Money in the Making

The history of money spans thousands of years. Numismatics is the scientific study of money and its history in all its varied forms. The Sumer civilization developed a large scale economy based on commodity money. The Babylonians and their neighboring city states later developed the earliest system of economics as we think of it today, in terms of rules on debt, legal contracts and law codes relating to business practices and private property (Brealey et al. 2-4).

Physical money has historically come into existence to facilitate trade. In most cases some form of metallic money has been used, but there are also other examples, where shells, or even large stones (on an isolated island) have been used as money. Oil has been proposed by the great Soros. Gold and silver has been used in most of world, but other metals have occasionally been used. Bronze was the basis of the monetary system in early Roman times (Brealey et al. 2-4). Copper has also been used at times, for example in Spain and Sweden. In many cases, combinations have been used, with fixed exchange rates between different metals. Those fixed exchange rates have usually broken down as the relative value of the metals has moved due to changes in supply or demand.

Coins are the basis of almost every metallic monetary system. A coin in a physical money system is a piece of metal with a stamp. (Brealey, Myers, Partington, Robinson, 2-4) The stamp is a guarantee that the metallic weight and content is right. It also makes all coins of the same sort equal. This may not seem like such a big deal today, but it once was a very important invention. Previously, metals had to be weighed in order to determine their value, and that made trade more ...