As we
have seen, money is basically a method of exchange, and coins
and notes are just items of exchange. Tiny
tools, axes and knives were used as items of exchange in China
in the 10th century BC. Coins have been found in Lydia, now Turkey,
dating from the 6th century BC. These quickly spread throughout
the trading world as convenient items for barter and exchange.
Early coins were actually
made of silver and copper and the metals were worth the
value of the coin. In Athens in the 6th century BC there were
silver coins and in China in the 4th century, copper coins were
used.
These valuable coins had their disadvantages
as people kept filing the sides for the precious metals! To stop
people doing this, governments used debased metals. Milled edges were introduced in Europe in the 17th century for
the same reason, to stop people taking bits off the edge of the
coin.
Paper money was introduced in China
in the 9th century but didn't appear in Europe until the 16th century.
Paper money was issued as a promise
note against deposits of gold, silver or money held in the bank.
If you look at a British bank
note today, you'll see it still says:
I promise to pay the bearer on demand the sum of twenty pounds.
