Do you have a piggy bank? Or maybe you have a glass jar in your house full of coins? You’ve probably seen your parents pay for something at the store with dollar bills – or maybe have yourself? Have you seen your parents use a credit card or pay with something using their phone and wonder how it works? How can they use a card or their phone to pay for something without actual coins and bills?? If you have any of these questions, you’re just like me, because I was very curious about how money came to be.
So take your mind back to time of the earliest people on earth. They were probably like you imagine, wearing animal skins and living in tribes, sometimes in caves or in little stick and mud huts they’d built to keep off the cold and rain. When these people needed something they didn’t have, they’d try and figure out how to make it or grow it or hunt for it themselves, but sometimes it was just easier to trade. You’ve probably traded something with a sibling or a friend before, right? I’ll give you this if you give me that. I used to do it with baseball cards. Well, these early humans would do it for things they really needed like blankets made from animal furs. They’d meet with other tribes in the area and make deals. They’d trade. Another word for this is bartering. They’d say “hey, I’ll give you five arrowheads for 3 furs? How does that sound?” The other tribe would would discuss the trade and maybe come back with, “How about six arrowheads for 3 furs?” The first tribe might agree that’s fair and then the deal would be complete and they’d swap items and everyone was happy.
Way back in 6,000 B.C. the people of Mesopotamia became known for their bartering skills and introduced trade to the Phoenicians. Over time it became more and more popular, but it’s more than likely bartering happened long before the Mesopotamians.
Bartering worked well down through history and people even do it today, but over time humans began to see the problems with bartering and began to think of other ways to “trade” goods. What if instead of trading things like arrowheads and furs directly, we can use a different object to make the deal happen. The problem with bartering is you had to move the thing you wanted to trade all over the place. So if I wanted to trade with a tribe all the way across the valley, I’d have to load all of my goods in a cart or a horse or a wagon and haul them there. Kind of a pain, right? Also, what if we couldn’t agree on arrowheads for furs and 3 ½ arrowheads made more sense than 4. You can’t break an arrowhead in half, then it wouldn’t be any good.
So ancient people came up with the idea to use valuable objects IN PLACE of goods. One of the early examples of what became money were shells. This is also called currency, a way to use one object to exchange for other objects. In China around 1,000 B.C. Asians began using a special type of shell called a Cowrie shell in exchange for other goods. So for example, I’d go to the market with a beautiful new dress I’d woven. There, a store owner might offer me 10 cowrie shells for the dress. They’d give me the cowrie shells, I’d give them the dress, and now I have shells, which are the equal value of the dress in my pocket. A lot easier to carry around than the dress. And then I can keep the shells, maybe go to another market later that week, and use the cowrie shells to buy my family wheat and rice for the rest of the month. Cowrie shells became a very popular form of money in China and spread throughout the region, including Africa .
Shell money was common in other places, too, like Australia, the Middle East, and North America. In North American indigenous people of the Iroquois Confederacy and Algonquin tribes, took shells they found in the ocean and ground them into beads called wampum. These white and purple beads were then strung into necklaces that could be used as money to exchange for other items. Soon European settlers also used wampum as money and it was used in the exchange for beaver pelts which were a very popular item at the time.
So you’re probably wondering why we’re still not using cowrie shells and wampum beads today? Well, that’s because once groups of people realized how money could be used some groups started creating their own money out of hard metals. Civilizations like those in China who worked in metals were able to create the first money out of gold, silver, bronze and other precious metals. This is called minting. What’s funny is some of this first metal money was shaped like cowry shells, their favorite money system of the past. They also stamped these early coins with a symbol to show that it was made by their people. This is important because a value is attached to money that sort of has to be agreed upon by everyone using it. And the value of money can change over time! We’ll talk about that in a few minutes. So with China minting money and creating coins, the really cool thing is that trade moved faster. People that have access to money, can exchange things easier, and the money moves throughout the empire and everyone is more prosperous because of it. Also, around this time metal coins were especially important because long trade roads were forming between Asia and Europe such as the famous Silk Road. Europeans and Asians traded goods along these roads and also by water.
Around this time, the Greeks also learned about minting money and started minting their own. The Athenians were minting their own silver coins by 500 B.C. and this practice later spread to the Roman Empire. Over time, minting became more and more common and as you know it’s in use by the United States and countries all over the world who have their own mints and their own coins. Growing up, I loved collecting coins with different dates and pictures on them and sometimes coins from other countries. I always thought it was interesting why they decided to put certain symbols and words on each of their own coins.
Paper money also was first invented by the Chinese, since they were also the first inventors of paper. Over time, paper money became easier to carry around than heavy metal coins. Imagine if you had to carry $100 worth of coins with you every time you went grocery shopping. Imagine $1,000 if you had to buy a bigger item. Paper money was also used by Charlemagne during his reign in Europe and of course is in use today with the dollar bill in the United States and each country with their unique bills. Do you know the names of money in different countries? Maybe you know a few. I’ll list some of the ones I know. The British Pound, the European Euro, the Japanese Yen, the Indian Rupee, Mexico’s peso, the Russian ruble. So If you get a chance be sure to look up these different currencies and what they look like. Sometimes you can even find them at hobby shops nearby.
You’ll notice with currency in different countries, they also differ in value. So 1 U.S. dollar is equal to about 113 Japanese yen. This value changes over time. The dollar today can buy less than it could 50 years ago. For example, in 1970 the cost of a candy bar was 10 cents! Just ten pennies! Today the cost of a candy bar is more like 1 or 2 dollars.
In modern times, countries are very careful with how they mint money. This is because counterfeiting is a widespread crime. Counterfeiting is when people try and make fake money and use it. This problem has existed for a very long time going back even 1500 years ago. People would mix other metals with gold or silver to make it appear that a coin was made of that metal. Today, counterfeiters use complex designs and machines to make paper bills that look like the real ones. If you hold bills up to the light and look closely at them, especially the big ones like a $20 or $100 dollar bill, you’ll notice complex watermarks inside the bills and strips of paper that are hard to duplicate. Whenever new money is printed the United States Treasury is trying to develop new ways to outsmart counterfeiters. And counterfeiters do the same, so it’s a never ending game of cat and mouse to keep money safe.
To get an idea of how much new money is printed every year in 2020, the United States Treasury printed over 1 million $100 dollar bills and around 2 and a half billion $1 dollar bills.
In the modern day, new modes of money have become popular. You’ve probably seen your parents swipe a credit card at the store or type in the numbers when buying something online. The first credit cards became available in the 1950s and grew in popularity over the years. What can be hard to understand, is that you can spend money on credit cards that you don’t even have yet. It’s what is called a loan. You spend a certain amount of money that the credit card company lets you borrow, and then you pay it off. Credit cards are a nice convenience but people also have to be careful not to spend too much on a credit card, because if you can’t pay it off by the next month it can cost you even more money.
Digital payments have also become very popular. This means that rather than having dollar bills or coins in your pocket, you can use your computer or phone to pay for things. All of the money spent using computers is tracked on a bank’s computer. It’s kind of hard to imagine that things are bought and sold and just tracked on computers now, but it is very convenient not to have to worry about having actual money in your wallet. For example, when I get paid by my job, the money just shows up in my bank account. And then I pay bills using my bank account and it just sends the transactions to pay for my house and my car and my electricity bill. And when people donate to Bedtime History, I get an email and then can use that to pay for expenses for the podcast. Pretty crazy, right? Using services like PayPal, Venmo, and Apple Payments, now you just bring up an app on your phone and send people and businesses money that way. It’s definitely revolutionized the way money can be used.
The last really interesting new form of money in the modern age I want to talk about is called cryptocurrency. If you’ve ever heard of Bitcoin, it’s the first cryptocurrency. The cool thing about cryptocurrencies is they aren’t managed by a government or bank like all of the other money. They live on the Internet and can be used by people all over the world, regardless of where they live. Cryptocurrency, also called “crypto” for short, started in 2008, when someone on the Internet using the fake name Satoshi Nakamoto wrote a paper about how crypto could work. Crypt uses a technology called a blockchain that keeps track of every payment (also called a transaction) made using Bitcoin. The blockchain is highly secure and anonymous, which means no one can hack into it and see who is using the money and what they are doing with it. It’s become an entirely new kind of money. When the first Bitcoin was released it was worth a few cents, but now it’s worth over $35,000 dollars. Of course, its value rises and falls and there are other cryptocurrencies such as Ethereum and there is debate over how important crypto will be in the future.
It’s pretty crazy to think back about how money started out, at basic trading or bartering for goods and where it is now, with complex digital payments systems and cryptocurrencies. The world has changed so much in the last few thousand years and one of the reasons I love history. To try and better understand where we are and how we got here. The world is a vibrant and rapidly changing place and knowing it’s history can help us better know how the world and people work and also what we can do to make it a better place. I hope you enjoyed learning about the history of money like I did!