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The Origins of Currency: its 3 stages of Evolution in History

The coin is an object that we used for several centuries as a common exchange material.

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The coin is an object that we used for several centuries as a common exchange material.

 

“Characterized by having an exchange value that allows us to generate transactions and acquire various goods, and its history has to do with the development of trade in Western societies.”

In this article we will see what are the origins of the currency and what has been its development.

Origins of the currency: from barter to metallic money

The coin is a metallic piece with an attributed value that works as a common means of exchange. As such, it has arisen along with the development of trade. Following with this definition we can see that, to be valuable as much money, the currency fulfills several requirements:

  • It is a means of change.
  • It is a deposit of purchasing value (you can buy things because their value remains in time).
  • It is a unit of account (transactions can be posted).
  • Allows deferred payment patterns (a payment can be raised today but made in the future).
  • It is accessible, portable, divisible and difficult to counterfeit.

All of the above has been developed gradually in different societies. In fact, throughout history there have been different objects used as a common means of exchange. For example, in the barter system, livestock or salt fulfilled the function that the currency now fulfills.

The difference is that this system was based on the direct exchange of one good over another. And when the currency appears, the parties interested in bartering are divided; that is, it allowed the separation of production from sale, a question that will be necessary later in the capitalist system (characterized precisely by the division of labor and specialization).

The history of currency precedes the current economic systems. This history also has to do with the conceptions about gold and silver, which are the raw material of the coin and it is about metals associated with wealth from the most classical philosophy.

This progresses to the establishment of payment systems that are different according to society and times.

For the same reason, the coin is not only the metallic object that we have described. It is also a social and political institution, and it is even an important element for the social bond.

Main stages

Monetary systems originate with the main purpose of maintaining the exchange value of the metallic object regardless of whether the political powers are modified. In other words, it is created as a way to avoid arbitrariness in decisions about said value and its use.

To summarize the origins of the currency, Viales Hurtado (2009) tells us that his story can be divided into three major stages: the heavy coin, the coin-account and the coin.

1. Heavy coin

The heavy monda has its origins in Egypt, approximately 2000 years before our era. It was shaped like a piece or bar of raw metal (an ingot) and was used to acquire some good.

2. Currency-account

Created approximately 800 years before our era as a product of the division of ingots or heavy currency. That is, it is the same coin as before, only that it has a smaller size, which makes it easier to exchange. Its predecessors were the Greek, Roman, Chinese, Indian and Middle Eastern civilizations.

3. Minted coin

Unlike the previous ones, this coin has an inscription, therefore it is known as a minted coin. This inscription has the function of indicating the exchange value of the piece, according to its weight. At first metals such as gold and silver were used in fixed amounts, and the seal functioned as a guarantee. Later these metals were mixed with others and their proportion varied according to the value that was wanted to indicate.

In addition, their coinage has not been the same for all societies and all times, but has depended on the dominant economic doctrines and their commercial development. Thus, this coin is the one that finally starts the metallic monetary system.

Paper money

After the coined currency, the next important step for the establishment of monetary systems was the creation of paper money; where, unlike the metallic coin that in itself had a value for the material with which it was made; paper money has a dissociated value from its own raw material.

It has served as a facilitator of commercial transactions and has made it possible to avoid the transfer of large currencies, which has made trade more accessible. Paper money has its origins in China in the ninth century, although its circulation in Europe and the rest of the world began until the middle of the 12th century.

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