When was money invented and at what point did the dollar become the main currency in the world?

Archaeologists, historians, philosophers and economists have their own theories about the mysterious leap that humans took when we developed the first commercial systems born after barter.

This system, which allows us to set prices and register debts, originates from the money in the transactions that thousands of years ago they were made with cereals, grams of silver, clay objects, sea shells or cocoa beans, until reaching the metal coins officially minted by kings in ancient Iraq.

Much later, the first paper banknotes emerged in China, created when coins were so heavy that carrying them was a nightmare. And recently, barely 70 years ago, in secret political negotiations until late at night, in a hotel lost in the middle of some mountains, a green ticket called dollar came to be imposed as the most powerful currency in the world.

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Background

If we think of money as something material that allows us to carry out transactions, some experts argue that its origin can be found in grams of silver or barley, a cereal with which the Sumerians in Mesopotamia (now Iraq) traded about 5,000 years ago.

Those products that, on the one hand, had a value in themselves, also served as a unit of measurement and were used to quantify the value of other things through their weight, such as the value of a slave, of work , interest on a debt and even promises to pay.

Some workers were paid in fixed amounts from things like beer or furniture, says Jon Taylor, curator of the cuneiform and cylinder seal collections in the British Museum’s Middle East Department.

Even “merchants who did long-distance operations offered each other a kind of credit, through which they could withdraw resources in one place and return them in another, or transfer the right to resources to another person,” he adds.

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From this point of view, barley and silver were forms of currency and probably the oldest type of physical money known to date.

Later, silver became the most common way in which the value of most things was quantified during much of Mesopotamia’s history.

“We often find silver treasures buried under the floors for protection. These contain bits of silver cut from vases, from old beads, cast into ingots or made into spiral rings,” Hafford explains.

The typical exchange rate was 1 shekel of silver (8.4 grams) for 1 GUR of grain (about 300 liters). The grain could be ground into flour, an essential product for food.

The first officially minted coin

The first coins officially minted by a government would have appeared around 640 BC in Anatolia, present-day Turkeywith the seal of King Aliates of Lydia.

this coin, the lydian statercommonly made of an alloy of gold and silver known as electrum, was older than coins minted in China, India, or in civilizations such as the Egyptians, Persians, Greeks, or Romans.

The minting of coins was successful because of their durability, the ease of transporting them and because they had their own value.

By becoming so efficient and valuable, they became an instrument of political control. They facilitated the collection of taxes to maintain the elites, allowed the financing of armies and expanded trade beyond borders.

Along with coins, other forms of money continued to be used. In fact, the word salary comes from the Latin salarium, whose origin is in salt. At the time of the Roman Empire, soldiers and public officials were paid with salt, a very valuable product that was used, among other things, to preserve food.

Some of the ancient coins are as rare as they are beautiful and, thanks to the fact that they have been preserved over time, provide valuable information to scholars of civilizations prior to our era. One of them is the silver Tetradrachma minted in Athens, around 450 BC. C., with an owl, emblem of the goddess Athena.

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The arrival of the paper ticket: the Chinese jiaozi

And when did the tickets appear? For a long time, the basic monetary unit in China was copper or bronze coins with a square hole in the center, which allowed them to be hung on a thread to form a chain.

But as travel and commerce expanded, so did the demand for coins to carry out transactions. There was a time when copper became scarce, but even more important, the rulers realized that it was key to maintain control of the currency.

Not wanting their valuable coins to leak into foreign lands, they made a rule: only coins made of iron could be used.

Well, the iron coins were so heavy that neither the mules nor the carts with oxen resisted such a load when large transactions had to be made. Imagine that, for a handful of silver, they gave you a giant sack of iron coins, as big as a person’s body.

It would have been the merchants who first began to experiment with “financial instruments” of paper to avoid the transfer of large amounts of coins.

It was during the Song dynasty, around 1,000 AD, in Sichuan province, that the empire officially issued the world’s first paper money, the jiaozi, made from the bark of the mulberry tree.

Since then, merchants stopped using their own IOUs and rulers took control of the system by making the jiaozi an official note.

As official as the dollar when it became the currency of the United States by decree in 1792.

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dollar supremacy

As World War II drew to a close, the Allied governments realized they had a problem: their economies were devastated and they were wondering what currency international trade would be in when rebuilding began.

It was then that representatives of 44 countries met for 22 days in July 1944 at the Mount Washington Hotel in the town of Bretton Woods, United States, to negotiate the future of postwar finance and trade.

The European countries came to the meeting with deep economic deprivations and the United States with the largest gold reserves in the world.

There were 22 days of meetings with intense political fights that took place in the halls during the day and in the hotel bar “The Moon Room” at night, between whiskeys and cigars, according to Ed Conway, in his book “The Summit”. .

Two men faced off in an intellectual duel almost to the death: the British John Maynard Keynes (with his utopian idea of ​​creating a common currency for the whole world called a “bancor”) and the American Harry Dexter White, of the Treasury Department, who ended winning the battle.

At the end of Bretton Woods, it was established that the US dollar would be the currency for international transactions. And the two institutions that were created at that meeting, the International Monetary Fund and the World Bank, would make loans in dollars to countries with economic problems after the end of the war.

Who would have imagined at that time that the negotiations carried out in a hotel half lost in the mountains would give rise to the architecture of international finance that persists to this day.

SOURCE: BBC.

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