loan is taken out, and banks keep a limit on how much one can take out at a time, usually based on one’s credit score. Credit card banking was a major advancement in finance, and it led to further innovations in the field.
The very first ATM (Automated Teller Machine) was introduced at Barclays Bank in England in 1967, allowing people to withdraw money more efficiently. By 1975, machine-readable banknotes were created. The machine used was the ISS 300, which banks used to check the condition and authenticity of notes. 13 years later, in Australia, polymer notes and holograms were issued nationwide. According to an article by J.P Morgan Chase, the largest bank in the United States, “Polymer is more durable than paper and enables additional security features, such as a transparent window containing a hologram or optically variable device (OVD). An OVD’s appearance differs depending on the viewing angle, and it cannot be scanned, photocopied, or easily replicated.” These notes, issued in Australia, essentially addressed the same problem that Benjamin Franklin did about 250 years earlier, but with more advanced technology.
Today, money is most often handled with credit cards. From simply being a lighter load to carry to offering rewards programs, owning credit cards in the modern world is much more efficient than carrying cash everywhere you go. Of course, credit cards have their flaws, whether it’s fraud, extra fees, or making it harder for some people to keep track of their finances. However, that is why money, like almost anything else in the world, continues to evolve into improved versions of itself.
