Origins of currency: its 3 stages of evolution in history

A brief review of currency, the element of exchange that gave way to complex societies.

Currency is an object that we have been using for centuries as a common exchange material. It is characterized by an exchange value that allows us to generate transactions and acquire various goods, and its history is related to the development of trade in Western societies.

In this article we will see what are the origins of the currency and what has been its development.

Origins of the coin: from barter to metallic money

The coin is a piece of metal with an attributed value that functions as a common medium of exchange. As such, it has emerged alongside the development of trade. Continuing with this definition we can see that, in order to be valuable as money, currency fulfills several requirements:

• It is a medium of exchange..
• It is a store of purchasing value (things can be acquired because their value remains over time).
• It is a unit of account (transactions can be accounted for).
• It allows for deferred payment patterns (a payment can be raised today but made in the future).
• It is accessible, portable, divisible and difficult to counterfeit.

All of the above has developed gradually in different societies. In fact, throughout history, different objects have been used as a common medium of exchange. For example, in the barter system, cattle or salt fulfilled the same function as currency does today..

The difference is that this system was based on the direct exchange of one good for another. And when currency appeared, the parties involved in barter were divided; that is to say, it made it possible to separate production from sale, an issue that would later be necessary in the capitalist system (characterized precisely by the division of labor and specialization).

In short, the history of currency precedes the present economic systems. This history also has to do with the conceptions of gold and silver, which are the raw material of the currency.which are the raw material of currency and have been associated with wealth since the most classical philosophy. This progresses to the establishment of payment systems that are different according to societies and times.

For the same reason, currency is not only the metallic object we have described. It is also a social and political institutionIt is also an important element for social bonding.

Main stages

Monetary systems originate with the main purpose of maintaining the exchange value of the metallic object regardless of the political powers being modified. In other words, it is created as a way to avoid a way to avoid arbitrariness in the decisions on such value and its use..

To summarize the origins of currency, Viales Hurtado (2009) tells us that its history can be divided into three main stages: the heavy coin, the coin-account and the minted coin.

1. Heavy coinage

The heavy coin has its origins in Egypt, approximately 2000 years before our era. It had the form of a piece or bar of raw metal (an ingot) and was used to acquire some good. and was used to purchase goods.

2. The coin-account

Created approximately 800 years before our era as a product of the division of ingots or heavy coinage. In other words, it is the same coinage as before, only that has a smaller size, which makes it easier to interchange. Its precursors were the Greek, Roman, Chinese, Indian and Middle Eastern civilizations.

3. The minted coin

Unlike the previous ones, this coin has an inscription, which is why it is known as a minted coin. This inscription has the function of indicate the exchange value of the coin, according to its weight.. At the beginning, metals such as gold and silver were used in fixed amounts, and the seal functioned as a guarantee. Later these metals were mixed with others and their proportion varied according to the value to be indicated.

Moreover, its minting has not been the same for all societies and all times, but has depended on the dominant economic doctrines and their commercial development. Thus, this coin is the one that finally gives rise to the metallic monetary system.

Paper money

After the minted coin, the next important step for the establishment of monetary systems was the creation of paper money; where, unlike the metallic coin that in itself had a value because of the material from which it was made, paper money has a value dissociated from its own raw material. has a value dissociated from its own raw material..

It has served as a facilitator of commercial transactions and has made it possible to avoid the transfer of large coins, thus making trade more accessible. Paper money has its origins in China in the 9th century, although its circulation in Europe and the rest of the world began in the middle of the 12th century.