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A Presentation on Origination of Money

Assigned By: Mr. Umair Yasir

Presented By: Salman Waheed (MAF-10-18)

Department of Commerce Bahauddin Zakariya University, Multan


Money is any object or record that is generally accepted as payment for goods and services and repayment of debts in a given country or socio-economic context. Etymology: The word "money" is believed to originate from a temple of Hera, located on Capitoline, one of Rome's seven hills. In the ancient world Hera was often associated with money. The temple of Juno Moneta at Rome was the place where the mint of Ancient Rome was located. The name "Juno" may derive from the Etruscan goddess Uni (which means "the one", "unique", "unit", "union", "united") and "Moneta" either from the Latin word "monere" (remind, warn, or instruct) or the Greek word "moneres" (alone, unique). In the Western world, a prevalent term for coin-money has been specie, stemming from Latin in specie, meaning 'in kind. Functions of Money Medium of exchange

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Store of value
Unit of account Standard deferred payment Measure of value


The history of money spans thousands of years. Numismatics is the scientific study of money and its history in all its varied forms. Many items have been used as commodity money such as natural scarce. precious metals, cowry shells, barley, beards etc., as well as many other things that are thought of as having value. Modern money (and most ancient money) is essentially a token in other words, an abstraction. Paper currency is perhaps the most common type of physical money today. However, objects of gold or silver present many of money's essential properties.


Contrary to popular conception, there is no evidence of a society or economy that relied primarily on barter. Instead, non-monetary societies operated largely along the principles of gift economics and debt. When barter did in fact occur, it was usually between either complete strangers or would-be enemies. Timeline: 9000-6000 BC: Domestication of cattle and cultivation of crops. Barter: Exchange of goods. Gift economies: Valuable goods and services are regularly given without any explicit agreement for immediate or future rewards. Debt: For insurance, social status or other benefit.



According to David Graeber the concept that money was invented to replace barter is wrong. Shekel: was an ancient unit of both weight and currency. It was first used in Mesopotamia around 3000 BC to define a specific weight of barley and equivalent amounts of materials such as silver, bronze and copper. The use of a single unit to define both mass and currency was a similar concept to the British pound, which was originally defined as a one pound mass of silver. Timeline: 3100 BC: Writing invented in Mesopotamia 3000-2000 BC: Development of Banking in Mesopotamia 2250-2150 BC: Cappadocian rulers guarantee quality of silver ingots 1792-1750 BC: Reign of Hammurabi in Babylon

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Bartering has several problems Need for intermediate commodity which has following characteristics


Non perishable
Have demand throughout year (like gold, silver) For this purpose different regions used different commodities

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Mesopotamia use shekel.

Ancient China, Africa, and India used cowry shells. Japan's feudal system was based on the koku a unit of rice.

Wherever trade is common, barter systems usually lead quite rapidly to several key goods being imbued with monetary properties


When a nation is without a currency it commonly adopts a foreign currency. In prisons where conventional money is prohibited, it is quite common for cigarettes to take on a monetary quality, and throughout history, gold has taken on this unofficial monetary function. Timeline: 1200 BC: Cowries used as money in China 1000-500 BC: Tool currencies adopted in China

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In fourth millennium BC when the Egyptians used gold bars of a set weight as a medium of exchange, as had been done earlier in Mesopotamia with silver bars.
The first known ruler who officially set standards of weight and money was Pheidon. The first stamped money (having the mark of some authority in the form of a picture or words) can be seen in the Bibliothque Nationale of Paris. It is an electrum stater of a turtle coin, coined at Aegina island. This remarkable coin dates about 700 BC. Electrum coins were also introduced about 650 BC in Lydia. Discovery of touchstone.


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Timeline: 687 BC: Crude "coins" invented in Lydia (according to Herodotus) 640-630 BC: The first true coins produced in Lydia 600-300 BC: Round base metal coins invented in China 600-570 BC: Use of coins spreads rapidly from Lydia to Greece 550 BC: Lydians produce separate gold and silver coins 336-323 BC: Reign of Alexander the Great 118 BC: Leather money issued in China Concept of standard coinage. Gold and silver were used as the most common form of money throughout history. Metal based coins had the advantage of carrying their value within the coins themselves.


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Disadvantages: Manipulation by recycling coins Difference in value of silver and gold coins Gold leave Asia and silver leave Europe Stability: Stability came into the system with national Banks guaranteeing to change money into gold at a promised rate; it did, however, not come easily. The Bank of England risked a national financial catastrophe in the 1730s when customers demanded their money be changed into gold in a moment of crisis. Eventually London's merchants saved the bank and the nation with financial guarantees. Another step in the evolution of money was the change from a coin being a unit of weight to being a unit of value. a distinction could be made between its commodity value and its specie value. The difference is these values is seignior age.


The acceptance of symbolic forms of money opened up vast new realms for human creativity Bills of exchange became prevalent with the expansion of European trade toward the end of the Middle Ages In the 12th Century, the English monarchy introduced an early version of the bill of exchange in the form of a notched piece of wood known as a tally stick. Tallies originally came into use at a time when paper was rare and costly, but their use persisted until the early 19th Century, even after paper forms of money had become prevalent

At same time Gold smith bankers and Demand deposits introduced.


Paper money or banknotes were first used in China during the Song Dynasty. These banknotes, known as "jiaozi", evolved from promissory notes that had been used since the 7th century. In China a severe shortage of copper for making coins causes the emperor to issue paper money notes. The history of money and banking are inseparably interlinked Banknotes were first issued in Europe by Stockholms Banco in 1661, and were again also used alongside coins.

The issuance of paper money was initiated by commercial banks. Inspired by the success of the London goldsmiths, some of which became the forerunners of great English banks, banks began issuing paper notes quite properly termed banknotes which circulated in the same way that government issued currency circulates today


In England this practice continued up to 1694 Scottish banks continued issuing notes until 1850 In USA, this practice continued through the 19th Century, where at one time there were more than 5000 different types of bank notes issued by various commercial banks in America.

These banknotes were a form of representative money which could be converted into gold or silver by application at the bank. Since banks issued notes far in excess of the gold and silver they kept on deposit, sudden loss of public confidence in a bank could precipitate mass redemption of banknotes and result in bankruptcy.
The use of bank notes issued by private commercial banks as legal tender has gradually been replaced by the issuance of bank notes authorized and controlled by national governments.


The use of bank notes issued by private commercial banks as legal tender has gradually been replaced by the issuance of bank notes authorized and controlled by national governments.

The Bank of England was granted sole rights to issue banknotes in England after 1694
In the USA, the Federal Reserve Bank was granted similar rights after its establishment in 1913 Timeline: 806-821 AD: Reign of Emperor Hien Tsung and the development of paper money 960 AD: Issues of Chinese paper money start to become regular 1236 AD: First Mongol issues of paper money 1260AD: Kublai Khan's first issue of paper money 1275-1292 AD: Marco Polo lives in China


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The term gold standard is often erroneously thought to refer to a currency where notes were fully backed by and redeemable in an equivalent amount of gold.

The British pound was the strongest, most stable currency of the 19th Century and often considered the closest equivalent to pure gold, yet at the height of the gold standard there was only sufficient gold in the British treasury to redeem a small fraction of the currency then in circulation In 1880, US government gold stock was equivalent in value to only 16% of currency and demand deposits in commercial banks. By 1970, it was about 0.5%.
The gold standard was only a system for exchange of value between national currencies, never an agreement to redeem all paper notes for gold. A gold reserve is the gold held by a central bank or nation intended as a store of value and as a guarantee to redeem promises to pay depositors, note holders (e.g., paper money), or trading peers, or to secure a currency.


AT DECEMBER 2010 & MAY 2011 Rank Country/Organi Gold (tones) zation U.S.A India Pakistan 8,133.5 557.7 116.1 Gold share of national forex reserve % 76.6% 09.6% 07.0%

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Rank 1

Name Indian Household

Type Household

Gold (tones) 18,000


Fiat money refers to money that is not backed by reserves of another commodity. Fiat money originated in 11th century China, and its use became widespread during the Yuan and Ming dynasties. The Nixon Shock of 1971 ended the direct convertibility of the United States dollar to gold. Since then all reserve currencies have been fiat currencies, including the dollar and the euro.

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The term fiat money has been defined variously as: any money declared by a government to be legal tender state-issued money which is neither convertible by law to any other thing, nor fixed in value in terms of any objective standard. money without intrinsic value. A feature of all fiat money is its acceptability to the government for payment of taxes and charges, or purchase of government debt, such as bonds, notes, and bills. Bretton Woods Loss of backing Monetary economics