Money History Holds Valuable Lessons
Few Look Back for Solutions to Current Money Problems
Oct 13, 2008
"Despite the antiquity and ubiquity of money, its proper management and control have eluded the rulers of most modern states, partly because they have ignored the wide-ranging lessons of the past, or have taken too blinkered and narrow a view of money."
So say Glyn Davies and Roy Davies, authors of the "bible" on money history.
Economists Misplace Emphasis
They explain that economists tend to overestimate purely economic, narrow and technical functions of money, placing "insufficient emphasis on its wider social, institutional and psychological aspects."
Money, they say, grew out of mostly non-economic causes: from tribute to trade, including bloodmoney and bride-money, with roots in ceremonial and religious rites, as well as from commerce and ostentatious "jewelry".
Here are excerpts from their money time line:
- ca. 9000 - 6000 BC: domestication of cattle and cultivation of crops; cows, or perhaps grain, were probably oldest form of money.
- ca. 3100 BC (or earlier): writing invented in Mesopotamia; probable reason was for keeping accounts.
- ca. 3000-ca.2000 BC: banking developed in Mesopotamia, probably relating to activities of temples and palaces where valuables were stored; deposits were of grain, cattle, implements and precious metals.
- ca. 2250-ca. 2150: Cappadocian rulers guarantee quality of silver ingots.
- ca. 1792-ca. 1760: code of Hammurabi in Babylon includes laws governing banking operations.
Mother of Money
The list continues, noting early cowrie shell currency in China, covering the Queen of Sheba's gift exchange with Solomon, the Lydians as first to use coins and open retail shops, and the 10% interest rate. Then the Gauls attack Rome, geese alert the defenders, grateful Romans build a shrine to Moneta and we meet the mother of the words money and mint.
Quite a journey it is: Inflation, emerging financial centers, leather currency and taxes are all BC. Then patterns begin to emerge. Causes of inflation are identified (but soon ignored), a banking system has broken down, mint workers rebel, price controls are instituted, wages are regulated, currency reform fails, annual government budgets are initiated and governments topple because of bad economic policies.
Gold Coin Lasts 700 Years
Thanks to Constantine, the solidus, a new gold coin, is issued and its weight and purity are unchanged for the next 700 years. The Chinese, however, are issuing paper money and soon the output of 16 paper note making houses is fueling rampant inflation. It is about year 1050, but it already looks like today's financiers and governments could gain from these lessons of the past.
The timeline goes about another 600 pages, ending in 2002.
Gold Backed Money
There was a time when nobody had to wonder what happened to the money they used to have. Until paper money was developed in China around the ninth century, money was something solid that had actual value - like a gold coin that was worth whatever that amount of gold was worth.
Back then, if the money you once had was suddenly gone, there was a simple reason - you spent it, someone stole it, you dropped it in a field somewhere, or maybe a tornado or other disaster struck wherever you last put it down.
In 1971, after a big drop in its gold reserves, the United States suspended the convertibility of the dollar to gold. In 1973, the United States abandoned the gold standard.
A related article talks about the 2008 economic crisis and stock and home values.
SOURCE: Davies, Glyn, A History of Money from Ancient Times to the Present Day, 3rd. ed. (Cardiff: University of Wales Press, 2002).
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