History of money. How it all started?

Now that we know the basic monetary terminology and the features of monetary technology, we can turn our attention to an overview of monetary history. With the beginning of trading through barter, people gradually developed more and more innovative and advanced forms of money. Many primitive civilizations used livestock as their main medium of exchange, as it was vital for survival, portable and fairly sustainable. Other forms of primitive forms of money also included glass balls, shells, pearls, grain, tobacco, tea, and heavy stones on which people recorded their ownership. These forms of money developed because they were the most appropriate instrument for making a monetary deposit in that area, according to the knowledge of the local inhabitants.

When researching the development of monetary technology, one very important trend can be observed: the new money that replaced the old had an ever-higher stock-to-inflow ratio. This means that the better money was always more resistant to increasing its supply, which meant that it had a lower rate of inflation. Thus, stronger money always displaced weaker money. Precious metals replaced increasingly primitive forms of money such as glass corals, stones, shells, salt, cattle and copper. The biggest battle was between the precious metals silver and gold, and many countries used them simultaneously, on this bimetallic standard, for centuries. However, since gold had a higher supply-to-inflow ratio than silver, and was also more difficult to destroy or use in production, over time it also supplanted silver.

The better money served its role, the more the civilization that used it could develop. With this, people gradually developed more and more advanced forms of money, which reached a peak towards the end of the 19th century, when most industrialized countries were on the gold standard. This period was known throughout the world as the golden age of prosperity, during which most of the most important technological inventions on which the world is based today were created. Gold’s supremacy was overshadowed by his greatest weakness, i.e. the inability to transfer gold through the telecommunications network, which in a globalized world had an extremely low marketability through space. This flaw proved to be his Achilles heel.

THE GOLD STANDARD

We reached the peak of human civilization at the end of the 19th century, when most of our civilization simultaneously used one monetary means – gold. This did not require any coercion or consensus from the authorities and politics, but was an organic evolution of monetary technology chosen by the free market. Based on experience over time, people realized that gold serves the role of money most effectively, and began to use it en masse in trade.

This period represented the fastest transition from poverty to the prosperity of Western civilization. Unemployment was rapidly drying up, turning into something optional that people decided to do when they judged they had enough gold savings to avoid work. The movement of prices during the 19th century was constant, as the price index at the end of the century was almost the same as at the beginning, which meant that people’s purchasing power remained the same, allowing them to afford better quality goods and witness many new inventions , which significantly increased prosperity.