6 Questions About the History of Money and Banking Answered (2024)

FAQs

What is the history behind money? ›

The barter system likely originated 6,000 years ago. The first coin we know of is from the 7th century BC and the first paper money came into the world around 1020 AD. Eventually, medieval banking systems gave way to the gold standard, which in turn gave way to modern currency.

The English word money first appeared in the 14th century. It was derived from the Latin word moneta, a name given to the Roman goddess Juno, at or near whose temple the Romans first began minting coins around 300 BCE. (Read Milton Friedman's Britannica entry on money.)

There are more than five stages of money's evolution. Still, five notable stages include: commodity money (i.e., grains, livestock), metallic money (i.e., coins), paper money, credit and plastic forms of currency, and digital money.

The first institutions that took on the storage of money and valuables, were the temples. For example, the inhabitants of ancient Athens kept their savings in the temples of the Acropolis and the medieval Europeans often save money in the monasteries. The word “Bank” is of Italian origin.

These issues with commodities led people to create coins out of precious metals to use as money. No one knows for sure who first invented such money, but historians believe metal objects were first used as money as early as 5,000 B.C. Around 700 B.C., the Lydians became the first Western culture to make coins.

Historians generally agree that the Lydians were the first to make coins. However, in recent years, Chinese archaeologists have uncovered evidence of a coin production mint located in China's Henan Province thought to date to 640 B.C. In 600 B.C., Lydia began minting coins widely used for trading.

Congress acted on Hamilton's recommendations, with the Coinage Act of 1792 that established the dollar as the basic unit of account for the United States. The United States Mint was created by Congress following the passing of the Coinage Act. It was primarily tasked with producing and circulating coinage.

The first known banknote was first developed in China during the Tang and Song dynasties, starting in the 7th century. Its roots were in merchant receipts of deposit during the Tang dynasty (618–907), as merchants and wholesalers desired to avoid the heavy bulk of copper coinage in large commercial transactions.

Historians generally agree that a system of bartering was likely used before this time. Bartering involves the direct trade of goods and services. For instance, a farmer may exchange a bushel of wheat for a pair of shoes from a shoemaker.

The basic truth is that we can do five things with our money: (1) save it; (2) spend it; (3) give it away; (4) pay taxes; and (5) pay down debt. Shake it up any way you want, and chances are it will end up in one of those buckets. It is not as sexy as talking about a hedge fund in an offshore trust, but it is truth.

What are the 4 things of money? ›

Money serves four basic functions: it is a unit of account, it's a store of value, it is a medium of exchange and finally, it is a standard of deferred payment.

Human beings need money to pay for all the things that make your life possible, such as shelter, food, healthcare bills, and a good education. You don't necessarily need to be Bill Gates or have a lot of money to pay for these things, but you will need some money until the day you die.

A stack of currency one mile high would contain more than 14.5 million banknotes. It is estimated that between one-half to two-thirds of the value of all U.S. currency in circulation is outside of the U.S. In 1934, the $100,000 Gold Certificate became the highest denomination ever issued.