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A History of Money, Part 1

By Edited Jan 14, 2016 1 3

In ancient times, agricultural crops and livestock were among the oldest forms of money used by early cultures. Cattle and barley were the most common forms of money in ancient Mesopotamia, for example. The word "pecuniary" is derived from the Latin pecuniarius from pecu, meaning both "cattle" and "money." And the Germanic Rune "Fehu," which represents money or mobile property, literally means "cattle" and depicts the horns of a bull or ox.

To avoid the difficulty of bringing large quantities of harvested crops and livestock to every negotiation, the earliest civilizations in Mesopotamia developed the use of clay tokens crafted in the shape of various commodities. The tokens could then be easily exchanged while making agreements, prior to the delivery of the actual goods. Not surprisingly, the use of tokens immediately gave rise to the practice of counterfeiting. This was counteracted by sealing the tokens in a clay pot and stamping it with the commodity owner's personal seal. The process was later simplified by dispensing with the tokens and using only the symbols themselves, stamped on clay tablets. This practice was the precursor to the invention of writing, as well as the precursor to more sophisticated forms of money. 

As communities grew into cities and hundreds of different types of goods and services became available, choosing a single form of money became essential to avoid having to deal with a cumbersome number of different exchange rates. Harvested grains became a preferred form of money, serving as both a medium of exchange and a unit of account. Granaries were arguably the precursors to banks and insurance companies: people in a community pooled risk by contributing a share of their harvested grain to the central granary, ensuring that if one farmer's crops failed he would not be forced to starve. But because physical grain was not a satisfactory store of value over time, the ancient Mesopotamians eventually began minting metal coins to designate a given amount of barley. The first known example of this is probably the ancient Akkadian shekel coins. With the creation of coinage, a form of money that also served as a store of value now existed, leading to the rise of money-lending and banking.

Herorodotus gave one of the earliest accounts of the use of coins in Lydia, which he claimed the Lydians had invented, along with retail-stores. The use of coinage did not immediately catch on elsewhere. The Athenians had cast iron spits or elongated nails for use as money before the use of coins spread from Lydia, and Pliny the Elder reported that soldiers in ancient Rome were paid with sacks of salt. (The Latin word salarium is the root of the modern word "salary.") However, after coins made of electrum were manufactured in Lydia, the use of precious metals for coinage became very popular, and the practice spread throughout the Greek, Persian, Macedonian and Roman Empires. 

As soon as precious metals began to be used, people began shaving off the edges of the coins before they spent them, in order to accumulate precious metals for themselves while still spending the debased coin at face-value. The Roman authorities began to mint coins with grooved edges to discourage this practice. Another notable incident involving the debasing of a currency took place around 405 BC, when Spartans captured the Laurion silver mines and cut off the supply of silver to the Athens. The government in Athens issued a bronze coin coated with silver as a replacement, and the Athenians proceeded to hoard the coins with higher silver content, leaving only the inferior bronze-filled coins in circulation. This process, known as "Gresham's Law," has been amply illustrated throughout history, and continues into modern times. 

When the Gauls laid siege to Rome in 390BC, a large force of them began climbing the cliffs of Capitoline Hill to launch a surprise attack by night. However, the Romans were alerted to the enemy's presence by the cries of geese, and the invasion was repelled. The geese were sacred to the goddess Juno, the Queen of the heavens, whose many attributes included being a goddess of warning. The grateful Romans therefore built a shrine to Juno-Moneta in her honor. After the Roman mint was built next to Juno-Moneta's shrine, many of the coins they minted featured her likeness. Eventually she became associated with money and wealth, after which "Moneta" became a general Latin term for mint or a place where money was kept. The word found its way into other Western languages over time, and this is the origin of the modern word "money." 

This history of money will continue in Part II, featuring the tumultuous episodes of Roman hyperinflation that took place up until the collapse of the Empire.

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Comments

Dec 15, 2011 2:14am
AuroraWindsor
Nice explanation of the origin of the word money.
Dec 15, 2011 5:09pm
KnightOfCoins
Thank you!
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