Peninsula Treasury Management Association (PTMA)

Before there was money, as we know it, there was barter. People in early societies developed forms of proto-money -- the use of commodities that everyone agreed to accept in trade. Various items have been used by different societies at different times. Aztecs used cacao beans. Norwegians once used butter. The early U.S. colonists used tobacco leaves and animal hides (settlers traded deer hides -- the origin of our modern word for money: "bucks"). The people of Paraguay used snails. Roman soldiers were paid a "salarium" of salt. On the island of Nauru, the islanders used rats. Human slaves have also been used as currency around the world. Pictured here: a flint arrowhead.

Early in pre-history, people made a fundamental shift in what they chose to use for proto-money. Some items, such as arrowheads, salt and animal hides, were useful in and of themselves. Gradually, however, people began exchanging items that had no intrinsic value, but which had only agreed-upon or symbolic value. An example is the cowrie shell. Cowrie shells are found on an island off the coast of India. They have been widely used as currency in China, India, Thailand and in West Africa (even as late as into the 1930s).

More Symbolic Currency:

Another symbolic currency -- used widely in the Americas -- was wampum. Wampum are oblong clamshells sawed into beads, polished, and then strung together. Wampum was used as legal tender in several early American colonies and states. A wampum factory in New Jersey remained in business until 1859. From the widespread use of wampum as symbolic currency we get the current phrase "shelling out".

The ancient Egyptians developed a system for making payments with weighed amounts of precious metal, such as the silver shown to the right, which were weighed on a balance with stone weights (below). Inscriptions on the weights were often made by officials to verify the accuracy of the measurement.

Coins are pieces of metal marked with designs that indicates they are money. The earliest coins were made in the Kingdom of Lydia (now in Turkey) in the 7th Century B.C. The Lydians used weighed lumps of metal (the shape was unimportant), stamped with pictures to confirm their weight. The process of stamping is called "minting". The stamp on the coin was a seal that identified the person who had guaranteed the coin's weight.

The use of coins spread rapidly around the world, spreading quickly from Lydia across Africa and Europe. These coins (right) were made in Greece in the 6th Century B.C. The Greeks were avid traders throughout the Mediterranean region, and the spread of coinage around the region can in large measure be traced to the influence of the early Greek trading peoples.

Alexander the Great's expansion across 3 continents was due in part by his ability to pay his armies with coins and keep them loyal. He minted and held huge supplies of silver coins. Sources estimate that at the peak of his empire Alexander paid out one thousand pounds of silver coins each day.

The earliest Chinese coins were made from Bronze in the shape of tools and cowrie shells. (Cowrie shells had been used as money earlier in China.)

Chinese Paper Money:

The earliest paper money was invented in China during the 10th cenury. Unfortunately, no examples of this paper money exist today.

Ghengis Khan was instrumental in the spread of paper money as currency. Ghengis Khan was intrigued with the paper money he discovered when he conquered China in the 13th Century. He used paper money as a uniform currency across his vast empire. He seized everyone's gold and silver, giving back paper money in return. He made rejecting the paper money a capital offense. Ghengis Khan's actions gave the government a monopoly on precious metals and left the population with no choice but to use his issued paper money as currency. Marco Polo noted in 1304, "...All the grand Khan's subjects receive this paper money without hesitation, because, wherever their business may call them, they can dispose of it again in the purchase of merchandise they have occasion for...".

Paper money was adopted in Europe much later than in Asia and the Arab world -- primarily because Europe didn't have paper. The first papermill in Europe was established by the Moors in 1151 A.D. in what is now Spain, but paper was not widely accepted because of religious prejudice. Official Christian officials discouraged paper because it was introduced by the heathen Moors. In 1221, the Holy Roman Emperor Frederick II announced that official documents written on paper were invalid -- only parchment or vellum were acceptable. Nevertheless, the use of paper spread because of its obvious convenience.

Once paper was available, people began leaving their heavy coins with merchants in exchange for handwritten receipts. The note illustrated on the left was issued by a Norwegian merchant in exchange for coins in 1695. The merchant used the coins to fund his business.

This is an example of early continental currency, issued by the U.S. colonists when they first broke from Britain. The colonists financed the Revolutionary War with paper dollars issued by the Continental Congress.