History of microfinance: small loans, big revolution
Microfinance involves supplying financial services and products to disadvantaged populations...
17/08/2017
From bartering to modern money
Historians consider that money arises as a consequence of the division of labor within a society. Of course, the first form of exchange was bartering – a livestock farmer trading an animal for tools produced by a blacksmith, for example.
However, this system carried with it several problems:
- It is not easy to carry out, since a cow is hard to split into pieces for smaller trades
- It is not always possible, for example when one person is not interested in the items offered in exchange for their own goods
Money solves both of these problems:
- For each tradeable “object” there is a corresponding amount of money
- Money can be split into fractions (just as Euros and Dollars are divided into cents today)
The etymological legacy of bartering
Livestock long served as the most important source of wealth, serving as the basis for exchange and asset value. Today, we can still see its impact on our vocabulary. Pecus, the Latin word for cattle, provides the root for the modern “pecuniary”. Cow heads were also used to assess property value (or, in some countries, a young bride’s dowry!), which is why caput, Latin for head, gave us the word “capital”.
From the first money to metal coins
Easily storable objects that could take on an exchange value served as early forms of money. These included directly useable goods like salt, which was used to pay Roman legionaries and gave us the word “salary”, as well as symbolic objects like seashells, such as the cowries used in some parts of Africa.
Metal coins came along later. First in Anatolia around 650 B.C., and then in Ancient Greece, where each city state used coins stamped with their respective effigies. The Romans expanded the use of coins across their entire empire.
The 3rd century B.C. saw the creation of the Capitol’s first mint, located near the Temple of Juno, the goddess of warning (her geese warned of an attack by the Gauls) also known as “Moneta” in Latin. This is where we get our word for money!
Money: a symbol of power
The denarius (originally worth ten “asses”, a form of coin) is another Roman invention. Appearing at the end of the 3rd century B.C. and was the first coin minted for a specific value (an “X” for 10 in Roman numerals).
The Roman monetary system gradually collapsed as the empire declined. So in the 4th century A.D., Constantine I created a new coin minted in gold: the solidus (which later became the “sol” and then the “sou” in France).
Over the centuries, each kingdom or empire facilitated trade and unified its territory by creating its own money – quite often stamped with the king or emperor’s portrait or motto. Money then came to represent a nation’s economic or military power, hence the strict suppression of counterfeit money.
The first international currency
The first true international currency did not appear until 1750, when Empress Maria Theresa Habsburg minted the Thaler with her image. The currency was quickly adopted in the Spanish and English colonies in America. The modern Dollar is a simple mispronunciation of the Thaler!
From value to confidence
Metal money was made of precious metals and carried a set value determined by its weight.
Faced with a shortage of metal money, French colonists in Canada invented fiduciary money in 1685. This paper money (printed on a playing card marked with the Governor’s seal and signature) had no intrinsic value. Its worth was based on the confidence of its bearers.
In France, paper money first emerged in the 18th century, with banknotes or Assignats. After the French Revolution, the French government created independent mints. However, the Banque de France was created in 1800 and later received exclusive privilege to issue money in Paris in 1803. In 1848, this privilege was extended to cover the entire country.