The Invention of Money: Who, When, How, Why?

Some form of money is used in everyday activities all around the world. Despite being present as an inevitable part of our activities, rare are those that know the real origins of money.

Four questions that come forward as four riders of the apocalypse are:

  • Who invented the money?
  • When did it happen?
  • How exactly did the process of invention go?
  • Why was money created?

Why Was Money Invented?

We will start by explaining the causes and build our way up to particular steps, times and names. There are to main obstacles, which made people, in their attempts to overcome them, into creating the money:

  • Time discord in between individual needs and wishes.
  • Double coincidence in between individual needs and wishes.

Understanding Market at its Base

Before diving into deeper explanation it is important to understand the foundation concepts of the market itself.

The market is every occurrence of exchange committed through the negotiation of terms.

While many experts would dispute this definition it is important to push the mind into viewing things from a philosophical perspective. Where ever is a need there is a potential for creating some kind of market. It doesn’t matter whether there is one human being or one million people. As long there is a need or wish, there is the attempt of achieving it. In order to make a full circle and create a market, the fulfillment of two more conditions is required. The first is an individual or a group of people capable of satisfying the aforementioned need or wish. The second is that this group or individual wants something in return. Otherwise, if one side would be ready just to give away chocolate, tv or barley it wouldn’t be market but rather the occurrence of generosity. So, the sum is that we need both sides that want something and are willing to, in return, give something back. And now comes the part with time discord, coincidences and a short story about the two cavemen Tony Dollar and Jonny Pound. Dollar and Pound were the last names of Tony and Jonny who weren’t able to purchase anything for their surnames even when they would write them on a paper. The reason for that is simple. Back then, during the stone age, nobody wanted paper with a dollar sign or pound symbol. People wanted food to eat, and skins to dress and get warm.

Value is the object of a wish.

Time Discord

Reference to time discord is present to point out towards what on the first glance may seem like a default item: “In different times different people want and need different things.” One day Jonny wanted skins. Tony had heard of it and traveled three days to come to the other side of the forest only to find out that yesterday Jonny had killed a bear and made himself a brand new coat. His fox fur coat had no worth because the time of need for it had passed. Tony Pound wanted grapes but had nothing to offer back. And as for Jonny Dollar, he now needed a new spear as the wooden rod of his weapon had cracked during the fight.

Double coincidence

Double Conincidence of Wishes
Difficulty in meeting double coincidence of wants.

Jonny needed a wooden rod and had a necklace of bear teeth while Tony, as we had already stated, had skins and wanted grapes. Wanting the thing you don’t have and having the things other people don’t need was the everyday problem humans were encountering in the early age of civilization. Even if the possessions and needs of different sides would match time discord was always lurking. To achieve the dream of the right thing at the right time required the invention of something special. That special thing or better to say item needed to have the following features:

  • Ability to measure and compare the values of different things (skins, weapons, food). Mostly, that meant knowing the amount of effort required for their acquirement and expressing it through the higher and lower amounts of “special item.”
  • Ability to hold its own value. If Jonny wanted new spear and gave two fox fur accepting 20 special items in return which, at that point of time, were enough to purchase his favorite weapon then that state needed to last until he would be able to find a man willing to sell the weapon he wanted. (No inflation!)
  • Wide acceptance. This item, entity or thing needed to be accepted widely. Without that, the only useful thing one man could do with full pockets of gold coins was to have fun while tossing them in the lake.

These problems and obstacles answer the question of why money was invented. The next question is how.

Barter Anime
How Would Barter Look Today

How Money was Invented

As communities people had lived in grew in the number of members, the societies evolved. Through the emergence of religions, different hierarchy structures occurred within the states proclaiming many divine elites and giving them the right to make decisions that will shape everyone else’s realities. And that brings us to the old Babylon. You might think that people somehow spontaneously came to a deal that gold or silver coins will be forged and used as the universal value in the exchange processes. Yet that was not the case. The first items that could be considered for money were actually the promissory notes.

A promissory note is a document containing a written promise that a certain amount of value will be paid to a specific person or a barrier at some date or on-demand.

According to some historians, the occurrence of the first promissory notes was related to the old Babylon. Allegedly, it was Babylon’s palace that created the debt confirmation tokens. While it is not completely clear how exactly did the economy operate it is highly probable that ruler, in the lack of goods that other side of bartering pursued, made up a token of his obligation and guarantee towards merchants. This kind of relation implies the conclusion that the first money ever used was actually the confirmation of state’s debt towards private sector. It was only later, that coins were developed and used as a common instrument in the exchange. It may be hard to be precise in determining what was what in the old era but with a little wider point of view we could say that all the merchants that bartered between each-other expressing the value of one merchandise true the quantity of the other, were the representatives of private sector.

When Did the Invention Happen?

The old era is vague which makes it hard to track when was the first promissory note created, but those that are held in the museums date back to the periods of 555 b.c. Since the paper wasn’t invented tokens were made from clay on which the conditions with names of the parties, in front of the witnesses, were curved. After the creators of notes would fill their debts, the peace of clay would be broken announcing that business was successfully accomplished. On the picture below you will see the promissory note created by Esagilaya, a temple dedicated to Marduk, the protector god of Babylon. As for the first promissory note, allegedly it dates back to a whole millennnium B.C. which is almost a three centuries earlier than the first forged coins showed up in the ancient kngdom of Lydia.

Babylonian Promisory Note
Babylonian Promissory Note

Who Invented Money?

And at last, the question of name to credit. The precise answer would be, the human need. But if we do want to say precise names then it had happened in the time of Nebuchadnezzar II.

In Addition – Mentioning Disagreements

During the article, while discussing the barter as the form of exchange encompassing the expression of the value of one merchandise through the quantity of another merchandise we didn’t mention disagreements between people. Jony Dolar could say that his spear is worth ten skins, while Tony Pound could oppose with valuing the weapon for only half of the skin. We skipped this part because it belongs to the politics and the economy which is a whole another subject that runs this world.

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