Money, in itself, is nothing – it is a symbol. It can be a shell, a metal coin, or a piece of paper with a historic image on it. The value that people place on the symbol has nothing to do with the physical value of money. Money derives its value by being a medium of exchange, a unit of measurement and a storehouse for wealth.

1. The Evolution of Money
by Patrick White

2. • Money, in itself, is nothing – it is a symbol.
• It can be a shell, a metal coin, or a piece of
paper with a historic image on it.
• The value that people place on the symbol has
nothing to do with the physical value of money.
• Money derives its value by being a medium of
exchange, a unit of measurement and a
storehouse for wealth.
• Money
– allows people to trade goods and services indirectly
– understand the price of goods (prices written in Euro
and cents correspond with an amount in your wallet)
– gives us a way to save for larger purchases in the
future.
What is money?

3. The evolution of money
 Stages in development of money
1. Barter trade
2. Commodity value
3. Representative money
4. Standardized Coinage
5. Paper Money
6. Banking
7. Credit Money
8. Electronic Money
9. Back to barter

4. Stage 1 – Barter Trade
 At the beginning, there was no money.
 Barter became the most primitive form of
reciprocal exchange
 People engaged in barter, the exchange of one
product for another product, without a
definition of equivalent value – based on needs
 Barter involves only two people; each has
something the other wants
 “Hungry weaver is searching for a naked
farmer” – exchange of feed for cloth

5. Stage 1 – Barter Trade (before 9,000 BC)
 This elementary form of trade is still found
today among people of primitive economies.
 Barter is also being revived again in the form
of exchange of services or goods.
 Limitations
 Coincidence of wants
 Perishability
 Divisability
 Inefficient

6.  Commodities then came to have a set
value accepted by all to allow
exchange for other products and used
to assess their value.
 Cattle was one of the mostly used and
had the advantages of moving for
itself, reproducing and rendering
services.
 Salt was another commodity money,
difficult to obtain, mainly in the
interior part of continents, also used as
a preservative for food.
 Commodities having a real value
Stage 2 - Commodity value (9,000 – 6,000 BC)

7.  Many cultures around the world eventually developed
the use of representative money.
 Ancient China, Africa, and India used cowry shells.
 Pepper – Europe
 Stones – Pacific Islands (in Micronesia, stone money is still used)
 Coils of red feathers – Pacific Islands
 Dog’s teeth – New Guiney
 Iron Nails – Scotland
 Whales teeth - Fiji
Stage 3 - Representative Money (assumed value)

8. Stage 4 - Token Money
 From approximately 1,000 BC,
the Zhou dynasty in China developed
token money in the shape
of miniature objects such as knives
and spades made of bronze
 The replicas’ shapes were simplified
to circles because no one wanted to
put a sharp tool in their pocket.
 These were the first coins.

9.  The use of silver as proto-money developed
in Mesopotamia with silver bars
 The use of gold has been traced back to the
fourth millennium BC when
the Egyptians used gold bars of a set weight
as a medium of exchange.
 The shekel was an ancient unit used
in Mesopotamia around 3,000 BC to define
both a specific weight of barley and
equivalent amounts of materials such as
silver, bronze and copper.
Stage 5 - Standardised value

10.  When metal was traded, it required an
assessment of weight and purity to evaluate its
value at each transaction.
 The touchstone was developed which allows
the estimate the amount of gold in an alloy,
which is then multiplied by the weight to find
the quantity of gold in the lump of metal.
 Later, metal money gained standardised form
and weight, receiving a mark indicating its
value, indicating also the person responsible
issuing it.
Stage 5 - Standardised value

11. Stage 6 - Standardised Money - coinage
 The first manufactured coins seems to have
taken place separately in India, China, and
in cities around the Aegean sea between
700 and 500 BC
 They were small metal pieces, with fixed
weight and value, and bearing an official
seal, which is the mark of who has minted
them and also a guaranty of their value.
 At the beginning, coin pieces were made by
hand in a very coarse way, had irregular
edges, and were not absolutely equal to
one another as today’s ones.

12. Stage 6 – Standardised money - Coinage
 The Aegean coins were stamped (heated and
hammered with insignia)
 the Indian coins (from the Ganges river valley)
were punched metal disks
 Chinese coins were cast bronze with holes in
the center that they could be strung together.
 The different forms and metallurgical process
implies a separate development in different
parts of the world

13. Stage 6 – Token money - Coinage
 For many centuries, countries minted their most highly
valued coins in gold, using silver and copper for lesser value
coins.
 This system was kept up to the end of the last century,
when cupronickel, and later other metallic alloys, became
used, and coins came to circulate for their token value, that
is to say their face value is independent from their metal
value.

14. Stage 6 – Token money - Paper money
 Paper notes date to the 7th century Tang
Dynasty ion China.
 In order to carry large amounts of cash,
people hefted around an ever-increasing
number of these coins – not the easiest, or
safest, thing to do over long distances.
 In an attempt to lighten their load,
merchants began to deposit these coins with
each other and were issued paper certificates
for the coin’s value.
 With the appearance of paper money,
minting of metal coins was restricted to lower
values, necessary as change.

15. Organisation of money - Greek Banking
 Banking activities in Greece were more varied and
sophisticated than in any previous society.
 Private entrepreneurs, as well as temples and public
bodies, undertook financial transactions.
 They took deposits, made loans, changed money from
one currency to another and tested coins for weight and
purity. They even engaged in book transactions.
 Moneylenders would accept payment in one Greek city
and arrange for credit in another, avoiding the need for
the customer to transport or transfer large numbers of
coins.

16. Organisation of money - Roman Banking
 Rome, with its genius for administration, adopted and
regularised the banking practices of Greece.
 By the 2nd century AD, a debt could officially be
discharged by paying the appropriate sum into a bank,
and public notaries were appointed to register such
transactions.
 The collapse of trade after the fall of the Roman empire
made bankers less necessary than before, and their
demise was hastened by the hostility of the Christian
church to the charging of interest.

17. Organisation of money - Crusades
 In the 12th century, the need to transfer large sums of
money to finance the Crusades stimulated the re-
emergence of banking in western Europe.
 In 1162, Henry II of England levied a tax to support the
crusades.
 The Templars and Hospitallers acted as Henry's bankers
in the Holy Land.
 The Templars' practice was to take in local currency, for
which a promissory note would be given that would be
good at any of their castles across Europe, allowing
movement of money without the usual risk of robbery
while traveling.

18. Money during the middle ages
 Many of the units of currency in use today derive
from the Roman origins, and more specifically from
versions of the Roman coins minted during the
Middle Ages.
 The stable currency of the Byzantine empire was a
gold coin, the solidus, linked in later history with the
various forms of European shilling.
 From about 690 AD it was joined as a hard currency
by another gold coin, the dinar (from the
Latin denarius), first minted by the caliph Abd-al-
Malik in Damascus.
 In the following century the Frankish king Pepin III
introduces a silver denarius, or penny, which became
the standard medieval coin in western Europe.

19.  In the 7th century AD, the kings of the
Carolingian dynasty standardized the penny,
decreeing that 240 are to be struck from a
pound of silver.
 It is subsequently established that twelve
silver pennies were to be considered the
equivalent of the Byzantine gold solidus or
shilling.
 Thus there evolves a monetary scale of
1:12:20 (penny:shilling:pound) which lasted
in much of Europe until the decimalizing
innovations of the French Revolution, and in
Britain until decimalisation in 1971.
Pounds, shillings and pence
Silver penny Queen Elizabeth I
Carolingian penny
Gold solidus

20. Keeping a tally of your money
 When currency was often unavailable (and few people
were literate), the tally stick became increasingly popular
in Europe to record payments.
 In this early version of financial record keeping, notches
were made on a wooden stick to indicate the amount lent
— and owed.
 The sticks were then split down the middle; the creditor
kept one half and the debtor the other.
 When a payment was made, the sticks were paired up, and
the payment was marked on both pieces of the stick.
 Tally sticks were nearly impossible to counterfeit, as the
shape, size and grain of the wooden halves had to match
up perfectly.

21.  Tally sticks were used in much of Europe, but probably
nowhere as extensively as in England.
 For more than 700 years, tally sticks were used to collect
taxes from local citizens, until the system was finally
abandoned in 1826.
 Eight years later, when the British parliament finally decided
to get rid of the thousands of leftover tally sticks being kept
in storage, they decided to burn them in an underground
furnace that heated the House of Lords
 This resulted in a massive fire that destroyed most of the
building — the worst fire to hit London since the Great Fire
of 1666.
Keeping a tally of your money

22. Bank notes issued by Private banks
 Inspired by the success of the London
goldsmiths (some of which became the
forerunners of great English banks), the
Swedish banks began issuing paper bank
notes in the 17th century.
 These banknotes were a form of
representative money which could be
converted into gold or silver by request at
the bank.
 In England this practice continued up to
1694.
 Scottish banks continued issuing notes until
1850.

23.  The use of private bank notes issued by
commercial banks as legal tender has
gradually been replaced by bank notes
authorized and controlled by national
governments.
 The Bank of England was granted sole rights to
issue banknotes in England after 1694.
 Until recently, these government-authorized
currencies were forms of representative
money, since they were partially backed by
gold or silver and were theoretically
convertible into gold or silver.
 Britain ended in gold standard in 1931
Bank notes issued by Government banks

24. Payment by Cheque
 As coins and notes ceased to be convertible into
precious metal, money became more dematerialized
and assumed some abstract forms.
 One of these forms is the cheque that is still used by
many people today as it is simple and relatively secure.
In 2018, Cheques will be phased out in Britain.

25. Borrowing money on Credit
 Money is borrowed and an interest rate is
charged to cover the risks of the borrowing
and a profit margin
 IOUs, Promissory Notes, Overdraft
 Mortgages
 Credit cards

26. Change in the value of money - Inflation
 Inflation is a sustained increase in the
general price level of goods and services in
an economy over a period of time
 1 Euro =
 14,945 Indonesia Rupiah
 25,311 Vietnamese Dong
 33,403 Iranian Rial

27. Zero value money
 A zero rupee note is an imitation banknote
issued in India as a means of helping to fight
systemic political corruption.
 The notes are "paid" in protest by angry
citizens to government functionaries who ask
for bribes in return for services which are
supposed to be free.

28. Electronic money - bitcoins
 Bitcoin is a form of digital currency, created and
held electronically.
 Only 21 million bitcoins can ever be created
 Bitcoins can be used to buy things electronically
 No one controls it. It is decentralised and
anonymous.
 No transfer fees
 Great for the black economy!

29. Purchasing power parity – adjusted for differences in the cost of
living in different countries – what we can afford to buy
Wealth – how do we compare

30. Modern barter – back to the future
 Modern barter - Each member offers a range of
goods and services in a directory which is
circulated to every member.
 This directory also contains a list of the goods
and services each member wants to receive.
 Individuals then decide what they want to trade,
who they want to trade with and how much
trading they wish to do.
 The price is agreed between the seller and buyer
(sometimes the price is in the directory).
 No money is exchanged

31. Modern barter – Favabank, Totnes, UK
 Favabank is modernising the age old idea of
barter, exchanging items and time as favours
between members of your community.
 The function is to enable people to trade
goods and services in a locality without using
the national currency.
 All barter exchanges are tracked using a
virtual currency called a 'Fava', to create a
'gift economy' to trade skills, time and
everyday items without using cash

32. Modern barter – SEL money in Crest, Tain
 SEL means "Système d'Échange Local"
 It is an association whose members
exchange them the services, knowledge
and property.
 The principle of trade is based on the time:
1 hour = 60 grains.
 For trading objects, the value assessment is
decided by the "sélistes".
 The question may be: how long am I willing
to work to buy a bicycle, a small table or a
basket of vegetables.

35. Brexit - value of the pound
Pound Euro exchange during the last week

36. Brexit - value of the pound
Pound Euro exchange during the last month
Greed
Panic