Money is a central component of civilization’s evolution from subsistence and barter economies into finance and trade societies. The initial step in economic development usually involves the bartered exchange of goods and then physical-value equivalents, in a manner that validates simultaneous transactions between two or more parties. Heralding further transition into a financial economy, the potential issuance of currency-based tender subsequently enables legal contractual consideration and a range of transactions via a monetary standard that favourably supports economic development and labour specialization.
A Metallic System Allowing Intrinsic Measurement Stamping: Ingots to Coinage
Consistent with prevailing knowledge, it is generally accepted that money appeared in Mesopotamia concurrent with the emergence of an alphabet and a written system of Cuneiform language, around 2900 BC.2 Excavations have uncovered numerous terracotta tablets stamped with cuneiform signs, and detailing inventories, entries and exits of valuables.3 Examples of valuation in metal weight appear much later, around the time of the “Hammurabi Code”, or 1650 BC. Within the “Hammurabi Code” itself there are several references to the prices of goods and services.4
Through archaeologically recovered remains of palaces and both inscribed stones and Cuneiform terracotta tablets, a detailed description of organized Sumerian society and ruling structures has been compiled by experts. This includes the characterization of a general system of laws required for qualifying and distinguishing monetary tender from other value standards such as goods.
Precious metals such as gold and silver (or their electrolytic mix) were recognizable by anyone, regardless of language or regional culture. The rapidly appearing utilization of weight standards for value measurements provided a form of monetary unification that facilitated trans-Mediterranean trade, as well as trade between “capital kingdom” cities and states such as Egypt throughout the greater Middle East, prior to the introduction of coinage and before the Hellenistic period (8th to 2nd century BC). Further west, from Mesopotamia towards the Mediterranean, it is believed that the Greek Attic Talent of around 26 kg in metal ingots was one of the usual units of trade between palaces, temples and then cities.5 It was the equivalent of modern central bank money; only usable to clear what would be today’s international trade but not money that a citizen could carry to satisfy their day-to-day needs and pay for them. It was probably not the first monetary unit to be used. Without coinage artefacts dating back to the period of the Hammurabi Code, one does not know exactly when and where coinage appeared first.6 Nevertheless, it is hard to understand how monetary references such as prices could have existed without a tangible supporting means of payment, which a coinage system would provide when paper did not exist. We can already note the distinction between the means of payment though, the coin or metal ingot, and the accounting records found on terracotta tablets.
Claimed by Herodotus7 to have been introduced later (after the Hammurabi Code) as an invention of the Lydians established alongside the Pactole River (in today’s Turkey), coinage was subsequently struck to be used as monetary tender. The oldest existing examples of such coins from the ancient Greeks date back to between the 8th and 9th centuries BC.8 Controversy over the chronological appearance of coinage guarantees and units did not abate until the 19th century. Sovereign guarantees attached to coinage and units became historical with the Athenian civilization9 of the 5th century and much later, under the Roman Empire, as we will see later. Historical analysis of the interaction between political power and currency then reveals deepening thought on the historical evolution of a role for monetary currency in society.
Grounding the Guarantees of Stamping: From an All-Metallic System to Paper Bills
The split between the management of sovereign assets versus those belonging to the people, and the complexity of currency flows in the Roman Empire, are topics that have inspired many authors since the 18th century.10 After the disappearance of collectivist economies where property belongs to no one, including the sovereign (for example, ancient Egypt),11 this topic became important to the understanding of the guarantees and trust that an issuer of coinage or scriptural money may grant, or merely inspire. Analytical emphasis is frequently centred on the sovereign power to strike coinage (money species) versus the state allowing or disallowing a sovereign to issue money notes and bills-of-credit. The power to print notes with bargaining power (commercial notes and then note bills) gives those deemed to be in possession of coinage or paper counter value the capability to exchange goods in a manner that others would lack. The debate about whether the issuance of money should be a privilege of the sovereign, of the people collectively or be left to private initiative will go on subject to the limitation of the single or small number of stamping recognitions over a territory that efficient trade requires. We will see later that measurement stamping and its guarantee require authority. Specific topics include where such authority may derive from, and through which mechanisms.
Fluctuations in financial power characterize the core of market economies – in particular from the time of the 15th-century Lombardy traders to the 19th-century English Industrial Society, where the Bank of England’s power to print bills dates back to a charter instituted in 1694. (26 years before, the Swedish Risken Ständers, acting as a central bank, was accorded the same privilege as successor to a failed private bank whose privilege had already been granted in 1656.) The French Banque Royale, chartered in 1718 and having the monopoly to issue bank notes with the guarantee of the King, was the first to operate as a modern bank and to be used by a government to finance a war and reimburse budget deficit with paper. It also allowed a reduction in public debt. It dragged a large public of 2 million citizens out of public debt and brought forward the concept that gold should be put aside. People were forbidden to hold gold. It also facilitated the development of colonial trade companies, such as one for Louisiana, one for India and one for China. France’s yearly external trade with its colonies was multiplied threefold by volume (number of boats sent) after 1719 due to the capacity to finance its cargo. The bank failed because of an uncontrolled speculation on its shares and bonds; the first example of the possible disconnection between price determination processes for financial instruments, Banque Royale shares and realities. Even more interesting was its organized liquidation, with over 2,000,000 creditors, 251,000 depositors, holding up to 100 gold Louis, will be reimbursed totally while larger depositors, 100,000 with over 2,000 gold Louis would not, and 185 speculators would be sanctioned with penalties amounting to 137 million Louis. The resolution process for Cyprus’s 2013 process on a much smaller scale was not much different. Nothing is new in the world but France, like the USA later, was very much against pure paper money for 200 years, and both returned to gold worship.
Of course, Europe was only following a process already known in the east as a promise to pay the bearer. They were made on leather and appeared in 118 BC during the Han Dynasty. In fact, public literature says that even prior to China’s 7th-century Tang dynasty, paper bills guaranteed by the state were being issued. As claimable instruments, these issued bills were differentiated from instruments issued between private individuals as promissory notes, and utilized to clear a trade. In these evolving systems of currency-based economic societies, democracy or liberty was defined as the power of the individual to act without coercion, thus linking economic commerce with the freedom to trade – and limited only by the capability of traders to come into possession of valuable coinage, goods, notes or their equivalents.
In many settings, the scarcity of metal – and consequently of metal coinage – was the reason for the emergence of paper bills (Ma...
