Origin and Evolution of Money

Origin and Evolution of Money

Barter
Money, as we know it today, is the result of a long process.
At the beginning, there was no money. People engaged in barter, the exchange of merchandise for
merchandise, without value equivalence.

Then, a person catching more fish than the necessary for

himself and his group, exchanged his excess fish for the
surplus of another person who, for instance, had planted
and harvested more corn that what he would need. This
elementary form of trade prevailed at the beginning of
civilization, and may be found today among people of
primitive economies, in regions where difficult access
makes money scarce and, even in special situations, where
people barter items without regard for their equivalence in
value. This is the case, for instance, of a child who
exchanges with his friend an expensive toy for another of
lesser value, which it treasures.

Goods used in barter are generally in their natural state, in line with the environment conditions and
activities developed by the group, corresponding to elementary needs of the groups members. This
exchange, however, is not free from difficulties, since there is not a common measure of value among the
items bartered.
Commodity Money
Some commodities, for their utility, came to be more sought than others are.
Accepted by all, they assumed the role of currency, circulating as an element of exchange for other
products and used to assess their value. This was the commodity money.

Cattle, mainly bovine, was one of the mostly

used, and had the advantages of moving for
itself, reproducing and rendering services,
although there was the risk of diseases and
death.

Salt was another commodity money, difficult to obtain,

mainly in the interior part of continents, also used as a
preservative for food. Both cattle and salt left the marks in
the Portuguese language of their function as an exchange
instrument, as we keep using words such
as pecunia (money) and peclio (accumulated money)
derived from the Latin work pecus (cattle). The
word capital (asset) comes from the Latin capita(head).
Similarly, the work salrio (salary, compensation, normally
in money, due by the employer for the services of an
employee) originates from the use of sal [salt], in Rome,
for payment of services rendered.

Brazil used, among other commodity moneys,

cowry brought by Africans , Brazil wood,
sugar, cocoa, tobacco and cloth, exchanged in
Maranho in the 17th Century due to the almost
complete lack of money, traded in the form of
yarn balls, skeins and fabrics.

Later, commodities became inconvenient for commercial

trades, due to changes in their values, the fact of being
indivisible and easily perishable, therefore checking the
accumulation of wealth.

Metal
As soon as man discovered metal, it was used to made utensils and weapons previously made of stone.

For its advantages, as the possibility of treasuring,

divisibility, easy of transportation and beauty, metal
became the main standard of value. It was exchanged
under different forms. At the beginning, metal was used in
its natural state, and later under the form of ingots and,
still, transformed into objects, from rings to bracelets.

The metal so traded required weight assessment and assaying of its purity at each transaction. Later, metal
money gained definite form and weight, receiving a mark indicating its value, indicating also the person
responsible for its issue. This measure made transactions faster, as it saved the trouble of weighing it and
enabled prompt identification of the quantity of metal offered for trade.

Money in the Form of Objects

Metal items came to be very valued commodities.
As its production required, in addition to knowledge of
melting, knowing where the metal could be found in
nature, the task was not at the reach of everyone.
The increased value of these objects led to its use as
money and the circulation as money of small-scale replicas
of metal objects.

This is the case of the knife and key coins found

in the East and the talent, a copper or bronze
coin with the form of an animal skin that
circulated in Greece and Cyprus.

Ancient Coins
In the 7th century B.C. the first coins resembling current ones appeared: they were small metal pieces,
with fixed weight and value, and bearing an official seal, that is the mark of who has minted them and also a
guaranty of their value.
Gold and silver coins are minted in Greece, and small oval ingots are used in Lydia, made of a gold and
silver alloy called electrum.

Coins reflect the mentality of a people and their

time. One may find political, economic,
technological and cultural aspects in coins.
Through the impressions found in coins, we are
able to know the effigy of personalities who lived
centuries ago. Probably, the first historic
character to have his effigy registered in a coin
was Alexander the Great, of Macedonia, around
the year 330 B.C.

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 todays ones.
Gold, Silver and Copper
The first metals used in coinage were gold and silver. Employment of these metals happened for their
rarity, beauty, immunity to corrosion, economic value, and for old religious habits. In primeval civilizations,
Babylonian priests, knowledgeable about astronomy, taught to people the close relationship between gold
and the sun, silver and the moon. This led to a belief in the magic power of such metals and of objects made
with them.

Minting of gold and silver coins was common for

many centuries, and pieces were guaranteed by
their intrinsic value, that is to say, by the trade
value of the metal used in their production. Then,
a coin made with twenty grams of gold was
exchanged for goods of even value.

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 extrinsic value, that is to say, for their
face value, which is independent from their metal content.
With the appearance of paper money, minting of metal coins was restricted to lower values, necessary as
change. In this new role, durability became the most requested quality for coins. Large quantities of modern
alloys appeared, produced to support the high circulation of change money.
Paper Money
In the Middle Ages, the keeping of values with goldsmiths, persons trading with gold and silver items, was
common. The goldsmith, as a guaranty, delivered a receipt. With time, these receipts came to be used to
make payments, circulating from hand to hand, giving origin to paper money.
In Brazil, the first bank notes, precursors of the current notes, were issued by Banco do Brasil in 1810.
They had its value written by hand, as we today do with our checks.

With time, in the same form it happened with

coins, the government came to conduct the issue
of notes, controlling counterfeits and securing
the power to pay.
Currently, all countries have their central bank
in charge of issuing coins and notes.

Paper money experienced an evolution regarding the technique used in their printing. Today, the printing
of notes uses especially prepared paper and several printing processes, which are complementary to each
other, assuring to the final product a great margin of security and durability conditions.
Different Shapes
Money has greatly changed its physical aspect along the centuries.

Coins had already very small sizes, as the stater,

which circulated in Aradus, Phenicia, and some
reached large sizes, such as the thaler, a
17th century Swedish copper piece.

Although today the circular form is used in almost the whole world, there had been oval, square, polygonal
and other shapes for coins. They were also minted in different non-metallic materials, such as wood, leather
and even porcelain. Porcelain coins circulated, in this century, in Germany, when the country was under the
economic hardships caused by the war.
Bank notes were generally of rectangular lengthwise format, although with great variety of sizes. There
are, still, square notes and those with inscriptions written in the vertical.
Bank notes depict the culture of the issuing country, and we may see in them characteristic and interesting
motifs as landscapes, human types, fauna and flora, monuments of ancient and contemporary architecture,
political leaders, historical scenes, etc.
Bank notes bear, in addition, inscriptions, generally in the countrys official language, although several also
bear the same inscriptions in other idioms. The inscriptions, frequently in English, aim at permitting the
piece to be read by a larger number of people.
Monetary System
The set of coins and bank notes used by a country form its monetary system. The system is regulated by
appropriate legislation and organized from a monetary unit, its base value.

Currently almost all countries use a monetary system of

centesimal basis, in which the coinage dividing the unit
represents one hundredth of its value.

Normally, higher values are expressed in notes while smaller values are represented by coins. The current
world trend is that daily expenses be paid with coins. Modern metallic alloys enable coins to be more durable
than notes, making them more appropriate to the intense use of money as change.
The countries, through their central banks, control and guarantee the issue of money. The set of notes and
coins in circulation, the so called monetary mass, is constantly renewed through the process of sanitation,
substitution of worn out and torn notes
Checks
As coins and notes ceased to be convertible into precious metal, money became more dematerialized and
assumed abstract forms.
One of these forms is the check that, for simplicity of use and security offered, is being adopted by an
increasing number of people in their day-by-day activities.

This document, by which one orders payment of a certain

amount to its bearer or to a person mentioned in it, aims
mainly at transactions with bank deposits.

The important role played today in the economy by this form of payment is due to the innumerable
advantages offered by it, speeding transactions with large sums, avoiding hoarding and diminishing the need
of change by being a document completed by hand in the necessary amount.
Money, whatever the form it has, is not valuable for itself, but for the goods and services it may purchase.
It is a sort of security giving its bearer the faculty of being creditor of society and take advantage, through
his or her purchasing power, of all conquests of modern man.
Money was not, hence, invented by a stroke of genius, but stemmed from a need, and its evolution
reflects, at each time, the willingness of man to harmonize its monetary instrument to the reality of its
economy