History of money

The history of money concerns the development of means of carrying out transactions involving a medium of exchange. Money is any clearly identifiable object of value that is generally accepted as payment for goods and services and repayment of debts within a market, or which is legal tender within a country.

Due to the complexities of ancient history (ancient civilizations developing at different paces and not keeping accurate records), and because the true origins of economic systems precede written history, it is impossible to trace the true origin of the invention of money and difficult to trace the transition from a "barter system" to a "monetary system".

In the ancient histories[1], we find evidence that money has taken two main forms divided into the broad categories of money of account (debits and credits on ledgers) and money of exchange (tangible media of exchange made from wood, paper, bamboo, metal, etc.), and it is debated which was created first.

We also find evidence that many things were used on occasion in ancient markets that could be described as a medium of exchange. These included livestock and grain – things directly useful in themselves – but also merely attractive items such as cowrie shells or beads were exchanged for more useful commodities. However, such exchanges could be described as barter[dubious – discuss], and the common bartering of a particular commodity (especially when the commodity items are not fungible) does not technically make that commodity "money" or a "commodity money" like the shekel – which was both a coin representing a specific weight of barley, and the weight of that sack of barley.[2]

Regarding money of account, we find evidence of what can reasonably be described as the invention of a very primitive ledger in the form of the tally stick – the oldest of which is dated to the Aurignacian, about 30,000 years ago. While it may not be reasonable to conclude that the use of the most ancient tally sticks found to keep accounting records in the monetary system sense of the term[clarification needed][there is no main verb in the clause starting with "that"], it does however show that "accounting" – keeping a written record of things counted – is far more ancient than many people assume. David Graeber proposes that money as a unit of account was invented when the unquantifiable obligation "I owe you one" transformed into the quantifiable notion of "I owe you one unit of something". In this view, money emerged first as credit and only later took the form of a medium of exchange.[3][4]

Regarding money of exchange, the use of representative money historically pre-dates the invention of coinage. In the ancient empires of Egypt, Babylon, India and China, the temples and palaces often had commodity warehouses which issued certificates of deposit as evidence of a claim upon a portion of the goods stored in the warehouses, a form of "representative money".[5]

While not the oldest form of "money of exchange", we find various metals, both common and precious metals, from which early coins were made, were used in both barter and monetary systems. It is the use of these substances where we find the transition from the barter system to the monetary systems most easily illustrated. While not among the more ancient examples, the Romans' use of bronze illustrates this distinction clearly in the transition of the use of "aes rude" (rough bronze - which is still properly the barter system - the value of the bronze was related to its use in blacksmithing), into bars that had a 5 pound pre-measured weight to make barter easier, called "aes signatum" (signed bronze - which is still properly the barter system like the aes rude), and finally, there was a break from barter system related weights based on the usefulness of bronze in blacksmithing (heavy measures of bronze as bars), into weights measured into coinage (lighter measures of bronze), recognising the usefulness of bronze as a medium of exchange for transactions, not just for making tools. The aes grave (heavy bronze) (or As) is the start of this in Rome, but not the oldest known example. 100px-Claudius_II_coin_(colourised).png