The History of MoneyMohiminul Islam ID:UG01-35-14-069

Financial Market and Institution (FIN-303)

Why do we have money?

Convenience It is often easier to use money

than barter / trade Would you prefer to receive fish or

eggs instead of cash for the services you provide to your employer ?

What is money ?

Features of Money

A medium of exchange

A unit of account A store of value

Best Forms of Money

Historically, gold & silver coins and bars

Currency Debasement in Rome

Currency Debasement in China : 11th Century China – Flying Money. Called it “flying money” because it

could just fly from your hands. Banks had switched to the use of

iron coinage due to copper shortage.

These iron coins became over-issued and fell in value.

A bank in the Szechuan province issued paper money in exchange for the iron coins.

Currency Debasement in France : John Law was the first man to

introduce paper money to France in the early 18th Century

Louis XIV died and left 3 billionlivres of debt to his son, Louis XV

Louis XV required that all taxes be paid in paper money, which was initially backed by coinage

After high inflation, people demanded coinage, and the currency collapsed.

John Law became the most hated man in France and was forced to flee to Italy.

Currency Debasement in France In the latter part of the 18th century,

the French government tried paper money again.

By 1795, inflation of assigners was running at approximately 13,000%.

Then Napoleon returned the countryto gold coinage, a stable currency.

French gave it another go in the 1930s, this time with the paper franc. It took only 12 years for them to inflate their currency until it lost 99% of its value.

History of MoneyBartering & Exchange

Shells (1200 B.C.) Metals(1000 B.C.)

Paper Money (1000A.

D.)

Coins (600 B.C.)

Banking in

Europe (1400 A.D.)Wampum

(1637)

The Gold

Standard (1816)

Credit Card

(1950)

Plastic Money (1990s)

Google Wallet & Clear

Exchange (2011)

Modern Currency DebasementHungary – 10 million pengo, 1945

Modern Currency DebasementZimbabwe – 100 trillion dollars, 2006

Electronic Money :The money stored in

certain electronic cash cards.

Transactions are made electronically.

Examples are Credit Card, Debit card, Charge card etc.

Features of Money :

Money should be durable, it should not get easily decomposed or degraded.

Money should be handy, easily transportable. Accepted – People are willing to accept Divisible – it can be divided into smaller parts Stable in value – The value of Money dose

fluctuate, but overall it remains stable. Limited supply – Supply must be scarce

Thank you!