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The history of money is the development over time of systems for the exchange of goods and services.

Money is a means of fulfilling these functions indirectly and in general rather than directly, as with barter. Money may take a physical form as in coins and notes, or may exist as a written or electronic account. It may have intrinsic value (commodity money), be legally exchangeable for something with intrinsic value (representative money), or have only nominal value (fiat money).

Due to the complexities of ancient history (ancient civilizations developing at different paces and not keeping accurate records, or having their records destroyed), and because the ancient origins of economic systems precede written history, it has not been possible to trace the true origin of the invention of money. Further, historical evidence supports the idea that money has taken two main forms, divided into the broad categories of money of account (debits and credits on ledgers) and money of exchange (tangible media of exchange made from clay, leather, paper, bamboo, metal, etc.). Accounting records–in the monetary system sense of the term accounting–dating back more than 7,000 years have been found in Mesopotamia, and documents from ancient Mesopotamia show lists of expenditures, and goods received and traded and the history of accounting evidences that money of account pre-dates the use of coinage by several thousand years. David Graeber proposes that money as a unit of account was invented when the unquantifiable obligation "I owe you one" transformed into the quantifiable notion of "I owe you one unit of something". In this view, money emerged first as money of account and only later took the form of money of exchange. Regarding money of exchange, the use of representative money historically pre-dates the invention of coinage as well.

While not the oldest form of money of exchange, various metals (both common and precious metals) were also used in both barter systems and monetary systems; and the historical use of metals provides some of the clearest illustration of how barter systems gave way to monetary systems. Finally, there is a clear break from the use of bronze in barter into its indisputable use as money, because of lighter measures of bronze not intended to be used as anything other than coinage for transactions. In the early 17th century Sweden lacked precious metals, and so produced "plate money": large slabs of copper 50 cm or more in length and width, stamped with indications of their value.

The commodity theory of money (money of exchange) is preferred by those who wish to view money as a natural outgrowth of market activity. Others view the credit theory of money (money of account) as more plausible and may posit a key role for the state in establishing money.

In this view, money emerged first as credit and only later acquired the functions of a medium of exchange and a store of value.

Trading with foreigners required a form of money which was not tied to the local temple or economy, money that carried its value with it. This process was independent of the local monetary system so in some cases societies may have used money of exchange before developing a local money of account. In societies where foreign trade was rare money of exchange may have appeared much later than money of account.

Many cultures around the world developed the use of commodity money, that is, objects that have value in themselves as well as value in their use as money.

Goldsmiths in England had been craftsmen, bullion merchants, money changers, and money lenders since the 16th century.

Alvarado, Ruben, Follow the Money: The Money Trail Through History, Wordbridge 2013. A History of Money in Ancient Countries from the Earliest Times to the Present.

Quick Facts

• It may have intrinsic value (commodity money), be legally exchangeable for something with intrinsic value (representative money), or have only nominal value (fiat money).
• In this view, money emerged first as money of account and only later took the form of money of exchange.
• Money may take a physical form as in coins and notes, or may exist as a written or electronic account.
• Regarding money of exchange, the use of representative money historically pre-dates the invention of coinage as well.
• Others view the credit theory of money (money of account) as more plausible and may posit a key role for the state in establishing money.

Source material: Wikipedia - "History of money". Adapted and summarized for DiscoverScroll. Original contributors are credited through the linked Wikipedia article. Read original on Wikipedia. CC BY-SA 4.0. Changes were made from the original.