Where Did Money Come From, Anyway?

Source: http://strangebananadailybluster.blogspot.com/

It is difficult to imagine the world today without money, or the concept of money. But surely, the first civilizations did not start out using money, right?

Long ago, people did not use money to buy things. They also did not use money to pay the person who repaired their roof, or built their tables, chairs and other furniture. What they did was to exchange the things they had for the things that they needed. If they had a lot of rice, they might want to exchange some of it for fish, so they would find somebody who has a lot of fish, and see if that person wants to trade some of it for rice. Or maybe a person who was very good at repairing roofs or making chairs and tables would get paid with bananas, or whatever fruit was in season. This type of doing business is called barter.

As you can imagine, barter trade has some serious flaws. For example, what if the person who had just repaired your roof wanted, say, flip flops? And you only had bananas? Moreover, fruits like bananas could spoil, so waiting for a week until you could find a person who would repair your roof for a bunch of bananas was not really an option.

Thankfully, somebody thought up the idea of using money.

Since humans learned to live together in communities, money (or its variant) has shaped society. It advanced Mesopotamian commerce, spurred the development of mathematics, and helped kings and their officials collect taxes and impose fines. As the use of money (and money itself) evolved during the Bronze Age—especially in civilizations along the Mediterranean Sea—it promoted sea trade, built profitable cottage industries, and made possible the accumulation of wealth. With the accumulation of wealth, prosperity of course followed; and with prosperity comes all sorts of advancements.

Indeed, money made many things happen.

Money, however, did not always come in the form of paper bills and small metal coins that could easily be put inside one’s pocket. Different objects, such as spices, leather, seashells, and of course gold and silver were used as a medium of exchange. Carrying large amounts of what passes for money back then was a heavy task; it would have been heavy work when one goes shopping, or if one is buying a really expensive object. Moreover, a piece of gold or silver is difficult to divide into small pieces if you only wanted a small bit of, say, boiled camote.

So, where did money originate?

Archaeologists had established that cash originated in the world’s oldest cities, in Mesopotamia. Apparently, silver in Mesopotamia functioned much like our money today; that is, people used it as a means of exchange and used it for defining the value of commodities and services. Archaeologists had unearthed stone tablets (the tablets were dated to be about 3,700 years old) from the ruins of an ancient Mesopotamian city that referred to a currency, in the form of silver rings, that started circulating in the region two thousand years before the world’s first coins were minted.

Ancient texts unearthed in Mesopotamia by archaeologists show that some form of currency was used extensively during those times. Evidently, Mesopotamians began using money just about the time that they were building the world’s first cities.

Before the advent of cities, people could be found scattered out in hillsides. They produced whatever they could for their families, and because there were not many people, very little trade occurred. With the coming of cities, however, many things changed. For the first time in history, a sizable number of people were concentrated in one spot. As a result, there were many different goods, with lots of people trading them.

The thousands of clay tokens of what may be the oldest accounting records in the world that archaeologists found in the region show the growing complexity of the lives of these early Mesopotamians. These clay tokens were used for counters and later as promissory notes given to tax collectors even before the first writing appeared.

With this rapidly growing number of goods, and with a rapidly growing number of people who traded them, barter would have been very inefficient. People had a hard time determining the best price for an item.Trading became so complex that people did not really know what the best price for an item was. As with other things, necessity is, indeed, the mother of invention. People needed a formula of stating the standard value of trade goods. Thus, money was born.

Silver, a prized decorative metal, became the standard in Mesopotamia. This metal’s value remained constant year after year, and so it became an ideal measuring stick for computing the value of goods. Mesopotamians quickly recognized the effectiveness of such an arrangement. Soon, they began recording the prices of everything by weight in shekels of silver (a shekel then was about one third of an ounce)—from grains to timber to goats. For example, a slave cost between ten and twenty shekels of silver. A month’s worth of salary for an ordinary laborer was one shekel. They now had, at this time, a method of quantifying the value of goods and services.

Moreover, silver was portable. A shopper would no longer have to carry baskets of, say, wheat, on her ass (the animal) to barter for other goods.

The arrival of measurable commodity certainly had a major impact on the daily lives of early Mesopotamians. For one thing, this silver standard helped rulers attach a price to law violations. Tax officials could now calculate what the one-sixth tax increase was for a farmer who paid one ox as tax during the previous year. Interests on loans were now easy to calculate. Scholars suggest that the arrival of the silver standard spurred the advance of mathematics, when Mesopotamian scribes were struggling with the calculations of compound interests on loans.

As the concept (and use) of money became widespread in Mesopotamia, other civilizations in ancient Middle East soon found out the advantages of having money, and they decided that they, too, can’t live without it. The old ways of pure barter was abandoned as civilizations in the area began adapting to the new mode of trading.

Silver won out over other commodities as primary means of exchange. Metalworkers devised ways of turning silver into a more convenient form of money. In some parts of Egypt, silver currency took the form of coils and rings, while others used rod-shaped ingots of silver (gold was also sometimes used).

The emergence of money in Mesopotamia and nearby areas enabled different peoples to trade with each other. Phoenician merchants could now easily engage in trade with Hebrews, or with other people in the area.

People no longer had to produce everything by themselves, and try to be self-sufficient. They could now specialize. Someone could now concentrate on growing grains. Or graze cattle. Still others could concentrate on making potteries, and maybe his neighbor could be a furniture maker. People could now concentrate on improving their own crafts. Specialization resulted in increased productivity; diverse goods in increasing numbers were suddenly available to an ever-growing population.

The wealth created by specialization and trade became the foundation in which civilizations became empires.

Still, the pieces of silver that passed for money back then were still vastly different from the money we use today. Besides the shape, what makes this currency different from ours is the lack of guarantee or authenticity. The absence of such warranty made some people doubt the currency’s authenticity, and even refused to accept its face value: the pieces of metal might be a few grams short of a shekel.

Confidence was guaranteed when someone reputable certified that a coin has both the promised weight and composition. A sort of antifraud device was needed.

Archaeologists dug up a clay jug in northern Israel filled with almost 22 pounds of silver—dated to be about 3,000 years old—that were wrapped with a fabric that had some kind of official seal imprinted on it.

So, there was already an official seal; all that remained was to impress the seal directly into the pieces of silver. This was what happened in Lydia (around 600 BC), a kingdom in Turkey, considered as the birthplace of coinage. Lydian coins possessed the characteristics of modern coins. Made of small, precisely measured pieces of precious metal, the coins were stamped with beasts like lions and other animals. It is no coincidence that the legendary King Croesus—you may want to look his story up—was a Lydian king.

It did not take long for the idea to catch on. Within a few decades, Greek rulers began churning out coins of different denominations in gold and silver, imprinted with the faces of their gods and goddesses.

Greek merchants did the rest—trading with different civilizations along the Mediterranean bringing with them, and spreading, the new denominations. The rest, as they say, is history. Paper money soon came after, thanks to the Chinese.

It is no exaggeration to say that coins greatly helped modern society to be what it is today. Without some sort of currency, we would have been stuck with barter.

And where’s the fun in that?