A brief history of money

One of the foundational aspects of civilization was the development of items with a monetary value. Initially, different values were culturally assigned to precious metals and jewels. Something which in turn allowed people to transition from the simple and straightforward bartering system to a more elaborate exchanging system where sellers gave their goods in exchange for a certain amount of gold or silver. As civilization progressed thorough the centuries, more developed methods of exchange came into use.

However, it took a while until what we today consider as money to actually appear. At first people traded with standardized weight units of certain goods (usually grain) with a specific value accepted society wide. This allowed buyers to trade these weights of grain for other goods. For example, one of the first uses of a system like the one previously mentioned was the ancient shekel implemented around the year 3000 BC. The shekel was a unit of weight equivalent to a certain amount of barley, and people from many cultures from the Eastern shores of the Mediterranean Sea used it to trade weights of barley for goods and services. Similar systems were also used in Mesopotamia, as we can observe in the Code of Hammurabi, the code of Ur-Nammu and the Code of Eshunna.

The first coins

Money as we know it started appearing in the year 1000 BC in China, during the Zhou dynasty with the creation of the first coins. These primitive coins weren’t the disks we’re used to, but instead they were shaped like small spades. Modern disk shaped coins started appearing in the kingdom of Lydia in Asia Minor (around today’s Turkey) during the 7th century BC. From then on, and thanks to the importance of that region as a trading hub, most cultures in Northern Africa, Asia, the Middle East and Southern Europe adopted similarly disk shaped coins over time.

Chinese spade coins from the 1000 BC.
These silver spades invented in Chine were the first coins used in history in order to exchange goods and services in a standardized way.

Paper money

Curiously enough although it took nearly 8000 years from the establishment of the first agrarian civilizations to the creation of coins, going from coins to paper money took only 3 centuries. Paper money also was invented in China, and it appeared in the 7th century during the Tang dynasty. The revolutionary aspect of paper money is that, unlike coins whose value was guaranteed by the metal with which they were made, the value of paper money was guaranteed by the state itself.

As it is not difficult to imagine, during its beginnings the adoption of paper money was widely resisted and even rejected by the general population. It took a great effort by the state, mainly by forcing goods sellers and banks to accept it, in order to make paper money a regular thing among the population.

The “Jiaozi” the earliest preserved banknote. it dates back to the Song Dynasty.

Today paper money is still one of the most popular means of monetary exchange, but technology may soon bring that to an end thanks to the popularity of credit cards and the constant growth of e-payment methods.

The most expensive currency in the world

The most expensive currency in the world right now, and during the past decades as well, is the KD or Kuwaiti dinar. Each Kuwaiti dinar is equivalent to $3.25 US dollars or $2.88 Euro. Kuwait is a relatively small 4.4 million people oil rich nation in the Middle East, famous for its vast luxuries and riches. Their currency, the Kuwaiti dinar, is the world’s highest-valued currency unit per face value (basically economics speak to say it’s the most expensive currency in the world).

The KD was introduced in order to replace the Gulf rupee during 1960, and originally it was paired in value to the pound sterling. The Kuwaiti dinar was briefly replaced by the Iraqi dinar in 1990 when Iraq invade Kuwait, but after the Gulf War and the subsequent retreat of Iraqi forces from Kuwait the dinar was reinstated. Its symbol is the ك or KD.

A man holding all the KD banknotes. We can see tthe fractional bills.

Here’s an amazing fact, the Kuwait dinar is such an expensive banknote that it’s one of the very few currencies in the world with fractional bills. The means that instead of 1 being the lowest, there are bills with fractional values. Currently you can find KWs in these values: ​14, ​12, 1, 5, 10, 20.

The 1⁄4 kuwaiti dinar is roughly equivalent to one US dollar.

The $100,000 dollar bill

Believe it or not there exists a perfectly legal $100,000 dollar bill (although it cannot be legally held since it was never in circulation). The Woodrow Wilson dollar or the $100,000 dollar bill was a special banknote issued by US treasury in 1934 as a gold certificate after the gold standard was repealed and compulsorily confiscated by orders of President Franklin Roosevelt a year earlier.

The Woodrow Wilson dollar or the $100,000 dollar bill, considered as the most expensive currency in history.
The Woodrow Wilson dollar or the $100,000 dollar bill.

This note was intended to be used only in transactions between Federal Reserve Banks and was not issued to the public. In other words, it was a bank note used among banks during the 30s when they needed to transfer large amounts of money between their treasuries.

Note: we also need to take inflation into account, since a dollar today is worth only 5% of a dollar in 1934. $100,000 1934 dollars are equivalent to roughly $1.9 million present day dollars.