One may wonder "who invented money?" and "when was money invented?" Neither question is easy to answer. Much like writing, both questions are asking for a stable, defined answer to something that evolved in several different places throughout the world.
Money and language have much in common, as scholars David Orrell and Roman Chlupatý discuss in The Evolution of Money (2016). In their introduction to the text, Orrell and Chlupatý note that "both money and writing are a way of using symbols to describe the world," and that "like language, money is based on social conventions." Therefore, common currencies, like the Euro, are portrayed as a unifying tool, even as money just as often will drive people apart.
But, given the hopes that a common currency will unify groups, common forms of currency have been established throughout human history as a way to create social cohesion in newly developed civilizations. The following sections describe the rise of money in ancient civilizations, followed by an overview of the modern history of money.
Ancient Currency
Scholars typically identify the earliest forms of money to be livestock and grains exchanged for goods or services in a relatively standardized way and thus moved beyond simple bartering. Livestock and grains as money appear throughout numerous early cultures as far back as 9000–6000 BCE.
At the time Genesis, the first book in the Hebrew Bible, was composed (approx. 1400–1000 BCE), the societies of the ancient Levant were in the midst of a transition from livestock and grain as money to the use of weighted metals as money. This is evidenced by passages such as: "Now [Abraham] was very rich in cattle, silver, and gold."
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In ancient Asia and Africa, scholars have identified cowrie shells from c. 1200 BCE that were used as an early form of money as well. At about the same time throughout ancient China, many people also began to use metal coins for money.
The use of metals for coins quickly gained popularity. By 500 BCE, coins appeared in places throughout the Roman and Persian empires, including in places such as present-day Turkey and Greece.
China was also the first to create a lighter, more flexible form of currency. First, around 118 BCE, leather money, decorated along its borders, was used in China. Paper money was introduced during the reign of Emperor Zhenzong of Song (宋真宗; r. 997–1022 CE).
Paper money did not spread far beyond China until the 18th and 19th centuries and, even then, paper money was more often a promissory note, a kind of "I-owe-you" receipt. These receipts acknowledged that one would later be paid in gold or silver currency.
Modern Money's Evolution
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In Europe, paper money began to move on from the promissory note form when the "gold standard" was introduced. In 1821, the United Kingdom began to tie its currency to a real amount of gold, ensuring the specific value of any money that they issued.
Even as the gold standard helped to ensure that money has a specific value, it does not remove all of the issues with currency systems. Depressions and inflation can still occur, just as they did throughout the 20th century.
To try to alleviate these issues, places such as the United States created new areas of their government. In the US, the Federal Reserve System was created in 1913 to regulate banks and try to maintain the stability of the currency system.
Still, the degree of harm caused by these depressions and inflation made many countries rethink their use of the gold standard. Some countries began to abandon the gold standard following World War I, leading to the first "currency war."
In a currency war, countries compete to try to change the value of other currencies so that their goods are cheaper and easier to attain, reducing the purchasing power of other nations. Despite—and in some ways, because of—the currency wars, many countries abandoned the gold standard in the 1970s.
Modern money is much more than gold, paper, and coins. Credit cards, online payments, and cryptocurrencies have increased in popularity, especially in the past few decades. A brief timeline of the history of modern money is as follows.
- 1948–49: The first e-commerce transactions take place using telex, an international messaging system and one of the many precursors to the internet and online banking.
- 1950: The first credit cards, as one may understand the concept today, are developed by Diners Club, an American company founded by Ralph Schneider and Frank McNamara.
- 1967: ATMs (automatic teller machines) appear first in London, England, followed by other locations around the world.
- 1985: The Bank of Scotland creates the first system for electronic home banking.
- 1994: Stanford Credit Union creates the first online banking website.
- 2009: Bitcoin, a popular cryptocurrency, is created.
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