The History of Currency
The earliest form of currency dates back to ancient Babylonia times around 4,000 BCE. Clay tablets were used to represent goods or services being traded whereas other tablets represented a receipt of deposit or letters of credit. The term, ‘cleaning of slates,’ dates back to this period and was used when the king of the time would declare all debts null and void. The actual slates would either be smashed or dissolved in water.
Up until the first world currency originating in Greek times, people operated mainly on a barter system. If you were a fisherman you could trade some of your fish in return for some vegetables from a farmer. The problem arose, however, when the farmer didn’t like fish – what was the fisherman to do? He would have to find someone else that wanted his fish in return for something the farmer would be interested in. The barter system works, however it was eventually deemed slow and inefficient.
Around 800 BCE, the Greeks developed the first money system that was eventually accepted around the world. Greek money has been found in China, India and northern Europe! The main currency in Greece was a silver coin called the Athenian drachma and during the time of Alexander the Great (300 BCE) it eventually became the monetary standard in all of Asia. Even as Greece declined and Rome came to power, the value of the drachma held its ground.
Paying the Greeks a massive complement, the Romans fashioned their own money, called the denarius, after the drachma to the exact specification. In an effort to expand from the Greek monetary system, the Romans created a gold coin for the army and emperors, a silver coin for international trades’ people and a copper coin for poor people. Eventually, however, the Roman currency system was eroded by removing the valuable precious metal and replacing it with a worthless base metal. After years of reducing the gold and silver content, the currency eventually became valueless and in 215 AD India stopped accepting it as a mode of payment. Soon after, the rest of the world followed.
In 325, as Rome was in serious decline, Constantine created a new monetary system which quickly became the world currency. The coins, called ‘bezants,’ have been found as far away as Scandinavia and Sri Lanka and as Western Europe fell into the Dark Ages, Constantine’s money was the only currency traded. By 1050 the bezant eventually lost its popularity and around 1204 the Byzantine Empire lost monetary supremacy.
During the 7th-12th centuries, the Islamic dinar also had high levels of circulation and remained quite stable. It wasn’t until paper money was introduced that the Islamic monetary system went into serious decline. Due to the ease of printing money, nothing stopped authorities from printing more of it with nothing to back it.
Throughout history, there was one constant that caused the demise of each currency. They all went into decline after the authorities removed the silver or gold and replaced it with a worthless base metal or paper. The devaluation of money has even been seen in today’s world currencies. In 1971, when America went off the gold standard the value of the US Dollar started to go down – it has actually depreciated by over 90% since the removal of the precious metal. If history is to repeat itself, American monetary supremacy may be on its way out!
Charles Purdy is a Director at Smart Currency Exchange Limited – the international payment and currency specialists www.SmartCurrencyExchange.com