Claremont Advance JournalA blog about money, business & finance

The History of Money: Part 2

Bullion Gold Bars

While most ancient currencies were accepted and traded in their respective regions, one of the biggest challenges for universal adoption stems from the nature of money itself. Up until now primitive currencies have helped establish some, but not all of the core operating principles of cash:

1. A collective agreement or public confidence that the currency holds value.

2. Some form of rarity or limitation to prevent inflation.

3. Practical or aesthetic use.

In the case of gold, all three criteria were met and some of history's most resilient currencies would be created using highly coveted materials.

Egyptian Gold

From the Aztecs to the Incans to ancient Egyptians, gold had long been established as a symbol of wealth and status. According to the Greek historian Herodotus, the earliest use of gold as a currency was found in ancient Lydia (modern day Turkey). By 700BC, Lydian merchants were producing the first bimetallic coins, combining 55% gold and 44% silver into a mix called "electrum".

Lydian Electrum Coins

By forging two of the most economically viable metals together and branding them with the official Lion seal of King Alyattes, merchants constructed a social contract - a foundation of consensus which would attract wealth and commerce for centuries.

Early Forms of Banking

Wherever there are vast quantities of wealth, people will always seek security and convenience. As far back as 2000 BC, ancient Babylonians were storing gold at a fortified temple for a nominal interest rate. The temple also provided basic lending services.

Mesopotamian Relief Carving

Storage of wealth in temples would prove commonplace throughout many regions, including Egypt, Mesopotamia and India until 209 B.C. when Antiochus III pillaged the temple of Aine in Ecbatana, robbing its reserves and stripping the building of all gold and silver adornment. It was so thoroughly ransacked that collective faith in temples plummeted and the practice faded.

The Rise of Banking and Credit

The earliest officially documented descriptions of banking practices comes from ancient Greece. The speeches of Demosthenes makes multiple mentions of the issuing of credit (Trust). The philosopher Xenophon was also the first to suggest the creation of an organization currently known as a joint-stock bank in "On Revenues" which was written circa 353 BC.

Parthenon, Athens

Loans were issued on multiple occasions by the Temple of Athens. These transactions were backed by the notion of "good faith, belief or trust" or as they called it "credos", which is where the word credit comes from.

To this day, their Drachma remains as one of the oldest functioning currencies, second only to the British Pound. It was minted from silver as far back as 535 BC and even continued under Roman rule after the 1st Century AD. These coins were known as Roman provincial coinages or 'Greek Imperials' and continued well into the 3rd Century.

The Drachma: Greek City State Coins

Greek coins were often adorned with a unique symbol or emblem representing their localities. The city-states of Greece laid the groundwork for private citizenship, allowing for the separation of wealth from state ownership to the possibility of ownership by individuals. In this fashion the contributions of Greek philosophers would set the stage for capitalism itself, although such theories would not formally exist for centuries.

When in Rome

Illustration of Juno Moneta in Ancient Rome

The Roman Empire picked up right where the Greeks left off, minting their first coins at the temple of Juno Moneta and gradually moving these stores of wealth to private and secret depositories. In 352 BC the first public bank was established, offering loans to the impoverished in exchange for collected interest.

These early bankers soon discovered that their transactions need not be limited to the confines of their institutions. Money-lenders would set up their stalls in the middle of enclosed courtyards called macella on a long bench called a bancu, from which the words banco and bank are derived.

The Conversion of Constantine

After 313 AD, with the conversion of Emperor Constantine, Rome became the world's first Christian nation/state. As a result all forms of usury and interest were abolished given their prohibition in the Bible.

The banking system would continue to function until the fall of the empire in 476 AD. After this most European banks collapsed and the industry would not be fully revived for another 500 years.


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