The History of Money: Part 1

March 1, 2021

The History of Money: Part 1

It is often said that money makes the world go round. But this wasn't always the case. Long before the existence of cash, banks or bitcoin, our ancestors dabbled in many different forms of trade to manage and distribute resources. Indeed, the story of money isn't just about finance or numbers, it's has ties to the history of civilization itself, stretching back to our humblest beginnings.

The earliest form of trade was untracked in a system often referred to as a "gift economy". This was an arbitrary way of sharing goods that relied on the collective goodwill and honor of the participants.

Some of the earliest writings of New World colonists revealed that indigenous cultures were still operating under this open model well into the 16th century. Their unflinching generosity was among the most shocking traits to European settlers who could not comprehend a society built without any sense of ownership or personal wealth.

The Advent of Tally Sticks

Over time commerce evolved as merchants sought practical solutions to document ownership. The first known attempts at fiscal record keeping came in the form of tally sticks. Inscriptions into wood or bone would serve as a financial ledger, which would keep track of inventory, properties and transactions. The oldest discovered tally stick is from Lebombo, South Africa dating back to 35,000 BC.

While you couldn't exactly use these sticks as a universal unit of trade, they represent mankind's primordial attempts to represent or keep track of ones goods and assets.

Bartering: The Art of the Trade

Roughly 15,000 years ago humanity discovered agriculture, which totally transformed the shape of society. Once a completely nomadic species, humans transitioned from migratory foragers to settled farmers. By gaining dominance over their environment and food supply, the roots of civilization were established, and people began to settle together and build in greater numbers.

Due to this newfound stability and proximity, early citizens relied on each other heavily as crafts and skillsets became more valuable. In this environment bartering would become the lifeblood of local commerce for the community. For example, a farmer could use some of his harvest as a bargaining chip to exchange for clothes, tools or services.

It was a system which would endure for centuries, though it wasn't without its flaws. Farmers faced the challenge of timing their trades with harvest cycles which were not only infrequent, but often subject to unpredictable challenges. Droughts, floods and other adverse weather conditions could spell certain ruin to those unprepared for the unexpected. These limitations and risks would lead to one of the earliest forms of money.

The Evolution of the Shekel

The shekel was originally a unit of measurement for barley grain, much like we use poinds and kilograms to measure weight today. Barley was such a staple of ancient commerce that a shekel began to take on a life of its own as a currency, eventually becoming a market standard which most people understood the value of. Its name comes from the Akkadian "she", which was the name for barley. The earliest shekel coins date back to 3000 BC in Mesopotamia and were valued at 180 grains of barley (around 11 grams).

The shekel was traded as silver coins throughout the middle east and still exists today as the official currency of Israel. The first coins featured an icon depicting barley grains and baskets - leaving little room for imagination as to what the money stands for.

In 2012, one of the earliest known shekels was  sold at auction for $1.1 million.

An Economy of Shells

With the rise of empires and multinational economies, merchants kept developing new currencies to trade in, and it wasn't always in the form of coins. By 1200 BC, coastal trading posts around the Indian Ocean were using cowry shells - the highly decorative remains of sea snails.

Their use would become widespread and commonplace throughout Africa and Asia well into the midieval era. The shells carried some of the key principles of a currency - namely rarity and a collective agreement as to their value, which in this case is purely aesthetic.

Native Americans also traded in Dentalium shells, commonly known as tusk shells, which were used for jewelry, decoration and trading.

The fact that so many disparate cultures were arriving at the same solutions demonstrates the organic needs of society to develop and evolve trading customs.

Obviously such early attempts had their limitations. Different varieties of shell could be traded locally but were often considered utterly worthless outside the tribe. In order for the value of money to spread beyond local communities, more permanent and universally valuable forms of exchange were needed.

The Bronze Age of Money

In ancient China, bronze coins were minted in a variety of shapes, including small knives and spades, clearly a callback to money's agricultural roots.

In 350 BC they transitioned to round coins, which were minted differently from countries in the West. While Europeans typically hammered, cut or milled metals together, the Yuan was cast in molds, very much the way modern coins are minted today.

The earliest coins had holes cut into the center, which allowed them to be stacked on a long stick so the edges could be filed and polished. It was also for convenience. You could run a string through a series of coins and keep them together in organized quantities.

Throughout the rest of the world, money would perpetually evolve. Coins would continue to be minted from a variety of metals, each one carrying value within regional limits of the issuer. In essence, coins had run into the same limitation as the shells, albeit on a bigger scale. In order to unify economies and expand trade beyond national borders, a stronger form of currency had to be developed.

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