What is money? Quite simply, it is any object that people are willing to accept as payment for goods or services. Throughout history, money has taken many different forms. Today money of some kind is accepted as payment by virtually all people. In the past, however, this was not always the case. Early societies-in which people hunted, fished, and farmed for their own needs-used a barter system. A fisherman might trade a basket of fish for a farmer’s extra vegetables. This system did not always work very well, however. What if the farmer did not want fish that day? The fisherman would have to look around for someone else who did.
To make trade easier, people began to look for objects with a common value that could be traded. To work well, the object had to be useful to everyone, rare enough to be valuable, and small and light enough to be carried. Salt was one of the first kinds of this “commodity money,” as it has been called, that people used. Early Roman leaders paid their soldiers in salt. In fact, our word salary comes ultimately from the Latin word for salt, sal. Salt money, however, was useful only in areas where salt was hard to find. Other kinds of commodity money were also used.
Some ancient peoples used cattle as money. In fact, our word pecuniary, which means “measured in money,” comes from the Latin word for cattle, pecus. A very unusual form of money was employed on the island of Yap in the South Pacific. People there used wheel-shaped boulders as money until the early years of the twentieth century. The wheels were from 1 to 12 feet in diameter and had a hole in the center. The larger the stone, the greater its value. Difficult to move, they usually remained in one place although different people might own them over time.
Shells were another widely accepted form of money. In India, people used colorful cowrie shells. The shell money with which Americans are most familiar is wampum, carefully cut and highly polished colored shells. For hundreds of years, American Indians in the region that is today the northeastern United States used these beautiful and rare tiny objects, strung together on their belts and jewelry, as money. Easy to carry, durable, and scarce, shells made excellent money. But in other parts of the world, another material-metal-met these requirements. Metal rings were used as money as early as 2500 B.C. in Egypt. Gold or silver bars were also used for exchange.
After some time, merchants began stamping these bars with their personal imprints, and this stamp also stated the bar’s weight. As the countries around the Mediterranean Sea began to trade with one another, they needed to find a kind of money that was mutually accepted and that could be readily carried in ships. Inthe600s B.C ., the government of the kingdom of Lydia in what is now western Turkey began issuing small kidney-bean-shaped pieces of money made of electrum, a mixture of gold and silver.
This form of money is usually considered to be the first coinage. Within about 100 years, Greek city-states began minting coins that were known as staters. These coins were made of electrum, gold, or silver. In about 1501B.C ., Rome issued the silver denarius. It eventually became one of the most widely accepted coins in the world. These ancient coins often were stamped with images of gods and goddesses, pictures of sacred objects, or portraits of rulers.
In the early days of the American colonies and even of the United States, official money was often very hard to find. The inventive population came up with a variety of answers to this problem. Some people accepted rice or tobacco. Others used beaver skins or the Indians’ wampum. Over time, many governments throughout the world began issuing notes or IOUs for their coins. Unlike earlier forms of money, the notes had no value in themselves. On a note the government might declare that it would pay the owner of the note its stated value in gold or silver. Paper money was in use all over the world by the 1700s.
But the value of paper money depended on the confidence people had in the government that issued it. During difficult periods in the American Revolution, for example, paper money issued by the new United States government had very little value, and people did not want to use it. The same was true of Confederate “scrip” issued by the South during the Civil War. After the South lost the war, of course, Confederate paper money became totally worthless.
Coins today are little more than symbols themselves. The value stamped on the coin’s face is far more than the coin’s metal is worth. Since 1965, dimes and quarters minted by the United States government have contained no silver at all. Today, credit cards and ATMs (automatic teller machines) are used worldwide. The money of one country can be electronically converted into another’s almost instantaneously. We rarely think about the problems of storing, using, and transporting money. Less than 300 years ago, however, a sack of rice might have brought more for you than a government-issued bill!