The Evolution of Money

Money has been around for thousands of years and traces its beginnings to conch shells and grains of wheat and barley until its evolution to the various types of currency that we now know today. The earliest forms of money were anything that had any value—precious metals, conch shells, beads, stones, and even livestock such a sheeps, cows and goats. However, money as it is known today is essentially an abstraction which represents a certain value of gold or silver.

Coinage reached widespread use in the 6th century B.C. with silver the most common metal used to make coins. The use of gold coins started in Asia Minor and quickly spread to other parts of the world. Representative money evolved from commodity money, and was first issued by banks to symbolize the actual value backed by redeemable gold or silver and other commodity of value. Types of representative money include paper receipts issued by warehouses, tallies, trade bills of exchange and bank notes. The evolution of money also gave rise to fiat money, which was issued during times of crisis by governments and later evolved into a form of currency that is not backed by a commodity or convertible into one.

Today the value of money is backed by public perception of the strength of the economy and the expected prosperity of the nation. This stems from the belief that the greater the nation, the greater is its ability to produce goods and services, therefore, the greater the public trust on the soundness of the economy.