Have you ever wondered how the concept of cash developed?
The fiat Dollars, Euros, Yen, and Sterling that change hands daily have an extensive history as reserve currencies. The paper in wallets and the digital numbers that flow through small businesses and corporate accounts form the backbone of the global economy. Cash has taken on interesting and exciting forms over the ages. Base metals, precious metals, and finally a paper promise to the bearer on demand have all been accepted by communities as currency for trade.
The purpose of cash is to present a portable medium of exchange that represents the efforts of labor.
This idea has always been the core concept of cash and the key to its ongoing legacy; to create a lightweight, portable asset that is easily stored and readily accepted by creditors. The Chinese people were the initial creators and innovators of alternative forms of currency. Here is a brief history covering the evolution of this monetary instrument.
The Birth of Cash
2500 – 1455 BC
Chinese communities first outlined the concept of cash over 2,000 years BCE. At the time, talented artisans manufactured agricultural tools from base metals mined by local operations. The tools became worth much more than just the materials; they represented a finished product that contained hours of skilled labor and the potential of offering income to the person that purchased them. Thus tools became a representation of value, with a demand from the local public for their agricultural and economic benefit.
As time progressed, people tired of carrying heavy tools to trade for other goods. The tools were cut down to the stock and hilt to enable easy transport and storage. This natural evolution resulted in the final practice of carrying and trading only the steel hoop at the end of the hilt. This stock acted as a means of currency that represented an obligation to pay the bearer on demand for goods and services rendered.
The steel hoops were collected and strung through a steel loop worn on the belt of the owner, thought to be the world’s first wallet.
The Rise of Cash, Zhou dynasty
1046 – 256 BC
By 1000 BC, the Zhou dynasty had issued an official currency and introduced laws to regulate its use amongst the Chinese people.
By the turn of the fourth century, the Chinese financial system featured a healthy credit market and a refined currency system.
Coins were made from copper or bronze with the most remarkable feature being that they were cast, not minted, in a ‘casting tree.’ The coinage also featured a square hole in the center, allowing the coins to be stacked on top of one another and filed by hand to their final round, smooth finish.
These coins were officially named ‘cash,’ which is the origin of the word and the first time it is used in recorded history to describe currency.
Centralizing Currency, Qin Dynasty
221 – 206 BC
After unification of China in Imperial China, the Qin dynasty centralized the Chinese monetary system. The government outlawed the use of any other means of exchange other than the official currency of the state. The shells, gems and other metals previously used as money became contraband, with the state implementing the first legal tender laws.
The final blow to alternative currency came when the government declared that only state-recognized legal tender coins, or ‘cash’, would be accepted as payment for taxes. Cash was the preferred currency and medium of exchange for almost a thousand years.
As the Chinese economy expanded, the demand for coins grew, to the point of casting ‘cash’ from wrought iron instead of copper or bronze. The Qin government, therefore, debased their currency to the point where its value began to diminish, and citizens were required to carry large, heavy loads of iron coins to complete simple transactions.
Enter the Paper Tiger, Hien-Tsung dynasty
806 – 821 AD
The first certificates of deposit were created by the Hien-Tsung dynasty somewhere between 806 to 821 BC. Cash deposited in government bank vaults backed the certificates with intrinsic value, and the population began to use these claim checks or receipts for trade.
The world’s first paper money was born into economic existence and nicknamed, ‘flying money’ for its portable and lightweight nature.
We will continue our historical journey up to the Ming dynasty next week in The Evolution of Cash in China – Part 2.