Origin and growth of
Bank Notes and Currencies - 1
(Written by N.R. Jayaraman)
The birth and growth of Paper Currencies and Bank Notes stemmed from several facts spread across centuries. It will therefore be interesting to know how the Paper Currencies and Bank Notes world over came to be accepted as Money replacing the earlier form of Money that were exchanged in different stocks.
Now Money as a means of payment, consists of coins, paper money and withdrawal documents. Today, credit cards and electronic cash form an important component of the payment system. However a majority of common people prefer the use of paper currency and coins for transacting their day to day business. Especially in a country like India which has vast majority of her people living in the villages, people believe in transacting anything and everything through liquid cash which is in the form of printed notes or coins. It
is true that only from the primitive system called barter i.e. exchange
of goods for goods- emerged the system of payment through some form of
money- -both made of Metals and Paper.
At the beginning of the bygone years say in and around 9000 BC, it was seen that the most popular form of barter was live stocks such as Ox, cows, goats , sheep etc which were exchanged. With the advent of agriculture the use of grain and other vegetable or plant products too came to be exchanged. Besides the live stocks and cattle, in and around 13000 BC, expensive shells and cowries which were widely available in the Indian Ocean and Pacific Ocean were also considered as money for transacting the business. They were considered treasured item in the civilizations of China and India from very early times. This system continued till the Europeans arrived in Asia.
In about 1500 years ago metals represented the stored value of goods exchanged as barter in place of shells and Cowries. The earliest form of money in metallic form was used in China in and around 1000 BC while in the third millennium BC in Egypt the metallic Money consisted of Gold bars. Money, one of the earliest and most significant inventions of civilization became essential to the development of trade.
When use of metals as a form of Money became prevalent they had holes in between as the coins could be chained together which made one easier to carry them for transacting the business. If we see the earlier coins issued by the Govt of India, one may find holes in the center for few reasons. It was perhaps thought that the coins will weigh less and they can be easily carried by chaining with thick thread if they had holes. From metals like Copper and Steel came the Silver, Bronze and Gold coins to act as Money. Gradually the metallic coins with some images impregnated as seals were adopted across the world as Money.
Prior to the introduction of banknotes, precious or semi-precious metals minted into coins were widely used as a medium of exchange. The value attributed to Money in coins were originally based upon the value of the metal, but over time, coins developed a value in their own right which might have differed substantially from the metal from which they were made.
The next form of currency that was used as Money was issued in leather for a limited period but did not succeed. The idea of a using durable light-weight substance like leather as evidence of a promise to pay a bearer on demand originated during the Han Dynasty in China. It has been discovered that around the year 118 B.C when Han Dynasty ruled China, some of the banknotes in China were made from leather such as white deerskin. This period is believed to be just the starting of paper money.
This may be true because parched vellum, an animal skin treated and used as Paper to document the texts surfaced in China during the same period i.e 9th century A.D to 15th Century A.D. Numismatics are of the opinion that in India in the 13th century in the Yadav kingdom the concept of leather currency appeared to have been known. If a king were to impress his royal stamp on a piece of leather, it may pass of as Money. In one of the most infamous act an eccentric monarch called Muhammad Bin Tughlaq (1325-1350 AD), reportedly introduced leather currency in India, but like many of his other monetary reforms it did not succeed.
It will be interesting to read the following news which throw some light on the use of Leather as Currency :
LEATHER MILITARY SIEGE MONEY
David Klinger writes: "I recently acquired an interesting used book from an online bookseller (B&N): "Money and Conquest - Allied Occupation Currencies in World War II", by Vladimir
Petrov (1966 - The Johns Hopkins Press). This is from Petrov's introduction:
"During the prolonged siege of Tyre in the year 1123, the Doge Domenigo Michieli exhausted his treasury chest. Because his brave Venetians clamored for pay and some reportedly contemplated desertion, the resourceful Doge had leather coins struck and issued them to pay his troops. The issue of this "money of necessity" was accompanied by a solemn promise that it would be redeemed at full face value upon the return of the fleet to Venice. Historians did not record the reaction of the crusaders to this early substitute for good gold, or indeed whether Domenigo Michieli, noted for his shrewdness as well as his ferocity, actually honored his pledge. But in all probability these leather coins were the first issue of what has eventually come to be called military currency.
Kublai Khan, the most famous Mongol ruler in China in 13th Century issued
Paper Money by decreeing that his paper money must be accepted by
traders and to enforce it he confiscated all gold and silver, even if
it was brought in by foreign traders.
Impressed by the efficacy of the Paper Money established by Kublai Khan, one of the most famous travelers Marco Polo, who discovered some of the Nations, chronicled in his The Travels of Marco Polo (Il Milione) on the use of Paper Money:
these pieces of paper are issued with as much solemnity and authority
as if they were of pure gold or silver; and on every piece a variety of
officials, whose duty it is, have to write their names, and to put their
when all is prepared duly, the chief officer deputed by the Khan smears
the seal entrusted to him with vermilion, and impresses it on the
paper, so that the form of the seal remains imprinted upon it in red;
the money is then authentic.
forging it would be punished with death. And the Khan causes every year
to be made such a vast quantity of this money, which costs him nothing,
that it must equal in amount all the treasure of the world."
- Unquote ( Courtesy: http://www.computersmiths.com )
........to be continued