The History Of Paper Money
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Loading ...It is well known that paper currency or paper money was first created by the Chinese,who also incidentally
invented paper around 100 AD. The development of paper money in its earliest form can be traced right back to the 7th century. In the year 812, as a temporary solution to massive copper shortages, a Chinese Emperor started issuing paper money as a form of currency to aid trade, and this caught on so well that by the year 970 it was considered as a dominating type of currency in ancient China.
Stag skins, bark, or parchments marked with the imperial seal as “bills of payment” were used as a form of paper money during this time in history, and the penalty for those caught counterfeiting was death.
Before Marco Polo came back from his many voyages to China, dated between 1275 to 1292, the people of Europe initially doubted that the Chinese effectively used paper for as a form of currency, and paper money only began circulating in Europe 300 years later. However, the use of paper money ceased in China in the year 1455.
Paper currency had a lot of problems in gaining acceptance in Europe, although leather money was temporarily used around the year 1100, as a substitute to silver when the precious metal started becoming scarce. The history of paper currency in Europe started as emergency money substituting regular money such as coins. The first emergency paper bills are dated back to the year 1483 and the first bank notes were printed in the 17th century.
In 1161, a Swedish bank starting issuing paper currency but the money quickly lost its value when the bank started flooding the market with it. These first bank notes carried a guarantee that it could be traded at any time for coinage. Interestingly the name of this bank note was ‘cash’, a term that we still use today to describe paper money. The oldest existing bank note in the world is the 1000 ‘cash’ note of the Ming dynasty.
The usage of paper currency only caught on in Europe in the early 1700’s, when the French Government officially began issuing paper currency. The idea came from the paper receipts goldsmiths often gave their customer as a proof of payment and these receipts can be exchanged for gold as and when needed. This act was a milestone and was so significant that money was seen as a representation of valued commodity, as its exchangeable for silver and gold anywhere. A piece of paper currency is as good as a guarantee by the issuing institution, either the government or the bank, that would ensure the holder of the bill receive a predetermined amount of silver or gold from its reserves when it is produced. This is where the system in which money was backed by gold originated from, with the exception of times of war or national emergencies when paper money was supported by actual supplies of precious metal. This practice, however, ended in 1971.
Today, paper currency can be exchanged for almost any form of goods or services, in its value in return. This monetary system has proven so effective for so long that it may take a very long time before the currently emerging electronic money, as we know it today, will be commonly used as an alternative currency to paper money.
Tags: Bills of Payment, Cash, electronic money, History of Paper Money, monetary system, paper bills, paper currency, Paper Money
November 17th, 2008 at 4:14 pm
Yes, I feel that electronic money such as credit cards still have a long way to go before it can be accepted on a global basis, its not accessible to the poor or the lower income levels. Paper money is definitely more easily accessible for sure, and theres just so much of it that a complete transition, although not impossible, is very unlikely to happen. Here’s to our dollar bills!