A history of money and how our use of it has changed down the centuries

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What do cows, cheese and seashells all have in common? At one point or another in the past, they’ve all been used as forms of currency, before the invention of money as we know it today.

For the past 11,000 years, humanity has developed the idea of how to pay for goods and services – and even the concept of “paying”. People began by bartering or swapping goods and services with each other; if I wanted one of your fish, then I’d give you six of my berries.

But what happens when berries are out of season? Or if you haven’t been able to go out fishing because the weather’s been too bad, but you still need my berries to feed yourself?

The solution was a complex system of payments and accounting. A wide variety of objects would be used in transactions, from precious metals through to coloured beads, each recorded by their weight.

The value of goods being traded would be determined by their flexibility, their versatility and even their aesthetics. Eventually, tokens could be swapped for goods and services.

The concept of money itself emerged around 9000BC thanks to the domestication of cattle. Cows became units of exchange, along with other livestock, such as sheep or camels.

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Seashells were another common form of payment in parts of Africa, Asia, Europe and Oceania. Cowry shells were particularly popular, with their earliest use as a currency documented in China in 1300BC; simplified pictures of cowry shells still form parts of the characters for words including “buy, “coin”, “money” and “value” in some Chinese dialects.

Cowry shells are believed to have led to the creation of the first coins. The Chinese began creating imitations of cowry shells from bronze and copper in around 1000BC.

Other Chinese tokens included tiny metal knives and spades. Such early forms of money developed into the more familiar round coins made from base metals.

The first coins made from precious metals were formed using silver and gold around 700BC in Lydia, now part of modern-day Turkey. Those early coins had a design on one side and simple punch marks on the other.

Coins spread throughout Greece, Macedonia and Persia, and then later throughout the Roman empire.

Bartering fish and berries over long distances was impractical, so coinage and money allowed for trade across a wider geographic area.

Meanwhile, Italians had other ideas for currency. Parmesan cheese has been used in financial transactions since the Middle Ages, with some banks accepting pungent parmesan as collateral or security for loans to this day.

Each wheel of parmesan weighs 30kg, is worth about €300 (roughly £265), and each is marked with an individual serial number.

One of the banks in the Emilia-Romagna region, Credito Emiliano, holds about 430,000 wheels of parmesan, which are said to be worth about €190 million.

As well as developing cowry shells into coins, China was also the first country to issue paper banknotes, during the 7th century. Six hundred years later, banknotes began to become more common in China – but they also delivered an early lesson in the value of money.

The Ming dynasty tried to use paper money to completely replace metal coins. But too many notes were issued, which caused hyper-inflation and rendered the currency worthless.

In 1661, Sweden became the first country in Europe to print banknotes. Across the North Sea, goldsmiths in Great Britain started to issue paper receipts for gold coins that had been deposited with them – effectively making them the first bankers.

Those goldsmiths’ receipts were called “running cash notes” and included the famous line that they promised to pay the “bearer” on demand. Directors signing bank-notes today make a very similar pledge: “I promise to pay the bearer on demand the sum of…”.

The Bank of England was founded in 1694 and began issuing banknotes, while Scottish banks started handing out slips of paper as receipts for deposits the following year. While only the Bank of England can issue banknotes south of the Border, Scotland still has three banks that can print paper currency – the Bank of Scotland, Clydesdale Bank and the Royal Bank of Scotland.

Paper banknotes and metal coins haven’t been the end of the story for money though. As technology has continued to develop, so too have the currencies we use for transactions.

In 1860, Western Union began allowing customers to “wire” money to one another over the telegram network, in effect creating an electronic currency.

Fast-forward to 1994 and 21-year-old Dan Kohn sold a copy of Sting’s Ten Summoner’s Tales album to one of his friends, completing the first online transaction. Nowadays, almost 20 per cent of purchases in the UK are carried out online, with seven out of ten people using internet or mobile banking. Debit cards overtook cash as the most common form of payment during 2017.

Yet cash isn’t necessarily on the verge of dying out. There are £70 billion-worth of banknotes in circulation in the UK today – roughly twice as much as a decade ago.

While the Bank of England expects the popularity of digital payments to continue to increase, it also highlights the enduring popularity of cash, both for transactions but also for hoarding under the mattress. After all, it’s hard to keep a bitcoin or cryptocurrency beneath your bed.

Two of cash’s biggest selling points are its anonymity and its availability. As the Old Lady of Threadneedle Street puts it, cash is fast and convenient, it’s very widely accepted, and it’s helpful for managing a budget – while cash may have replaced cows, seashells and cheese, it’s perhaps not quite ready to give way to digital currencies just yet.

Cash may still be a ubiquitous part of everyday life in the developed world, but in some corners of the globe communities manage to go about their business in a manner unchanged for millennia

Brazil

Survival through fishing, foraging and hunting means that the Yanomami people, right, who live along Brazil’s Amazon rainforest frontier with Venezuela have little need for cash. An influx of gold miners in the 1980s had devastating consequences for the tribes though, exposing them to diseases against which they have no immunity, and bringing them into contact with the outside world.

Similarly, the life of the Awa people in eastern Brazil has also been threatened by the influx of outsiders, including illegal loggers. Dubbed “Earth’s most threatened tribe” by campaign group Survival International, the Awa are nomadic hunter-gathers with no need for money and are among the last tribes to live in isolation.

India

Towards the end of January each year, once the harvest festival is completed, tribes in Assam in north-east India gather for the three-day Jonbeel Mela, a fair that still operates on a bartering system, with no cash.

Villagers gather from the surrounding hillsides to sell their wares at the fair, which traces its roots back more than 600 years.

Papua New Guinea

The Kula Ring involves islanders from Milne Bay, part of the Solomon Sea off the south-east of Papua New Guinea, travelling for hundreds of miles in canoes to swap and barter armbands, necklaces and other ancient valuables made from shells. The Kula exchange binds communities together, giving each other gifts instead of cash.

South Sudan

Parts of war-torn South Sudan still use cattle as currency, including the Nyimang people in the Nuba mountains. Cows are used to make any large purchases, such as buying a house, or when a dowry needs to be paid for a marriage. Yet cows are also a central part of the conflict itself, with herders going to war with each other over livestock.

This article first appeared in The Scotsman’s Talking Money 2019 supplement.