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Wednesday, May 20, 2009

The History of Money

The history of money spans thousands of years. Numismatics is the scientific study of money and its history in all its varied forms.

Many items have been used as commodity money such as naturally scarce precious metals, conch shells, barley, beads etc., as well as many other things that are thought of as having value.

The history of money and banking are inseparably interlinked. The multiplication of money really took off when banks got into the business. Inspired by the success of the London goldsmiths, some of which became the forerunners of great English banks, banks began issuing paper notes quite properly termed ‘banknotes’ which circulated in the same way that government issued currency circulates today.

In England this practice continued up to 1694. Scottish banks continued issuing notes until 1850. In USA, this practice continued through the 19th Century, where at one time there were more than 5000 different types of bank notes issued by various commercial banks in America. Only the notes issued by the largest, most creditworthy banks were widely accepted.

The script of smaller, lesser known institutions circulated locally. Farther from home it was only accepted at a discounted rate, if it was accepted at all. The proliferation of types of money went hand in hand with a multiplication in the number of financial institutions.

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