history paper money

The Invention of Paper Money

History of Chinese Currency

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Paper money is an invention of the Song Dynasty in China in the 11th century CE, nearly 20 centuries after the earliest known use of metal coins. While paper money was certainly easier to carry in large amounts, using paper money had its risks: counterfeiting and inflation.

Earliest Money

The earliest known form of money is also from China, a cast copper coin from the 11th century BCE, which was found in a Shang Dynasty tomb in China. Metal coins, whether made from copper, silver, gold, or other metals, have been used across the globe as units of trade and value. They have advantages—they are durable, difficult to counterfeit, and they hold intrinsic value. The big disadvantage? If you have very many of them, they get heavy.

For a couple thousand years after the coins were buried in that Shang tomb, however, merchants, traders, and customers in China had to put up with carrying coins, or with bartering goods for other goods directly. Copper coins were designed with square holes in the middle so that they could be carried on a string. For large transactions, traders calculated the price as the number of coin strings. It was workable, but an unwieldy system at best.

Paper Money Takes the Load Off

During the Tang Dynasty (618–907 CE), however, merchants began to leave those heavy strings of coins with a trustworthy agent, who would record how much money the merchant had on deposit on a piece of paper. The paper, a sort of promissory note, could then be traded for goods, and the seller could go to the agent and redeem the note for the strings of coins. With trade renewed along the Silk Road, this simplified cartage considerably. These privately-produced promissory notes were still not true paper currency, however.

At the beginning of the Song Dynasty (960–1279 CE), the government licensed specific deposit shops where people could leave their coins and receive notes. In the 1100s, Song authorities decided to take direct control of this system, issuing the world's first proper, government-produced paper money. This money was called jiaozi . 

Jiaozi under the Song

The Song established factories to print paper money with woodblocks, using six colors of ink. The factories were located in Chengdu, Hangzhou, Huizhou, and Anqi, and each used different fiber mixes in their paper to discourage counterfeiting. Early notes expired after three years, and could only be used in particular regions of the Song Empire.

In 1265, the Song government introduced a truly national currency, printed to a single standard, usable across the empire, and backed by silver or gold. It was available in denominations between one and one hundred strings of coins. This currency lasted only nine years, however, because the Song Dynasty tottered, falling to the Mongols in 1279.

Mongol Influence

The Mongol Yuan Dynasty , founded by Kublai Khan (1215–1294), issued its own form of paper currency called chao; the Mongols brought it to Persia where it was called djaou  or djaw . The Mongols also showed it to Marco Polo (1254–1324) during his 17-year-long stay in Kublai Khan's court, where he was amazed by the idea of government-backed currency. However, the paper money was not backed by gold or silver. The short-lived Yuan Dynasty printed increasing amounts of the currency, leading to runaway inflation. This problem was unresolved when the dynasty collapsed in 1368.

Although the succeeding Ming Dynasty (1368–1644) also began by printing unbacked paper money, it suspended the program in 1450. For much of the Ming era, silver was the currency of choice, including tons of Mexican and Peruvian ingots brought to China by Spanish traders. Only in the last two, desperate years of Ming rule did the government print paper money, as it attempted to fend off the rebel Li Zicheng and his army. China did not print paper money again until the 1890s when the Qing Dynasty began producing yuan .

• Lande, Lawrence, and T. I. M. Congdon. " John Law and the Invention of Paper Money. " RSA Journal 139.5414 (1991): 916–28. Print.
• Lui, Francis T. " Cagan's Hypothesis and the First Nationwide Inflation of Paper Money in World History. " Journal of Political Economy 91.6 (1983): 1067–74. Print.
• Pickering, John. " The History of Paper Money in China ." Journal of the American Oriental Society 1.2 (1844): 136–42. Print.
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How Did Paper Money Develop in the Premodern World?

Paper money was created during China’s Song Dynasty, based upon ancient economic ideas and medieval inventions, which combined to create the world’s first paper currency.

Paper money (also banknote or bill) was first invented in China’s Song Dynasty (CE 960-1279) after a long process that can be traced back to the 3rd century BCE. Eventually, coin currency became too cumbersome and devalued, so various economists, philosophers, and emperors looked for answers. By the medieval era, the Chinese had developed new technologies, as well as different ways of visualizing money, which allowed them to develop the world’s first paper money. The following is an examination of the process that led to the emergence of paper money in medieval China.

Before Paper Money

The development of paper money was the result of a long process that began centuries earlier, thousands of miles away in the Near East. The Lydians were the first people to mint state supported coined currency in the 7th century BCE, and shortly after others followed. The Achaemenid Persians, Greeks, and Romans all developed coined currency from silver, gold, bronze, and copper, which provided the basis for the economies of medieval Europe and the Middle East. But as coined currency was being developed in the West, it was also flourishing independently in the East.

The Mauryan dynasty of India (c. 321-185 BCE), the Qin dynasty of China (221-206 BCE), and the Han dynasty of China (206 BCE-CE 220) were the earliest and most successful Asian states to utilize coined currency. These states disseminated the idea of coined currency throughout southern and eastern Asia, helping to prepare the continent for the eventual development of paper money. It was in late antiquity when the economic ideas of the West and East finally met along the Silk Road , which proved to be another major step in the development of money.

The Silk Road and Coined Currency

The Silk Road was actually a series of overland and sea routes that connected east Asia with the Middle East and Europe. The first Silk Road system existed from the late-2nd century BCE to the mid-3rd century CE, which was responsible for moving goods, ideas, and people. The first Silk Road system included the states of Han China, Parthian Persia, Rome, and the Kushan Empire . Among those states, the Kushan Empire is often overlooked, but its leaders played an important role in the development of coin and paper currency.

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All four of the major Silk Road states used copper, bronze, gold, and silver coins, but they used different systems of weights. A Roman, Kushan, Parthian, and Han silver coin may have looked similar, but because they often had different weights their inherent values were different. This situation could and did cause problems for long-distance merchants who wanted to trade coins of one empire for another. The Kushan rulers came up with a simple yet effective way to convert one trade or convert currencies by introducing a Kushan coin that was based on the Roman weight standard . Ideas such as this would percolate throughout the late ancient and early medieval worlds, ultimately leading to the creation of paper money and monetary standardization.

Chinese Coined Currency 

As coined currency developed in China, it looked physically different than coinage in other locations. The Han and Qin authorities developed a method of standardization known as “strings” or guan . In this system, 1,000 bronze coins with square holes were threaded together to create one “string” or guan , making it the currency standard of ancient China . The guan standard was codified in the Tang dynasty (CE 618-907), but during that time the Chinese economy moved closer to paper money.

The first use of paper banknotes, known as “flying cash,” was in the early 800s between provinces. This was because, although the guan was the standard of the Tang government, different regional coins were still used. Originally, flying cash was just used by provincial officials, but it was also later permitted for merchant use . The evolution to paper money was well underway when the Song dynasty came to power, but other conditions still needed to be met.

The Transition to Paper Money in the Song

The Emperor Taizu (ruled CE 960-976) further standardized China’s coin currency across all regions by eliminating existing regional coins. The new, standardized coin became known as the Song yuan tongbao (primary circulating treasure of the Song), but it quickly encountered problems. By 1080 there were five million strings of the Song yuan tongbao in circulation, which itself was probably too much. Lead was added to the high number of bronze-coined currency circulating in the Song economy, which created crippling inflation . The otherwise prosperous and stable Song economy began to teeter, so forward-thinking leaders looked to paper for a solution.

In addition to the devaluation of the coined currency, a number of other factors, some practical and some philosophical, led to the use of paper money. First, the high demand for bronze, copper, and iron created a dearth of materials to make coins. Iron and copper were needed to make weapons and tools for the expanding Song Empire, and bronze is an alloy derived partially from copper. As the Chinese began using these commodities for things other than coinage, they began to view the concept of money differently. Song officials and philosophers began to see money not so much for the value of the token itself, but as a means of payment and exchange . Once this view was accepted, then the transition to paper currency was inevitable.

The transition to paper money would not have been possible without the proper technology. The invention of the movable type press, probably by Bi Shen in the 1040s, combined with the existing knowledge of paper making, made paper money a reality . Unfortunately, no samples of the earliest paper currency notes survive, although texts from the era describe how they were made and what they looked like. The notes were made through multiple impressions of three colors: red, black, and blue. The notes were marked by their value and decorated with narrative scenes and iconic emblems of the era .

One interesting element of early paper currency in China that may have been a component of both its success and failure was its decentralization. A number of different paper currencies were issued during the Song dynasty, with no single currency existing until the final decade of the dynasty. Instead, there were several “currency zones” throughout the empire, where regional officials would issue their own currencies that were authorized by the emperor. The earliest paper currency used was the jiaozi in Sichuan, which proved to be quite successful. In 1160, the paper currency known as the huizi was first issued by Goazong (ruled 1127-1162), the first emperor of the Southern Song dynasty. The huizi would become the most important and widespread of all paper currencies.

The huizi was far ahead of its time in many ways. The emperor issued each series of the note with fixed terms of expiration to fight inflation and lessen the effects of counterfeiting. Between 1168 and 1264 the Southern Song emperors issued eighteen series of the huizi . The Song central economy planners tied the huizi to the coined currency still active, with one huizi equaling one guan . Later, smaller paper denominations were printed that equaled partial strings of 200, 300, and 500 coins . The huizi was backed by silver , so the value of printed notes was theoretically not supposed to surpass the value of the silver supply. The Song leaders eventually printed more money than the value of the silver supply, devaluing the currency and creating inflation.

Early Paper Money Elsewhere

The primary rival of the early Song dynasty was the Jurchen Jin dynasty in northeastern China. The Jurchens eventually forced their way into Song territory, conquering northern China and vanquishing the Song dynasty to southern China. From 1127 to 1234 the Jurchens ruled northern China, following a policy of cultural and economic continuity from the Song. The Jurchens issued paper money notes beginning in the mid-1150s based on the Song notes originally issued in the Sichuan zone . The concept of paper money was then inherited when the Mongols conquered China and established the Yuan dynasty in 1271. As these advances in paper currency were taking place in the East, the West was lagging far behind, although some innovations were taking place there as well.

The legendary crusader military order, Knights Templar , were the first people to develop a proto-paper money in Europe. Churches throughout western Europe served as banks for the Templars, who serviced knights and other pilgrims who traveled to the Holy Land during the Crusades in the 13th century. The process worked in the following manner. A pilgrim would deposit his funds at a church or Templar castle in Europe, be given a paper note, and would then make the long journey. Once the pilgrim arrived in the Holy Land, he simply redeemed the note for coined currency , minus a small service charge. Although the Templars initially avoided charges of usury by not charging interest, they were still subjected to the Inquisition in 1312. The idea of paper money in Europe temporarily died with the Inquisition, but it was likely revived by the Silk Road when European merchants came into contact with Mongol paper money, later bringing the idea back to Europe. By the late High Middle Ages the idea of coined and paper currency had come full circle along the Silk Road.

Qin Shi Huangdi: The Man Who Gave His Name to China

By Jared Krebsbach PhD History, MA Art History, BA History Jared is a fulltime freelancer with a background in history. His work has been published in academic journals as well as popular magazines, blogs, and websites. Historical interests include cyclical history, religious history, and economics.

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The Invention of Money

By John Lanchester

When the Venetian merchant Marco Polo got to China, in the latter part of the thirteenth century, he saw many wonders—gunpowder and coal and eyeglasses and porcelain. One of the things that astonished him most, however, was a new invention, implemented by Kublai Khan, a grandson of the great conqueror Genghis. It was paper money, introduced by Kublai in 1260. Polo could hardly believe his eyes when he saw what the Khan was doing:

He makes his money after this fashion. He makes them take of the bark of a certain tree, in fact of the mulberry tree, the leaves of which are the food of the silkworms, these trees being so numerous that whole districts are full of them. What they take is a certain fine white bast or skin which lies between the wood of the tree and the thick outer bark, and this they make into something resembling sheets of paper, but black. When these sheets have been prepared they are cut up into pieces of different sizes. All 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 seals. And 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. Anyone forging it would be punished with death.

That last point was deeply relevant. The problem with many new forms of money is that people are reluctant to adopt them. Genghis Khan’s grandson didn’t have that difficulty. He took measures to insure the authenticity of his currency, and if you didn’t use it—if you wouldn’t accept it in payment, or preferred to use gold or silver or copper or iron bars or pearls or salt or coins or any of the older forms of payment prevalent in China—he would have you killed. This solved the question of uptake.

Marco Polo was right to be amazed. The instruments of trade and finance are inventions, in the same way that creations of art and discoveries of science are inventions—products of the human imagination. Paper money, backed by the authority of the state, was an astonishing innovation, one that reshaped the world. That’s hard to remember: we grow used to the ways we pay our bills and are paid for our work, to the dance of numbers in our bank balances and credit-card statements. It’s only at moments when the system buckles that we start to wonder why these things are worth what they seem to be worth. The credit crunch in 2008 triggered a panic when people throughout the financial system wondered whether the numbers on balance sheets meant what they were supposed to mean. As a direct response to the crisis, in October, 2008, Satoshi Nakamoto, whoever he or she or they might be, published the white paper that outlined the idea of Bitcoin , a new form of money based on nothing but the power of cryptography.

The quest for new forms of money hasn’t gone away. In June of this year, Facebook unveiled Libra, global currency that draws on the architecture of Bitcoin. The idea is that the value of the new money is derived not from the imprimatur of any state but from a combination of mathematics, global connectedness, and the trust that resides in the world’s biggest social network. That’s the plan, anyway. How safe is it? How do we know what libras or bitcoins are worth, or whether they’re worth anything? Satoshi Nakamoto’s acolytes would immediately turn those questions around and ask, How do you know what the cash in your pocket is worth?

The present moment in financial invention therefore has some similarities with the period when money in the form we currently understand it—a paper currency backed by state guarantees—was first created. The hero of that origin story is the nation-state. In all good stories, the hero wants something but faces an obstacle. In the case of the nation-state, what it wants to do is wage war, and the obstacle it faces is how to pay for it.

The modern system for dealing with this problem arose in England during the reign of King William, the Protestant Dutch royal who had been imported to the throne of England in 1689, to replace the unacceptably Catholic King James II. William was a competent ruler, but he had serious baggage—a long-running dispute with King Louis XIV of France. Before long, England and France were involved in a new phase of this dispute, which now seems part of a centuries-long conflict between the two countries, but at the time was variously called the Nine-Years’ War or King William’s War. This war presented the usual problem: how could the nations afford it?

King William’s administration came up with a novel answer: borrow a huge sum of money, and use taxes to pay back the interest over time. In 1694, the English government borrowed 1.2 million pounds at a rate of eight per cent, paid for by taxes on ships’ cargoes, beer, and spirits. In return, the lenders were allowed to incorporate themselves as a new company, the Bank of England. The bank had the right to take in deposits of gold from the public and—a second big innovation—to print “Bank notes” as receipts for the deposits. These new deposits were then lent to the King. The banknotes, being guaranteed by the deposits, were as good as gold money, and rapidly became a generally accepted new currency.

This system is still with us, and not just in England. The more general adoption of the scheme, however, was not a story of uninterrupted success. Some of the difficulties are recounted in James Buchan’s fascinating “ John Law: A Scottish Adventurer of the Eighteenth Century .” Law was the Edinburgh-born son of a goldsmith turned banker. He moved to London in 1692, where he observed the wondrous new scheme of government paid for by long-term debt and paper money. One of the most significant effects of the paper money was the way it stimulated borrowing and lending—and trading. Law had an instinctive understanding of finance and a love of risk, and it is tempting to wonder what would have happened if he had lent his services to the English government. Instead, on April 9, 1694, a different fate was set in motion. He killed a man in a duel, or brawl—the distinction, as Buchan explains, was not all that clear. “Duels then were not the tournaments of the Middle Ages or the affairs of honour of later years, governed by written codes of conduct and discharged at dawn with pistols in some snowy forest clearing,” he writes. They might be conducted “with rapiers or short swords in hot or barely cooling blood, sometimes with seconds drawn and fighting, and shading away into assassination and armed robbery.” Law was sent to prison to await a murder trial. He used his connections to get out, as prisoners of means did, and fled abroad as an outlaw.

Law spent the next few years knocking around Europe, learning about gambling and finance, and writing a short book, “Money and Trade Considered,” which in many respects foreshadows modern theories about money. He became rich; like Littlefinger in “Game of Thrones,” Law seems to have been one of those men who had the knack of “rubbing two golden dragons together and breeding a third.” He bought a fancy house in The Hague and made a close study of the many Dutch innovations in finance, such as options trading and short selling. In 1713, he arrived in France, which was beset by a problem he was well suited to tackle.

The King of France, Louis XIV, was the preëminent monarch in Europe, but his government was crippled by debt. The usual costs of warfare were added to a huge bill for annuities—lifelong interest payments made in settlement of old loans. By 1715, the King had a hundred and sixty-five million livres in revenue from taxes and customs. Buchan does the math: “Spending on the army, the palaces and court and the public administration left just 48 million livres to meet interest payments on the debts accumulated by the illustrious kings who had gone before.” Unfortunately, the annual bill for annuities and wages of lifetime offices came to ninety million livres. There were also outstanding promissory notes, amounting to nine hundred million livres, left over from various wars; the King wouldn’t be able to borrow any more money unless he paid interest on those notes, and that would cost an additional fifty million livres a year. The government of France was broke.

In September of 1715, Louis XIV died, and his nephew the Duke of Orleans was left in charge of the country, as regent to the child king Louis XV. The Duke was quite something. “He was born bored,” the great diarist Saint-Simon, a friend of the Duke’s since childhood, observed. “He could not live except in a sort of torrent of business, at the head of an army, or in managing its supply, or in the blare and sparkle of a debauch.” Facing the financial crisis of the French state, the Duke started listening to the ideas of John Law. Those ideas—more or less orthodox policy today—were wildly original by the standards of the eighteenth century.

Law thought that the important thing about money wasn’t its inherent value; he didn’t believe it had any. “Money is not the value for which goods are exchanged, but the value by which they are exchanged,” he wrote. That is, money is the means by which you swap one set of stuff for another set of stuff. The crucial thing, Law thought, was to get money moving around the economy and to use it to stimulate trade and business. As Buchan writes, “Money must be turned to the service of trade, and lie at the discretion of the prince or parliament to vary according to the needs of trade. Such an idea, orthodox and even tedious for the past fifty years, was thought in the seventeenth century to be diabolical.”

This idea of Law’s led him to the idea of a new national French bank that took in gold and silver from the public and lent it back out in the form of paper money. The bank also took deposits in the form of government debt, cleverly allowing people to claim the full value of debts that were trading at heavy discounts: if you had a piece of paper saying the king owed you a thousand livres, you could get only, say, four hundred livres in the open market for it, but Law’s bank would credit you with the full thousand livres in paper money. This meant that the bank’s paper assets far outstripped the actual gold it had in store, making it a precursor of the “fractional-reserve banking” that’s normal today. Law’s bank had, by one estimate, about four times as much paper money in circulation as its gold and silver reserves. That is conservative by modern banking standards. A U.S. bank with assets under a hundred and twenty-four million dollars is obliged to keep a cash reserve of only three per cent.

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The new paper money had an attractive feature: it was guaranteed to trade for a specific weight of silver, and, unlike coins, could not be melted down or devalued. Before long, the banknotes were trading at more than their value in silver, and Law was made Controller General of Finances, in charge of the entire French economy. He also persuaded the government to grant him a monopoly of trade with the French settlements in North America, in the form of the Mississippi Company. He funded the company the same way he had funded the bank, with deposits from the public swapped for shares. He then used the value of those shares, which rocketed from five hundred livres to ten thousand livres, to buy up the debts of the French King. The French economy, based on all those rents and annuities and wages, was swept away and replaced by what Law called his “new System of Finance.” The use of gold and silver was banned. Paper money was now “fiat” currency, underpinned by the authority of the bank and nothing else. At its peak, the company was priced at twice the entire productive capacity of France. As Buchan points out, that is the highest valuation any company has ever achieved anywhere in the world.

It ended in disaster. People started to wonder whether these suddenly lucrative investments were worth what they were supposed to be worth; then they started to worry, then to panic, then to demand their money back, then to riot when they couldn’t get it. Gold and silver were reinstated as money, the company was dissolved, and Law was fired, after a hundred and forty-five days in office. In 1720, he fled the country, ruined. He moved from Brussels to Copenhagen to Venice to London and back to Venice, where he died, broke, in 1729.

The great irony of Law’s life is that his ideas were, from the modern perspective, largely correct. The ships that went abroad on behalf of his great company began to turn a profit. The auditor who went through the company’s books concluded that it was entirely solvent—which isn’t surprising, when you consider that the lands it owned in America now produce trillions of dollars in economic value.

Today, we live in a version of John Law’s system. Every state in the developed world has a central bank that issues paper money, manipulates the supply of credit in the interest of commerce, uses fractional-reserve banking, and features joint-stock companies that pay dividends. All of these were brought to France, pretty much simultaneously, by John Law. His great and probably unavoidable mistake was to underestimate the volatility that his inventions introduced, especially the risks created by runaway credit. His period of brilliant success in France left only two monuments. One was created by the Duke of Bourbon, who cashed out his shares in the company and used the windfall to build the Great Stables at Chantilly. “John Law had dreamed of a well-nourished working population and magazines of home and foreign goods,” Buchan notes. “His monument is a cathedral to the horse.” His other legacy is the word “millionaire,” first coined in Paris to describe the early beneficiaries of Law’s dazzling scheme.

How did these once wild ideas become part of the very fabric of modern finance and government? Trial and error. It was not the case that smart people figured everything out at once and implemented it simultaneously, as Law tried to do. The modern economic system evolved, and evolution involves innovations, repetitions, failures, and dead ends. In finance, it involves busts and panics and crashes, because, as James Grant says in his lively new biography of the Victorian banker-journalist Walter Bagehot, “in finance and economics, we keep stepping on the same rakes.”

Bagehot (pronounced “badge-it”) knew all about those rakes. He grew up in the West of England in a family with strong links to a well-run local bank, Stuckey’s. After going to university and trying his hand at being a lawyer, he turned to journalism and to banking, the latter career paying for the former. He married the daughter of James Wilson, who had founded The Economist , in 1843—Bagehot became its third editor—and lived a life that was, from the outside, fairly uneventful. The interest in Bagehot comes from his dazzling, witty, paradox-loving writing, and in particular from his two key works, “ The English Constitution ” (1867), which sums up the unwritten order of Great Britain’s political institutions, and “ Lombard Street ” (1873), which explains how banking works. These books are still readable today, but they were of interest mainly to wonks until Ben Bernanke name-checked Bagehot as a crucial influence on the thinking behind the 2008 bank bailouts. That caused a revived interest, which led to the writing of Grant’s “ Walter Bagehot: The Life and Times of the Greatest Victorian .”

“Greatest” is a loaded word, especially since Grant—who is, among other things, the founder of Grant’s Interest Rate Observer —makes it clear that Bagehot was an unashamed misogynist and racist (“There are breeds in the animal man just as in the animal dog”) and an accomplished hypocrite. The last quality was useful from the journalistic point of view; Bagehot was brilliant at swapping sides without ever admitting that he had changed his mind. A Confederate victory in the Civil War, for instance, was “a certain fact,” and President Lincoln was “dishonest and foolish,” a settled view that didn’t preclude Bagehot from declaring, once the Union had prevailed, that “panic did not for a moment unnerve the iron courage of the American democracy.” His subsequent elegy for Lincoln is a genuinely lovely piece of writing: “Difficulties, instead of irritating him as they do most men, only increased his reliance on patience; opposition, instead of ulcerating, only made him more tolerant and determined.”

In a sense, this highfalutin hypocrisy and lack of principle is the point of Bagehot. His work on the English constitution focussed on a paradox: the pomp and circumstance of monarchy had an important function, he argued, precisely because the monarch had no real power. Bagehot’s work on banking similarly focussed on the difference between appearances and realities, specifically the gap between the air of solidity and respectability cultivated by Victorian banks and the evident fact that they kept collapsing and going broke. There were huge bank crises in 1797, in 1825, in 1847, and in 1857, all of them caused by the oldest and simplest reason of bankruptcy in finance: lending money to people who can’t pay it back.

In theory, all the money in circulation during the era of Victorian banking was backed up by deposits in gold. One pound in paper money was backed by 123.25 grains of actual gold. In practice, that wasn’t true. There were multiple occasions—usually linked to the cost of that old classic, war with France—when the government suspended the convertibility of paper money to gold. In addition, banks could print their own money. They often didn’t have enough gold to sustain the value of their notes, in the event of customers coming to the bank and demanding conversion. That phenomenon, the dreaded “bank run,” was a direct outcome of the fractional-reserve banking prefigured by John Law. A system in which banks don’t hold cash reserves equivalent to their outstanding loans works fine, unless enough people turn up at the bank and simultaneously want their paper money turned into its metal equivalent. Unfortunately, that kept happening, and banks kept going broke. The issues at stake were the same as those that had shaped the career of John Law, and which are on people’s minds again today: What is money? Where does it derive its value? Who finally guarantees the value of debts and credits?

Bagehot had answers to all those questions. He thought that money, real money, was gold, and gold alone. All the other forms of currency in the system were merely different kinds of credit. Credit was indispensable to a functioning economy, and helped make everybody rich, but in the final analysis only gold was legal tender, according to the strict definition of the term—money that cannot be refused in settlement of a debt. (U.S. currency makes sure you know it is legal tender: it says so right there on the front.) Bagehot loved a paradox, and this was one: all the credit in the system was essential to the economy, but it wasn’t really money, because it wasn’t gold, which underpinned the value of everything else.

So where was all the gold? In the Bank of England. The role of that once private company had evolved. Bagehot thought it was the Bank of England’s job to hold the gold, so that all the smaller banks didn’t have to. Instead, the smaller banks took deposits, made loans, and issued paper money. If they got into trouble—which they tended to do—the big bank would bail them out. Why shouldn’t all the other banks hold their own gold, and take care of their own solvency? Bagehot the banker-writer was completely frank about the reason. “The main source of the profitableness of established banking is the smallness of the requisite capital,” he wrote. The modern way of putting this would be to talk about the bank’s return on equity. The less equity the bank needed to keep as a margin of safety, the more money it could lend, and, therefore, the more profit it could make. Gold was essential in order to guarantee the currency, but the bankers didn’t want it taking up valuable space on their balance sheets. Better to let the government do that, in the form of the Bank of England.

We still have a version of this system, in which government guarantees underpin the profitability of banks. The central bank’s crucial role is to lend money freely at a time of crisis—to be what is called “the lender of last resort.” Grant, who admits to “a libertarian’s biases,” sees this doctrine as the seed of “deposit insurance, the too-big-to-fail doctrine, and the rest of the modern machinery of socialized financial risk.”

Like John Law and Walter Bagehot, I’m the child of a man who worked in a bank, and, as such, I had a banker’s-son question running through my mind as I read Grant’s entertaining book: what happened to Bagehot’s bank? The answer is that Stuckey’s was taken over by another bank, Parr’s, in 1909. Parr’s was part of the larger National Westminster Bank, which was taken over by the Royal Bank of Scotland, in 2000. R.B.S., as it is unaffectionately known in the U.K., grew through takeovers to become, in the early years of this century, the biggest company in the world, as measured by the size of its balance sheet. Then came the credit crunch, and the moment—the latest version of the old familiar one—when things turned out not to be worth what they were supposed to be worth. The biggest bank in the world came, according to its chairman, to within “a couple of hours” of complete collapse. The outcome was a huge bailout, and the nationalization of R.B.S., with costs to the British taxpayer of forty-five billion pounds. Not much about that story would have surprised John Law or Walter Bagehot. Maybe, though, both men—the man who almost bankrupted a country and the supreme advocate of bankers’ bailouts—would be amused to see just how little we have learned. As for the question of what to do about the bankers responsible for the crash, Kublai Khan would probably have had some ideas. ♦

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The History of Paper Money

Last Updated on January 18, 2024

The history of paper money is a history of failed experiments.

Authorities have sought to utilise the flexibility it gives their finances, but have often mismanaged it and brought catastrophe.

While fiat money is the norm today (now mainly digital and not actually physical paper), paper money has been less common in the past. Throughout much of human history, society has used some form of hard money. That is money that is hard to create and thus limited in its supply, such as precious metals like gold or silver.

The Chinese were the first to adopt paper money around 800 AD with the Tang dynasty and their “flying money.”

Paper money then appeared in Europe in 1661 and in America in 1690.

Initially paper money was redeemable for gold and silver and while the paper existed primarily for convenience, the real money was the metal.

However, things changed in the 20th century with the onset of World War One, as the major powers abandoned the gold standard in order to pay for the war through the printing press.

Governments learned that people would accept paper money with no convertibility into gold.

So today we live with a monetary system in which the US dollar is the global reserve currency but with the dollar having no tie to any hard asset. It exists entirely by fiat.

This works as long as the public maintain their confidence in both the soundness of the money and the authorities that issue the money.

How long we stay with the current system depends on how long governments and central banks can keep that confidence.

Read More: A Short History Of Fiat Currency Failures: 9 Currencies That Have Imploded

Table of Contents

What Is Paper Money?

Paper money is a currency where paper notes are used as the medium of exchange. Normally paper money is issued by a government or a central bank but sometimes it may be issued by commercial banks.

Traditionally, money has been some form of commodity, like gold or silver, that has some degree of natural scarcity and where it is quite difficult to increase the supply.

Unlike commodity money, the paper itself has no value but the currency gains value by the trust and confidence market participants give to the issuing authority.

Because the paper has no value, it is very cheap to create and new units can easily be added to the money supply.

The primary reason why paper money has been used throughout history is that it is more convenient than transporting a large amount of precious metals.

As Saifidean Ammous explains in his book The Fiat Standard , it has a high spatial salability. While it may not retain its value over time, it is very effective at transporting value over space.

Paper money is also referred to as fiat money. Fiat is Latin for “let it be done,” meaning that new units of money can easily be created by the issuing authority.

Before the digital era paper money actually meant physical paper. These days only a tiny fraction of the money supply is actually printed as physical cash. Instead most of it only exists as numbers on a screen in digital form. This is the modern day fiat currency which is still referred to by many as paper money.

And when governments and central banks increasing the supply of money it is often referred to as “printing money” even though the vast majority of the new money is digital.

This article on the history of paper money will start with the physical paper going back to the early Chinese paper money and will conclude with a look at modern fiat currency.

The First Paper Money in China

The first instance of paper money being used in China was during the Tang Dynasty (618-907 AD), which went by the awesome name of feiqian or “flying money.”

Around 800 AD the emperor compelled merchants to leave their cumbersome and heavy hard money in the public vault and issued them with a paper security instead. The security was the “flying money,” aptly named because of its tendency to blow away.

The flying money became a type of currency as it was able to be exchanged amongst the merchants. They were also convertible back into hard currency .

However it wasn’t intended to be used as a currency amongst the wider population and its use was rather limited.

After the Tang Dynasty there was a period of division in China before the Song Dynasty emerged in Southern China. (960-1279).

The Song issued the jiaozi , which were receipts given in exchange for the cumbersome iron money that was in circulation. The jiaozi was representative of an ounce of silver.

The government initially allowed 16 rich families to form a union to issue the jiaozi , before the later deciding to step in and take control themselves in 1024.

The jiaozi was limited to Sichuan and not used widely across the country. It was subject to counterfeiting and suffered from inflation caused by an expanding money supply.

In 1107 the jiaozi was discontinued and replaced with the qianyin.

After 1127 most of Northern China was conquered and the Song Dynasty shrank to almost half its size. The new northern empire, the Jin Dynasty, imitated the Song and issued their own paper currency, the jiaochao.

In 1161 in the now smaller Song empire, a new paper currency, the huizi , was issued. This was used throughout the whole empire with the exception of Sichuan, as they continued to use their own paper currency.

After initially controlling the money supply tightly, financial pressure and war caused the Song government to pursue an inflationary policy, beginning the first nationwide inflation in history.

The Mongols, who had already started using paper currency themselves, then took over China between 1279 and 1367 in what is know as the Yuan Dynasty. As the rulers of China they continued to use paper currency, also know as the jiaochao.

The first jiaochao issue was backed by silk and the second issue backed by silver. Like many great empires they eventually gave into the temptation to debase their currency. This was one of the reasons for the economic difficulties at the end of the Yuan Dynasty and their eventual demise.

The Ming, who succeeded the Mongols, initially continued with paper money before being forced back onto a silver standard . Their successor, the Qing also halted the use of paper money during the early period of their reign, using silver and copper instead.

Paper Money in Europe During The Middle Ages

In Europe in the Middle Ages, money was mostly coins but could also be uncoined precious metals, other valuable commodities or even small squares of cloth.

The Italian city states were the first to experiment with paper money. Due to the dangers and inconvenience of moving large amounts of precious metals, they developed a system of promissory notes and bills of exchange.

These were debt instruments written on paper that included the details and terms of repayment.

In some sense these were seen as paper money but they did not circulate as currency.

The Development Of Banknotes In Europe

It wasn’t until the Swedish Riksbank issued notes in 1661 that Europe first started using paper money in the form of bank notes.

Back then, Sweden was a quite a powerful empire.

This issue was initially successful as the notes were redeemable in hard money, however it comes as no surprise that the bank started printing more notes, which led to a reduction in their value and inflation.

Eventually the bank failed and the central banker, Johan Palmstruch, was sentenced to death.

The Bank of England

The Bank of England was established soon after in 1694 as a private bank to provide loans to the government, primarily to fund the Nine Years War against France.

England had been performing poorly in the war and needed money to rebuild her navy. But with a lack of funds and poor credit the government was in a tight spot.

A loan of £1.2 million was provided to the government by a group of over 1200 lenders , with the lenders being given the right to incorporate the Bank of England as a private company with the ability to issue banknotes.

This was much to the frustration of the goldsmiths who had previously fulfilled the role of banker.

One of them, Richard Hoare, presciently commented that the Bank would:

“Engross most of the Ready Money in and near the City of London, which is the Heart of Trade, and so will amount in effect to a Monopoly.”

The Bank quickly evolved beyond its role as banker to the government and later in 1694 began commercial banking, allowing public deposits.

The goldsmith bankers attempted to make a run on the bank in 1696. After they had gathered a sizeable number of notes issued by the bank they simultaneously demanded gold and silver in exchange for the notes. The Bank denied them the gold and silver, although it did pay out to other creditors who weren’t trying to bring the bank to its knees.

Bank of England notes were convertible into gold for much of the banks early history, suspended only in 1745 due to the Jacobite Rising, between 1797 and 1821 to finance the Napoleonic Wars and then again in 1914 as World War One broke out.

Clearly war is bad for sound money.

The Bank of England continued to operate as a private bank until 1946, when it was nationalised by Clement Attlee’s Labour Government.

Paper Money In France

In France, paper money was first introduced by the Scotsman John Law.

Law had to flee his homeland at the age of 23 after killing a man in a duel and spent his time travelling around Europe and developing his monetary theory.

Eventually he ended up in Paris and made the acquaintance of the Duke of Orleans, the regent of the child king Louis XV.

Law believed that credit was like blood. Just as a body needs the circulation of blood to survive, so too society needs the circulation of credit to survive. To him, paper money was far superior to gold and silver. He was a Keynesian long before Keynes.

With the French government deep in debt after the War of Spanish Succession, this argument swayed the Duke and the Banque Generale was established in 1716. It had a limited note issue of 60 million livres and would only issue notes in exchange for gold and silver.

The Duke even mandated that taxes were to be paid with John Law’s banknotes, which gave them the status of government money.

Two years later the bank was reorganised from a private to a public institution and renamed the Banque Royale, with no limit to its right to issue banknotes other than the permission of the Duke.

In the short term, Law’s bank was a wild success, stimulating trade and increasing confidence in the economy. The Duke was impressed with Law.

But like any paper induced inflationary boom the good times wouldn’t last.

In 1717 Law had been allowed to gain a trading monopoly over the French territory of Louisiana, and he established the Mississippi Company. He acquired three other rival trading companies who had rights in China, the East Indies and Africa to give him a monopoly on all of France’s foreign trade.

Law sold shares in the Mississippi company, while at the same time the Banque Royale began issuing more and more bank notes.

This started a speculative mania that resulted in one of history’s most famous bubbles.

The shares started at 500 livres in January 1719, rising to 10,000 livres by December 1719.

A 1900% gain in less than a year.

They would peak at over 18,000 livres.

As investors started taking profits the share price began a precipitous decline. It fell to 2000 livres in September 1720, 1000 livres in December 1720 and by September 1721 the price was back to where it began at 500 livres.

Law had been printing paper money so the company could buy back the stock that other investors were selling. He had hoped this would stabilise the market but it had the opposite effect. All the money printing spooked investors and made them want to sell their shares, get out of paper money and back into gold and silver.

This caused enourmous price inflation in France, at one point the monthly inflation rate reached 23%.

With not enough gold and silver to pay those wanting to convert their paper to hard money, Law, now the Finance Minister as well, made it illegal to hold large amounts of gold and silver, decreed that paper money could no longer be exchanged for hard money and devalued the paper currency by half.

This created a public uproar, causing the Duke to fire Law and place him under house arrest.

As he had done decades earlier, Law fled the country.

Traumatised by the John Law experiment, the French Crown returned to a monetary system based on gold and silver.

It stayed that way until the beginning of the French Revolution in 1789 when the dire state of the royal finances plunged the country into financial crisis and political chaos.

With tax reform and bankruptcy both politically unacceptable, the new National Assembly tried to solve the financial crisis by issuing paper money, known as the assignat.

The failure of John Law’s system was fresh in their memory, but they made the fateful and arrogant mistake in assuming that if they issued paper money they would be able to control it. They couldn’t and were seduced into issuing more and more paper currency.

The 1790s was a decade of political, economic and social chaos for France as the revolution led to the establishment of a republic, the killing of the king, massive inflation and a reign of political terror.

In 1795, five years after it was first issued, the value of the assignat had collapsed.

Eventually the assignat was abandoned and the silver franc took its place.

Napoleon, who had taken power in a coup in 1799, established the Bank de France in 1800. The bank established a new monetary system with gold and silver coins with the silver/gold ratio set at 15:1.

Read More: The Financial Crisis That Caused the French Revolution

When Did The US Start Using Paper Money?

Before the formation of the United States of America, the 13 British colonies used British money . Britain at the time was on a silver standard.

When British money wasn’t always available, for example in rural areas, commodities were used as media of exchange. For example beaver fur, fish, corn rice and tobacco.

As the colonial economy grew more and more British coins made their way to America, as well as the gold and silver coins of other European nations. These foreign coins freely circulated as money until banned by Congress in 1857.

The first paper money in the colonial era was issued by Massachusetts in 1690 as a means to pay their soldiers. When they issued this money they pledged to redeem the notes in gold and silver and also to make no further issuances of paper money.

The government failed to meet both of those obligations.

The first issue was £7000 in 1690, followed by a second issue of £40,000 in 1691. This led to a loss of confidence in the government’s ability to repay in gold and silver, devaluing the paper money by 40%. Prices rose.

In 1711 there was another issue of paper, this time £500,000.

Between 1744 and 1748 the total amount of paper money in circulation exploded from £300,000 to £2.5 million.

Silver traded at 10 times the price it had in 1690 when the paper money was first issued.

By the late 1750s every other colony had followed Massachusetts down the same path, issuing paper currency and experiencing massive inflation.

Things only changed when the British forced the colonies to wean themselves off paper money, passing a law in 1751 for New England and in 1764 for everywhere else, prohibiting new issues of paper money and demanding the gradual withdrawal of existing notes from circulation.

It wouldn’t be long before paper money would make a return.

The Continental

When the Revolutionary War broke out in 1775, the Continental Congress needed a means of financing it.

They decided that an emergency issue of paper money would be the way to go.

There was no promise of redemption for gold and silver. Instead, they promised to retire the notes in seven years and redeem them with future taxes.

In 1775, the money supply was estimated to be $12 million. The Congress issued a staggering $225 million of paper over the next four years.

Between 1775 and 1779 the paper dollars fell in value to the point where 42 paper dollars were needed to purchase 1 dollar in hard money. By 1781 it was 168 paper dollars.

Prices skyrocketed and price controls followed, leading to shortages.

Farmers refused to accept paper money in exchange for goods. The Continental Army just seized the goods instead.

Eventually the state and federal governments allowed the paper currency to depreciate until it was worthless, and all paper money was withdrawn by the end of the war.

Again, it didn’t last long before paper money would make a return.

The Bank of North America

In 1782 the Bank of North America was established. This was a private bank that was modelled on the Bank of England and it was granted a monopoly on the issue of paper money.

This paper money was redeemable in gold and silver but due to the lack of confidence in the bank their notes quickly lost value.

After just a year of operation, the first attempt at a central bank ended with the Bank of North America reverting to a commercial bank and all government debt to the bank being repaid.

With the establishment of the US Constitution, the power to coin money passed to Congress, with state governments prohibited from coining money or issuing paper. The Coinage Act of 1792 established a bimetallic standard with a silver/gold ratio of 15/1.

The Bank of the United States

In 1791 a second attempt at a central bank was made with the establishment of the Bank of the United States. This was a private bank, although the Federal Government did own shares. The bank had the right to issue paper money, although this was redeemable for hard money.

The Bank of the United States promptly issued large amounts of paper dollars, triggering a significant rise of prices.

Between 1791 and 1796 prices rose 72%.

By 1811, when the initial 20 year charter expired, the bank had hard money assets of $5.01 million and paper assets of $12.87 million. Congress and Senate narrowly voted not to give it a new charter and the bank met its end.

The Second Bank of the United States

An enormous inflation began in the following year, triggered by the War of 1812. The US government issued a huge amount of Treasury notes as well as letting a large number of new banks, often illegal, to spring up and start issuing their own paper money.

When some banks, who had not been recklessly issuing paper, demanded to redeem the worthless paper for hard money (as was their right), the government permitted the money printing banks to suspend payments in gold and silver.

This suspension was allowed to continue for two and a half years.

As Murray Rothbard puts it:

“More important than this inflation, and at least as important as the wreckage of the monetary system during and after the war, was the precedent that the two-and-a-half-year-long suspension of specie payment set for the banking system for the future. From then on, every time there was a banking crisis brought on by inflationary expansion and demands for redemption in specie, state and federal governments looked the other way and permitted general suspension of specie payments while bank operations continued to flourish. It thus became clear to the banks that in a general crisis they would not be required to meet the ordinary obligations of contract law or of respect for property rights, so their inflationary expansion was permanently encouraged by this massive failure of government to fulfill its obligation to enforce contracts and defend the rights of property.”

With numerous small banks issuing their own paper, it was decided to try the central bank experiment once again and the Second Bank of the United States was formed, opening in 1817.

Yet the Second Bank did nothing to rein in the recklessness of the smaller banks and merely joined in the money printing party.

It is estimated that between 1816 and 1818 the total money supply in the country grew by over 40%. This triggered an inflationary boom, but eventually the Bank realised it was in trouble and began to behave more responsibly. It contracted credit, purchased millions of dollars of gold and silver and made sure its debtors paid in hard money.

The money supply was almost reduced by half.

This tightening then brought about the country’s first widespread depression in 1819. Defaults and bankruptcies occurred and there was a massive drop in real estate values as well as general prices

It was the first “boom-bust” cycle.

Out of the chaos of 1819 came the Jacksonian movement, dedicated to hard money and 100% reserve banking. In 1831 President Jackson vetoed the recharter of the Second Bank of the United States and in 1833 he removed government money from the bank, effectively destroying it as an institution.

Jackson’s successor Martin van Buren established the independent treasury system, where the government kept its funds in hard money in its own Treasury vaults.

This separation of the federal government and banking would last up until the Civil War.

The Emergence of Legal Tender

The 19th century saw legal tender laws emerge in both Britain and the United States.

Legal tender is when a government designates a currency as acceptable for settling debts, transactions and obligations.

In effect this makes the legal tender currency a mean of payment that must be accepted.

Legal Tender In Britain

The Bank of England Act of 1833 established notes issued by the Bank of England as legal tender and gave the bank a monopoly on the issue of bank notes.

This was further reinforced by the Bank Charter Act of 1844.

No new banks were allowed to issue notes, however banks with existing rights to issue notes were allowed to continue with some restrictions.

But by 1921 this ceased and the Bank of England had a complete monopoly.

Legal Tender In The United States

In 1862, during the Civil War, Congress passed the Legal Tender Act, authorising the printing of $150 million of “United States Notes” which would become known as “greenbacks.” This was to fund the ballooning war deficits.

Congress hoped that this would just be one emergency issue. But once the printing starts it is very hard to stop.

A second $150 million was issued later in 1862 with another $150 million to follow in 1863.

Naturally the greenbacks fell in value against gold and silver but, rather than acknowledge that, the government placed the blame on gold speculators. This gave them an excuse to try and regulate the gold market and, when that failed, they tried to destroy the gold market altogether. All this did was destroy confidence in the greenback which depreciated further.

Over the course of the Civil War, the total money supply (including both hard money and paper) expanded 137.9%. Prices rose 110.9%.

The Civil War also spawned another important development – the creation of a national banking system. While this was established under the guise of a war time emergency, it was to have a permanent effect.

The national banking system had three tiers. Central Reserve City was the first tier and that was only for New York. Reserve City was the next tier for any city with 500,000 residents. Country was the final tier for all other national banks.

It swept away the Jacksonian system and replaced it with a centralised system controlled by Washington and Wall Street. Murray Rothbard argues this was the precursor to the Federal Reserve system we have today, which was to be the natural next step from a central banker’s point of view.

The structure of those banks and the reserve requirements meant that the system by its nature was inflationary. Murray Rothbard explains how it worked:

“Before the Civil War, every bank had to keep its own specie reserves, and any pyramiding of notes and deposits on top of that was severely limited by calls for redemption in specie by other, competing banks as well as by the general public. But now, reserve city banks could keep half of their reserves as deposits in New York City banks, and country banks could keep most of theirs in one or the other, so that as a result, all the national banks in the country could pyramid in two layers on top of the relatively small base of reserves in the New York banks. And furthermore, those reserves could consist of inflated greenbacks as well as specie.”

In other words, individual banks used to be limited in issuing paper money by their own gold and silver reserves. Now, as part of a system of banks they could use each others reserves, meaning the reserve requirement was less and they could print more paper money.

After the Civil War the US faced the twin problem of massive debt and a huge circulation of paper. Those who argued for a return to hard money were shouted down and the national banking system was bedded in for good.

Between 1865 and 1873 the total supply of state and national bank notes and deposits grew by 135.2% before leveling off in the panic of 1873.

In 1873 the US went onto the gold standard. This was the era in the industrialised world known as the classical gold standard. All major powers tied their currencies to gold or pegged their currency to a country who had tied theirs to gold.

The gold standard was threatened in the 1890s but survived the decade intact. It would continue this way until 1933 when Roosevelt famously took the US off the gold standard, although the dollar would retain a link to gold until 1971 when Nixon cut the last ties.

Read More: The History of US Currency

The Evolution of Paper Money Into Modern Fiat Currency

The gold standard.

The era of the 1870s to 1914 was known as the classical gold standard . With Britain on a gold standard and the new country of Germany going on a gold standard, other countries followed suit.

This was a system where countries fixed the value of their currencies to gold at a defined weight or fixed their currency to another country that did so.

The role of central banks under this system was to maintain the ability to convert paper money into gold at the fixed price.

This system put a check on the ability of central banks to issue too much currency, which in turn limited the boom and bust nature of inflationary monetary expansion.

A financial panic in the United States in 1907 increased the clamour for a central bank in the US modelled on the European central banks. After years of planning this culminated in the Federal Reserve Act of 1913 which established the Federal Reserve system in 1914 as we know it today.

Rothbard argues that this was:

“A governmentally created and sanctioned cartel device to enable the nation’s banks to inflate the money supply in a coordinated fashion, without suffering quick retribution from depositors or noteholders demanding cash.”

In the same year as the Fed was established, war destroyed the classical gold standard that had served the world so well for two generations.

The outbreak of World War One in 1914 meant the belligerents abandoned the gold standard. The European powers thought they were engaging in a short war and did not want to fund it with increased taxation.

The solution was to pay for the war through the printing press.

The expected short war lasted for four years, leading to immense hardship and suffering, the downfall of four empires and devastating economic consequences.

Debt exploded, prices rose, shortages occurred and the money printing continued. Russia went into a hyperinflation under the Bolsheviks (and again in 1992 after the collapse of the Soviet Union ), as did Germany under the new Weimar Republic.

With the European powers all off the gold standard, only the USA remained with its pre-war monetary system, although the Fed had doubled the money supply to finance the war when the US entered in 1917.

With this chaotic fiat experience, Europe looked nostalgically at the pre-war classical gold standard.

By 1920 Britain had the least inflated currency with only a 35% depreciation relative to its 1914 value, compared to 64% for the French Franc and 71% for the Italian Lira. The German mark had lost 96% of its value and it was about to get much worse for them.

At the 1922 Genoa conference, the European powers hammered out a new monetary system for the post-war environment, setting in place plans to return to gold and calling for the establishment of central banks in countries where they did not exist.

In 1925 Britain, seeing the fiat system as intolerable, led the way and returned to the gold standard.

But they got the price horribly wrong.

Hoping to return to the pre-war classical gold standard they set the price at the pre-war level £4.86 per ounce. With the wartime money printing double the money supply not accounted for, this resulted in a significantly overvalued British Pound and undervalued gold. This made British exports very expensive.

The only way to make this work would have been to contract the money supply back to the pre-war level. But they did not, continuing with a policy of inflation and cheap money.

Rothbard argues that, aside from the issue of price, this was not a true gold standard anyway. Because of the mechanisms in how it was set up, it did not prevent money printing and inflation.

It is instead known as the gold exchange standard.

Rothbard again:

“In this way, for a few years Britain could have its cake and eat it too. It could enjoy the prestige of going back to gold, going back at a highly overvalued pound, and yet continue to pursue an inflationary, cheap-money policy instead of the opposite. It could inflate pounds and see other countries keep their sterling balances and inflate on top of them; it could induce other countries to go back to gold at overvalued currencies and to inflate their money supplies; and it could also try to prop up its flagging exports by using cheap credit to lend money to European nations so that they could purchase British goods.”

By 1926 39 countries had followed Britain onto the gold exchange standard and by 1928 that number was 43.

The USA had been inflating throughout the 1920s, the theory being that Britain’s new gold standard would be more workable if the USA had higher prices. This accelerated in 1927 and, along with artificially low interest rates, poured fuel on the fire that was the American stock market.

By the late 1920s, England was suffering from the effects of returning to gold at the pre-war price. With an overvalued pound and high wages due to unionism, British exports continued to suffer. With an outflow of gold from London, the British pleaded with the USA to keep inflating and they obliged.

Despite the best effort efforts of central banks to inflate, this undervalued gold exchange standard resulted in deflation and eventually a collapse of money and credit. It was a key cause of the Great Depression.

Jim Rickards argues:

“Gold did not cause the Great Depression; a politically calculated gold price, and incompetent discretionary monetary policy, did. For a functional gold standard, gold cannot be undervalued. When gold is undervalued, central bank money is overvalued, and the result is deflation.”

Or as Rothbard describes it:

“The international monetary framework of the 1920s collapsed in the storm of the Great Depression; or rather, it collapsed of its own inner contradictions in a depression which it had helped to bring about. For one of the most calamitous features of the depression was the international wave of banking failures; and the banks failed from the inflation and overexpansion which were the fruits of the managed international gold-exchange standard. Once the jerry-built pyramiding of bank credit had collapsed, it brought down the banking system of nation after nation; as inflation led to a piling up of currency claims abroad, the cashing in of the claims led to a well-founded suspicion of the solvency of other banks, and so the failures spread and intensified.”

The Fed tried its best to inflate its way out of the Great Depression but despite their best efforts the money supply actually fell. Americans began a run on the banks and foreigners, losing confidence in the dollar, withdrew gold. Fractional reserve banks could not meet the demands of their customers and failed in enormous numbers.

This triggered a death spiral. As Rothbard explains:

“The more that Hoover and the Fed tried to inflate, the more worried the market and the public became about the dollar, the more gold flowed out of the banks, and the more deposits were redeemed for cash.”

After experiencing bank runs, Austria and Germany went off the gold standard in 1931.

Britain too came under pressure in 1931 as those holding pounds demanded redemption in gold. Under the classical gold standard Britain could have tightened her monetary policy to restore confidence but instead after just 6 years Britain abandoned the new gold standard and inflated her currency further.

The pound fell by 30%.

25 countries followed Britain off the gold standard and onto floating exchange rates.

Incoming US President Franklin Roosevelt followed suit in 1933. He ended the official gold standard, confiscated gold from US citizens, put an embargo on the export of gold and devalued the dollar by raising the price of gold from $20.67 to $35 per ounce.

The US Dollar was still linked to gold, but since citizens could not convert their dollars to gold it was not a true gold standard. Instead it has been described by some as a quasi gold standard.

China, which was on a silver standard, had been making preparations for a shift to a gold standard.

However, events in the United States and Europe and the changes to the gold standard meant they decided to skip the yellow metal altogether and go straight from silver to fiat with the introduction of the fabi in 1935.

Read More: A History of the Renminbi

Bretton Woods

A big shift in the global monetary system then occurred during World War Two at the Bretton Woods conference. The 1930s had been a period of monetary nationalism and the USA sought to re-establish an international monetary system.

With Europe devastated by war, the Bretton Woods agreement saw the US Dollar replaced the British Pound as the supreme currency of the world. Foreign currencies were to be set at fixed exchange rates based on the dollar. This system would last until 1971.

The Bretton Woods system initially worked quite well as European currencies were inflated and overvalued. The US Dollar, still linked to gold, was, as Rothbard says, the “hardest currency” and the US had accumulated a vast quantity of gold that had fled Europe during the war.

Yet in the 1950s, as the USA continued her inflationary policies, several European countries became more conservative, in particular West Germany, France, Italy and Switzerland.

With the dollar still fixed to gold at $35 per ounce, the inflationary policy of the USA meant that US dollars were overvalued relative to gold. The Europeans, who held a lot of US Dollars were concerned.

As the dollar became more inflated and more overvalued, it’s role as the global reserve currency came into question as confidence in it collapsed.

Rather than hold dollars, these European countries would rather hold gold. Most notably France, under President Charles de Gaulle, and Switzerland were selling overvalued dollars and buying gold. This led to a worrying outflow of gold from the USA.

In response to this the USA could have raised the price they fixed their currency to gold, in other words devalued their currency. They could have restrained their inflationary policies and increased the soundness of the dollar.

Instead, on a Sunday evening in August 1971, President Richard Nixon famously “closed the gold window.” In practice this meant that foreign central banks were no longer able to convert US dollars into gold at the fixed price of $35 per ounce. This effectively ended the post-war monetary system and by 1973 the Bretton Woods system had completely collapsed.

The Fiat Currency Era

What followed the Bretton Woods system was a global monetary order of floating exchange rates with no link to a hard asset – fiat money.

Since most people were accustomed to using paper money and, since it was still paper money, it seemed the same as it was before.

But it wasn’t.

The US had moved from paper money backed and freely convertible to gold, to paper money backed but not freely convertible to gold, to paper money neither backed nor convertible into gold.

Paper money that is convertible to gold, however tenuous that link, is very different to paper money that exists by fiat or by decree.

This system that emerged in 1971 is still the system we live in today and exists entirely on fiat money and confidence in central banks.

Saifedean Ammous makes the point that the public’s acceptance of this money was only possible because the paper was originally redeemable in gold or silver:

“No fiat money has come into circulation solely through government fiat; they were all originally redeemable in gold or silver, or currencies that were redeemable in gold or silver. Only through redeemability into salable forms of money did government paper money gain its salability. Government may issue decrees mandating people use their paper for payments, but no government has imposed this salability on papers without these papers having first been redeemable in gold and silver.”

Although now the vast majority of money in the system does not exist on physical paper but is digital instead. Nevertheless the issue remains the same. The increase in quantity of fiat money is not restrained by any link to gold. The public accepts this digital fiat money only through its historic link to gold and the confidence that is currently given to central banks.

Since 1971 the US Dollar has continued to be inflated, as have all other fiat currencies, and the market price of gold is well above $35 per ounce. In fact, it is not that gold has risen in value, it is that dollars have fallen in value relative to gold.

Yet even though the world’s currencies have no formal link to gold, most of the world’s major central banks continue to hold gold as reserves. Even while they disparage it in public, they recognise its value. So in a way, there is still some form of gold backing.

Jim Rickards calls this the “shadow gold standard.”

Read More: 4 Lessons Investors Can Learn From the Weimar Hyperinflation of 1923

Read More: The Rentenmark: How Weimar Germany Ended Hyperinflation

Read More: 3 Lessons For Investors From the Russian Hyperinflation of 1992

The history of paper money entered a new era with the establishment of the Euro.

In 1991, the Maastricht Treaty was signed, an agreement between the 12 members of the, then, European Community. They agreed to form an economic and monetary union.

This would become the European Union, with the Euro adopted as the common currency. National currencies would be phased out.

In 1998 The European Central Bank was established and the Euro began its life in 1999 first as a bank currency, with notes and coins following in 2002.

While the European Central Bank does hold gold reserves , and these are in fact increasing, the Euro is a fiat currency.

Like the Federal Reserve and other central banks, the ECB engages in an inflationary policy.

However, what makes the Euro particularly interesting is the disciplining effect it has on national governments. Without their own central bank to print money and lower interest rates, politicians have to confront economic reality in a way that countries with national currencies do not.

While the European Union and Brussels bureaucrats are unpopular in Europe, the population is very supportive of the single currency. This is particularly the case in Southern Europe, whose populations remember the bad old days of the inflationary Greek Drachma, Italian Lira and Spanish Peseta.

Austrian economist Jesus Huerta de Soto has even gone so far as to argue that this restraining function on governments acts in a way that is similar to the gold standard, although obviously inferior.

However, while that may apply to national governments, the same restraint does not apply to the ECB, which has more than tripled the money supply over its short lifetime.

What Is Paper Money Backed By?

For most of paper money’s history it has represented and been convertible into hard money in the form of gold and silver.

In this sense paper money isn’t backed by the hard asset. Instead it is representative of the hard asset because it can be exchanged for it. It is what hard money economists and historians call a warehouse receipt.

However, when paper money is not convertible into a hard asset, we tend to talk about what it is “backed” by.

In many times in history paper money has been backed by gold and silver even if it has not been convertible. This is when governments and central banks have been restrained in the amount of money they can print based on the amount of hard money they have in their vaults.

However, this raises the question of why people would use paper money if it is not convertible into hard money.

The answer is that people have faith in governments and therefore are willing to accept government paper. In that sense we can say that paper money is “backed” by faith and confidence in governments and central banks.

Read More: What Is Fiat Currency Backed By?

How Did Paper Money Impact The World?

The impact of paper money on the world has been a predominantly negative development.

Its one key benefit is that it improves salability across space. That is, it is easier and more convenient to transfer value across space in the form of paper money than it is in the form of cumbersome heavy precious metal coinage.

This is the main reason that paper money was developed in China in the first place and why it continued in many parts of the world.

However, that advantage came with many downsides.

The critical downside is that paper money is very poor at holding its value over time. That is because new currency creation is very easy and every new unit of currency created dilutes the value of existing units.

Therefore, individuals who save in paper money see a loss of purchasing power over time.

Additionally, paper money confers huge power onto governments. Instead of raising revenue through the constrained mechanisms of taxation and borrowing, governments can raise revenue through money printing.

This enables them to spend beyond their means and pass the bill onto the population in the form of an inflation tax. Future generations pay for the current largesse by price rises in the future.

This has enabled governments to spend in a reckless manner while only consideration for the short term.

Ultimately this has resulted in capital destruction, a lower standard of living and negative social impacts than would otherwise have occured under a hard money standard.

Read More: The Social Cost Of Unsound Money

Read More: 15 Reasons Why Fiat Currency Is Bad

So what does all this mean?

Well, what the history of paper money shows you is that its existence has been short lived, and that hard money has been the enduring and dominant medium of exchange in human societies.

In modern history, gold and silver have been the currency of choice, while paper money was only used in emergency situations, often induced by war and often with disastrous results. The paper money that worked the best was the paper money backed by gold.

As the printing presses churn, consumer prices rise. Hard-earned savings disappear. Rising prices often leads to calls for price controls, which then leads to shortages. The political consequences can sometimes get ugly.

The John Law experiment, the Assignats of Revolutionary France and the experience of America in the colonial, revolutionary and Civil War eras, demonstrates the short life of paper money.

That the global paper money experiment that we are living in now has lasted so long is a bit of an historical aberration. Most of the world has been off gold from the early to mid 1930s, with the USA finally severing the last tie to gold in the 1970s.

That is a long time.

Yet the continued existence of this monetary system depends on the wisdom of central bankers and the confidence the public has in them.

If they can maintain a degree of soundness in the fiat currencies and confidence in the institutions, then the system will continue.

If they make the wrong move and confidence is lost, then a change will be necessary.

Every paper money system that has come into existence has eventually perished. Ours will go the same way, although no one knows when. It might only have a short time left or it might have many decades.

When that day comes don’t worry. Civilization won’t collapse in a heap. Life will go on. The real economy will always survive, although it might be battered and bruised.

History shows that in the collapse of a paper money system, people flee to the safety of gold and silver. If the past is anything to go by, we will probably go back to a hard money system for a few generations.

Eventually though the lessons of history will be forgotten and a new generation will be seduced by the short term allure of paper money and the cycle will repeat itself all over again.

The best way to protect yourself is to move a portion of your savings out of paper money and into the hard money protection of gold and silver or the new hard money kid on the block, Bitcoin.

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Ammous, Saifedean. The Bitcoin Standard : The Decentralized Alternative to Central Banking Hoboken, New Jersey: John Wiley & Sons, Inc, 2018.

Antipa, Pamfili M. “How Fiscal Policy Affects Prices: Britain’s First Experience with Paper Money.” The Journal of Economic History 76, no. 4 (November 17, 2016): 1044–77. https://doi.org/10.1017/s0022050716000978.

Huerta de Soto, Jesús. “In Defense of the Euro: An Austrian Perspective (with a Critique of the Errors of the ECB and the Interventionism of Brussels).” Journal Des Économistes et Des Études Humaines 19, no. 1 (January 3, 2013): 1–28. https://doi.org/10.1515/jeeh-2013-0012.

Kindleberger, Charles P. A Financial History of Western Europe . London: Allen & Unwin, 2006.

Kynaston, David. Till Time’s Last Sand : A History of the Bank of England 1694-2013 . London: Bloomsbury, 2020.

Lui, Francis T. “Cagan’s Hypothesis and the First Nationwide Inflation of Paper Money in World History.” Journal of Political Economy 91, no. 6 (December 1983): 1067–74. https://doi.org/10.1086/261201.

Pickering, John. “The History of Paper Money in China.” Journal of the American Oriental Society 1, no. 2 (1844): 136–42. https://doi.org/10.2307/3217743.

Rickards, James. Death of Money. Portfolio Penguin, 2015.

———. The New Case for Gold . London: Penguin Business, 2019.

Rothbard, Murray N. A History of Money and Banking in the United States : The Colonial Era to World War II . Auburn, Ala.: Ludwig Von Mises Institute, 2005.

Spufford, Peter. Money and Its Use in Medieval Europe . Cambridge: Cambridge University Press, 1988.

Von Glahn, Richard. “Re-examining the Authenticity of Song Paper Money Specimens.” Journal of Song-Yuan Studies , no. 36 (2006): 79-106.

Image Credits

World Map by Christine Roy on Unsplash

Hangzhou by David Veksler on Unsplash

Kublai Khan is in the public domain {{PD-US}}

The Swedish Empire is licensed under CC-BY-SA 3.0

The Bank of England is in the public domain

Portrait of John Law is in the public domain {{PD-US}}

The Value of Assignats is licensed under CC-BY-SA 3.0

One Sixth of Dollar Continental Congress is licensed under CC-BY-SA 4.0

First Bank of the United States is licensed under CC-BY-SA 3.0

Second Bank of the United States is licensed under CC-BY-SA 4.0

$10 Greenback is licensed under CC-BY-SA 4.0

Gold Bar by Jingming Pan on Unsplash

Franklin Roosevelt is in the public domain

The European Central Bank by bruno neurath-wilson on Unsplash

About The Author

I have been studying monetary history since 2007 and have been investing since 2011. My economic philosophy is predominantly Austrian. My goal is to help you become a better investor and build generational wealth with accessible and digestible pieces of history that have implications for the present day. Read more about me.

The History of Paper Money

by Clear Junction 2 December, 2021 Payments

With the world increasingly moving to cashless and contactless payments, the use of paper money is dwindling fast . But how many of us have thought about how the use of paper money came into being in the first place? Here, we take a look at the history of paper money – its origins, the ideas behind its inception, and the advantages and disadvantages of banknotes.

Some would have you believe that the digital age is around 50 years old , while others claim it began with the release of Apple’s iPhone in 2007 . Irrespective of which is closer to the truth, there can be little doubt that this particular technological solution – one that has led to just about everyone carrying a computing device disguised as a telephone in their pockets – has led to a significant change in how we go about our daily lives.

THE CASHLESS REVOLUTION

It wasn’t that long ago that I could only board a bus into Nottingham if I had cash in my pocket. The times I was running late and was forced to make a detour via a cash machine on the way to my stop! A couple of years later, when I first moved to London, the opposite happened – I only had cash on me and was told by the driver that physical money was not an acceptable means of paying – it had to be via bank card, smartphone app or an Oyster card.

While this in some ways can be explained by my innate Luddite ways, it also shows how quickly the world is changing. Cash is becoming increasingly redundant – Big Issue sellers now carry contactless card machines , bank branches are closing at a rapid rate as customers move online and, in 2017, debit cards overtook cash as the most frequently used payment method in the UK for the first time.

Now that the death knell has been sounding for some time, I got to thinking: how did paper money come about in the first place? It is simply something I had never thought about before. So let us look through the history of paper money and see how we got to where we are today.

THE BEGINNINGS OF PAPER CURRENCY

Paper currency came about as a result of one (and perhaps, later, two) of the Four Great Inventions : papermaking, printing, gunpowder and the compass. Ancient China led the way, although it wasn’t until the Tang dynasty during the 7th century that merchants began using paper in the form of what would these days be called promissory notes .

The reason for this was simple: copper coinage had been used in China for centuries – and the coins were circular with a hole in the middle. The hole enabled rope to be thread through the coins to string them together. If a merchant was rich enough, the rope was too heavy to carry (boo hoo), so the coins were left with someone they trusted who gave them a paper receipt recording how much had been deposited.

It was some centuries before paper currency came to replace the need for coinage in some instances, but a precedent had been established and it was only a short leap from paper receipts to paper money.

JIAOZI – THE SONG DYNASTY

By the 11th century, during the Song dynasty, jiaozi (a form of banknote that is widely regarded as the world’s first paper money by numismatists ) was being officially printed and issued. There was a shortage of copper from which coins were struck around the year 960, so the government issued the first banknotes and before long the economic advantages of printing paper money became apparent.

A jiaozi note depicting Chinese merchants inside a city

Over the next couple of centuries, the idea of paper money became so central to the economy that the Song government built factories in various Chinese cities to exclusively print the banknotes. According to Joseph Needham’s Science and Civilisation in China , by 1175, a factory at Hangzhou employed over 1000 workers – although it was still some time before the idea of paper money spread across China and was instead restricted to specific areas of the empire.

This changed between 1265 and 1274, when the Song dynasty issued a national paper currency standard that was backed by gold or silver. Paper money was now firmly established, to the extent that the designs of banknotes were often deliberately intricate to prevent forgery and counterfeiting.

THE IDEA TAKES HOLD IN EUROPE

It is often said that bad news travels fast but so too do good ideas – especially when Venetian globetrotter Marco Polo dedicates a portion of his unimaginatively titled book, The Travels of Marco Polo , to the subject of paper money. The chapter, imaginatively entitled ‘How the Great Kaan Causeth the Bark of Trees, Made into Something Like Paper, to Pass for Money over All His Country’, describes the use of paper money in Kublai Khan’s Yuan dynasty in the 13th century:

“With these pieces of paper…he [Khubilai Khan] causes all payments on his own account to be made; and he makes them to pass current universally over all his kingdoms and provinces and territories…and nobody, however important he may think himself, dares to refuse them on pain of death.”

Before long, European countries had taken China’s lead, beginning with similar promissory notes that later evolved into receipts to be used by way of payment.

BANKS BEGIN ISSUING BANKNOTES

By the 17th century, London’s goldsmith bankers were issuing receipts as payable to the bearer of the document, as opposed to the depositor (a sentiment echoed on contemporary banknotes with the sentence “I promise to pay the bearer on demand the sum of X pounds”), while 1661 saw Sweden’s Stockholms Banco become the first central bank to attempt to issue banknotes.

Unfortunately, the bank went bankrupt soon after and so it was left to the Bank of England – established in 1694 to help fund King William III’s Nine Years’ War against France – to start permanently issuing banknotes (which it did in 1695). Although these notes were originally handwritten to an exact amount, by 1745 they had become fixed denomination notes of between £20 and £1000 (the equivalent purchasing power of between £4650 and £232,000 today).

The Seven Years’ War (1756-1763) caused gold shortages that forced the Bank of England to start issuing £10 notes for the first time, with £5 notes coming in 1793. Ongoing war against Revolutionary France further drained the Bank’s bullion reserve and it wasn’t too much longer before £1 and £2 notes were being issued as a means of restricting the paying out of gold.

FUN FACT: the Bank of England’s nickname “The Old Lady of Threadneedle Street” is said to have derived from this period when gold payouts were extremely limited.

BANKS BEGIN ISSUING LEGAL TENDER

Here it is worth highlighting that until the early 19th century, any and all banknotes issued by central banks were merely promises to the bearer that they could redeem the paper for its value. However, in 1833, a Bank Charter Act decreed that banknotes were now considered legal tender – still, it took another 20 years before cashiers no longer had to sign each note individually and in 1853 the first fully printed notes began to appear.

Ultimately, the Charter Act of 1844 led to the establishment of what we now think of as the modern central bank and only the Bank of England could issue new banknotes. By 1921, the Bank of England had sole control of the money supply and new banknotes could only be issued if they were 100% backed by gold or up to £14 million in government debt.

Interestingly, the issuing of banknotes did not always solely rely on central banks or treasuries – particularly before official national currencies were established. Even today, the private issuing of banknotes continues in some countries (Scotland and Northern Ireland have their own banknotes for domestic circulation, while the Bank of England prints notes that are legal tender in England and Wales).

ADVANTAGES OF PAPER MONEY

As this article hopefully shows, there are many advantages of paper money and the creation of it as a means of exchange was often a result of circumstance and practical consideration. However, here we will take a look at some specific advantages that may not be obvious from the preceding text.

Paper Money Can Be Controlled Easily

The ‘elasticity’ of paper money is a key advantage. The supply of it can be easily controlled by governments, meaning that more can be printed if there is demand, but less can be produced if demand falls. This essentially means that a government can align its printing practices with the specific requirements of its economy at any given moment.

Paper Money Is More Stable

In relation to the above, the control of circulation means that the price stability of paper money is greater than it would otherwise be with other mediums of exchange. When Spain raided the Americas and brought loads of gold back to Europe, the value of it decreased as there was so much more of it about.

Paper Money Is Easily Moved

The weight of paper money is negligible, meaning that large amounts of money can be moved. Of course, this was not the case with gold or copper – which is what led to the creation of paper money in the first place.

Paper Money Is Easier To Count

If you have ever used an old spirit bottle to store saved coins and then had to count them before turning them into the bank, you will appreciate how much easier it is to count paper money than coins. A quick lick of the finger (or use of a thimble) is all that you need to be into the hundreds and thousands of pounds. Emptying your coin jar onto the table, stacking what you’ve counted, then transferring to bank bags takes far longer and will amount to much less money in a greater bulk.

Paper Money Can Be Used Quicker

The fact that we all acknowledge what a £20 note is worth means that it can be exchanged quickly. We all know it as legal tender so there are never any problems of it being accepted – especially as each note is secured against foreign security and gold reserves.

DISADVANTAGES OF PAPER MONEY

It would be remiss to not acknowledge that there are some disadvantages of paper money. Of course, the advantages significantly outweigh the disadvantages – why else would paper money have been continuously used since its inception? Still, it is worth highlighting some of the potential pitfalls.

Paper Money Can Bring Inflation

History has shown us the significant negative impacts that printing new banknotes can have upon a country’s economy. The hyperinflation that took place in the Weimar Republic in the early 1920s was a result of myriad reasons, but it was certainly in no small part because of Germany’s strategy of mass printing banknotes to pay war reparations – this ultimately led to the collapse in the value of the mark.

Paper Money Has An Unstable Exchange Rate The sheer size of the foreign exchange market shows the instability of the exchange rate. While this can be highly profitable for traders, the wild fluctuations in the external price of any given currency against internal prices can have negative impacts on international trade and domestic economic growth.

Paper Money Can Be Damaged

Many of us will have washed a pair of jeans and discovered a crumpled £10 note inside one of the pockets. This shows how paper money is not as durable as coins. The new polymer notes that the Bank of England has started printing recently certainly helps to address some of the durability issues, as they are much stronger than paper.

FINAL THOUGHTS

In this article, a brief history of paper money has been presented, from some of the reasons behind the development of the idea, through to the issuing of legal tender by the Bank of England. Of course, with a history as colourful and chequered as that related to paper money, there is so much more that could be said – it would be impossible to document a comprehensive history of paper money without making this article somewhere near book length.

Still, it is worth considering how paper money came into existence, if only because so many recent reports appear to point to its impending demise. Still, although there are now more ways to pay for things than ever before, there are some reasons for thinking cash is here to stay – at least for the time being.

Consider that today, there are more than 70 billion pound’s worth of notes in circulation – around twice as much as there was a decade ago. Clearly, people still want and need to be able to pay for things with banknotes and will continue to do so for some time yet. It is easy for us in the UK, who have easy access to contactless technology and other ways of paying, to think that paper money is on the way out – but many people around the world rely on paper money to buy things.

Then there is the simple fact that cash is a means of payment that is convenient, reliable and anonymous – something that no other form of payment can claim. Often two of the three might be true of something like card payments or cryptocurrency, but nothing yet quite ticks all three boxes in the same way that cash does.

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Paper Money: Definition, History, Use, Need For It, And Examples

Published: January 5, 2024

Learn about the history, definition, and use of paper money in finance. Explore the need for it and discover examples of its significance.

• Definition starting with P

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Paper Money: Definition, History, Use, Need for It, and Examples

Welcome to our “FINANCE” category, where we dive into various topics related to the world of finance. In today’s post, we will be discussing paper money – its definition, history, use, need for it, and provide some examples to help you better understand its significance in our modern economy. So, let’s jump straight into it!

Key Takeaways:

• Paper money is a form of currency that is made from paper or similar materials and is widely used in transactions worldwide.
• Its history dates back to ancient China, and its introduction was a significant milestone in the development of modern economies.

What is Paper Money?

Paper money, also known as fiat currency, refers to a form of currency that is physically represented by banknotes or bills. These banknotes are made from paper or other materials and are recognized as a legal tender by the government that issues them. Unlike commodity money, which has intrinsic value (such as gold or silver), paper money has value only because the government guarantees its acceptance as a means of payment.

A Brief History of Paper Money

The origins of paper money can be traced back to ancient China during the Tang Dynasty (618-907 AD). It is believed that the first paper money, known as “Jiaozi,” was used to facilitate trade and economic activities. This early form of paper money served as a convenient alternative to carrying heavy copper coins.

Over the centuries, paper money evolved and spread to other regions of the world. In the 13th century, Marco Polo described the use of paper money during his travels to the Mongol Empire. However, it wasn’t until the 17th century that paper money was officially introduced in Europe, followed by its adoption in other parts of the world.

The Use of Paper Money

Today, paper money is used as a primary medium of exchange in most economies worldwide. It plays a crucial role in facilitating trade, enabling people to buy goods and services, paying debts, and saving for the future. The convenience of paper money lies in its portability and the ease of its transfer compared to other forms of payment.

Alongside physical banknotes, the use of digital forms of money, such as credit cards and mobile payments, has been increasing. These digital representations of paper money have further revolutionized the way transactions are conducted, making payments faster and more secure.

The Need for Paper Money

Paper money serves several essential functions in our economy:

• Medium of Exchange: Paper money allows for smooth and efficient transactions, replacing the need for bartering or carrying valuable commodities.
• Store of Value: People can accumulate paper money as a means of preserving their wealth over time. It provides a stable medium for savings and serves as a tangible representation of financial security.
• Unit of Account: Paper money provides a standardized unit for measuring the value of goods and services. It allows for easy price comparison and helps in evaluating economic trends.

Without paper money, economies would face significant challenges in conducting trade and managing their financial systems. It would be difficult to conduct large-scale business transactions, create a stable pricing system, or provide a universally accepted medium of exchange.

Examples of Paper Money

Throughout history, numerous countries have issued their own paper currencies, each with unique designs and denominations. Here are a few examples of widely used paper currencies:

• The United States Dollar (USD)
• The Euro (EUR)
• The British Pound (GBP)
• The Japanese Yen (JPY)
• The Chinese Yuan (CNY)

These examples represent just a fraction of the vast array of paper currencies that exist around the world. Each currency tells a story of its nation’s history, culture, and economic significance.

As we conclude our exploration of paper money, we hope you have gained a deeper understanding of its definition, historical roots, use, and importance in today’s economy. Paper money plays a fundamental role in facilitating trade, preserving wealth, and providing a standard unit of account.

So, the next time you hold a banknote in your hand, take a moment to appreciate the significance it holds in our financial system, connecting nations, and enabling economic progress.

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The History of U.S. Currency

By tracing our currency back to the colonial era, we can explore how American history has helped shape the way we design, issue, and process modern U.S. banknotes.

Periods of Influence

The following centuries proved to be pivotal for the development of our nation's currency. Explore the timeline for an in-depth look.

Colonial Notes

Paper currency in the United States is born, issued by the Massachusetts Bay Colony to fund military expeditions. Other colonies quickly take up the practice of issuing paper notes.

Franklin's Unique Colonial Notes

Benjamin Franklin takes on counterfeiting, using his Philadelphia printing firm to produce colonial notes with nature prints—unique raised patterns cast from actual leaves. This process adds an innovative and effective counterfeit deterrent to notes.

Independence and Strength

Certain designs of Continental Currency feature illustrations inspired by the thirteen colonies fighting and defeating Great Britain in the American Revolution. These illustrations signify the colonies’ values and virtues.

Continental Currency

The phrase “not worth a Continental” is coined after the Continental Congress issues paper currency to finance the Revolutionary War, currency that quickly loses its value because of a lack of solid backing and the rise of counterfeiting.

The First $2 Note

The first $2 notes are Continentals and are nine days older than America. On June 25, 1775, the Continental Congress authorizes issuance of the $2 denominations in “bills of credit” for the defense of America.

Adoption of the Dollar Sign

The United States officially adopts the dollar sign in 1785. The symbol evolves from the Spanish American figure for pesos. From colonial to modern times, the United States has issued several types of banknotes with unique purposes, like paying taxes, earning interest on an investment, or buying goods.

The Bank of United States

Alexander Hamilton establishes the Bank of the United States to create a system of credit for the government. The bank is the first of several in the country to issue private currencies facilitating borrowing and lending.

The Mint Act

On April 2nd, 1792, Congress establishes the coinage system of the United States by passing “The Mint Act.” The U.S. adopts the decimal system for currency.

President James Madison

James Madison’s portrait features on multiple series of the $5,000 Treasury bearer notes. These large value notes are originally redeemable for gold. The note back features George Washington resigning his commission.

$10 Demand Notes

The first $10 notes issued by the U.S. federal government are Demand Notes, featuring President Abraham Lincoln’s portrait, fine-line engraving, and intricate geometric lathe patterns. Each Demand Note was immediately redeemable in gold or silver “upon demand” at seven specific banks around the nation. The Treasury issued Demand Notes in 1861 and 1862.

"Greenbacks"

In order to finance the Civil War, Congress authorizes the U.S. Department of the Treasury to issue non-interest-bearing Demand Notes. These notes earn the nickname “greenbacks” because of the green ink on the back. All U.S. currency issued since 1861 remains valid and redeemable at full face value.

United States Notes

After the Treasury issued Demand Notes, Congress authorizes a new class of currency known as “United States notes” or “Legal Tender notes.” These notes replace Demand Notes. They continue to circulate until 1971. Similar to Demand Notes, they are nicknamed "greenbacks."

Secretary Salmon P. Chase

The Treasury seal first appears on currency during the Civil War. The federal government issues the first $1 Legal Tender" notes. These banknotes feature a portrait of Secretary of the Treasury Salmon P. Chase.

The Foundation of Modern Design

By 1862, the Demand Notes incorporate fine-line engraving, intricate geometric lathe work patterns, a U.S. Department of the Treasury seal, and engraved signatures to aid in counterfeit deterrence. To this day, U.S. currency continues to add features to deter counterfeiting.

Treasury Seal

The Treasury seal first appears on currency during the Civil War. While the color and style of the seal changes over the years, the internal seal remains essentially the same to modern day with a key, scales, and stars.

First Division of the National Currency Bureau

Congress creates the Office of the Comptroller of the Currency (OCC) and National Currency Bureau to handle the newly created National Bank Notes.

Liberty and Justice

American money has depicted Liberty and Justice as allergorical figures. On interest-bearing notes of 1863, Justice can be seen holding her scales. She appears on the right side of a $50 bill from 1880 holding a sword and shield.

A National Banking System

Congress establishes a national banking system and authorizes the U.S. Department of the Treasury to oversee the issuance of National Banknotes. This system sets Federal guidelines for chartering and regulating "national" banks and authorizes those banks to issue national currency secured by the purchase of United States bonds.

Trumbull's Paintings

The first $100 and $500 national bank notes feature John Trumbull’s paintings “Declaration of Independence” and “Surrender of General Burgoyne.” Both paintings now hang in the U.S. Capitol Building.

The Secret Service

The United States Secret Service is established to deter counterfeiters, whose activities diminish the public’s confidence in the nation's currency.

George Washington on $1 Note

The 1869 series of United States notes features the first use of George Washington’s portrait.

Centralized Printing of United States Notes

The Bureau of Engraving and Printing begins engraving and printing the faces and seals of U.S. banknotes. Before this, U.S. banknotes were produced by private banknote companies and then sent to the Bureau of Engraving and Printing for sealing, trimming, and cutting.

Bureau of Engraving and Printing

Congressional legislation recognizes the U.S. Department of the Treasury’s Bureau of Engraving and Printing (BEP) with specific allocation of operating funds for fiscal year 1875.

Engraving and Printing

Congress mandates that the U.S. Department of the Treasury solely performs the engraving and printing of notes, bonds, and other securities of the United States. 

Silver Certificates

The U.S. Department of the Treasury issues silver certificates. Legislation directing an increase in the purchase and coinage of silver authorizes the creation of the certificates.

Senator Blanche Kelso Bruce

Former United States Senator Blanche Kelso Bruce is the first African-American to have his signature on American paper currency. He becomes the Register of the United States Treasury in 1881.

Women on Currency

$1 silver certificates feature Martha Washington in their 1886 and 1896 series.

Treasury Notes

The U.S. Department of the Treasury begins issuing Treasury notes.

Jim the Penman

Emmanuel Ninger is arrested for counterfeiting banknotes. Nicknamed “Jim the Penman” by the U.S. Secret Service, Ninger uses only a pen and a brush to counterfeit money. While his work is convincing, he is caught because the ink dissolved on one of his counterfeits.

Educational Note Series

In 1896 US released a series of silver certificates with neoclassical designs. They were referred to as the "Educational Series". The $1 note had allegorical figures of history instructing the youth. Two dollar notes had figures of science presenting the children, Steam and Electricity, to adults, Commerce and Manufacture.

Federal Reserve Act

The Federal Reserve Act of 1913 establishes the Federal Reserve as the nation’s central bank and provides for a national banking system that is more responsive to the fluctuating financial needs of the country. The Federal Reserve Board issues new currency called Federal Reserve notes.

The First $10 Federal Reserve Notes

The Federal Reserve Board, which is separate from the Treasury Department, issues $10 Federal Reserve notes featuring Andrew Jackson's portrait. These notes are physically larger than $10 bills currently in circulation.

Introduction of "Large Denomination Banknotes"

In 1918, the Federal Reserve Board begins issuing currency in $500, $1,000, $5,000, and $10,000 denominations.

$1,000 Federal Reserve Notes

The Federal Reserve Board issues $1,000 notes featuring Alexander Hamilton’s portrait. This bill is discontinued in 1969.

$10,000 Federal Reserve Notes

The Federal Reserve Board issues $10,000 notes featuring Salmon P. Chase’s portrait. This note is intended for bank-to-bank large value transfers, not public circulation.

$10 bill with Automobile

BEP engraver Louis S. Schofield added an automobile in front of the Treasury building image on the back of the $10 notes issued between 1928 and 1996. The car was based on a number of different models and brands that were available in the 1920s.

Serial Numbers on Banknotes

The United States adds unique serial numbers to banknotes.

Standardization of Design

The appearance of U.S. banknotes changes greatly in 1929. In an effort to lower manufacturing costs, all Federal Reserve notes are made about 30 percent smaller—measuring 6.14 x 2.61 inches, rather than 7.375 x 3.125 inches. In addition, standardized designs are instituted for each denomination, decreasing the number of designs in circulation and making it easier for the public to distinguish between genuine and counterfeit notes.

$100,000 Gold Certificate

The Treasurer of the United States issues $100,000 gold certificates to Federal Reserve Banks to settle large value transactions. The gold certificate features Woodrow Wilson and do not circulate amongst the public.

Great Seal of the United States

$1 Federal Reserve notes feature the obverse and reverse of the Great Seal of the United States. The Seal dates to 1782. Its reverse side depicts the Eye of Providence and an unfinished pyramid symbolizing the nation’s strength and duration. The Seal’s obverse side shows an eagle bearing a shield and clutching both an olive branch and arrows in its talons.

Victor Lustig

Victor Lustig is arrested for using a “money-making machine” to produce counterfeit currency.

"Know Your Money" Campaign

The Secret Service prints “Know Your Money” booklets to educate the public on designs and features of genuine currency. It features cartoons and displays images of counterfeit bills next to genuine bills.

Special World War II Currency

The BEP prints Silver Certificates and Federal Reserve notes bearing a “Hawaii” overprint. These items only circulate in Hawaii, and their brown seals and serial numbers differentiate from other certificates. They are easily identifiable and can be declared valueless if Hawaii is overran by enemy forces.

Allied Military Currency

The BEP prints Allied Military Currency for the use by Allied invasion forces in Italy. AMC helped prevent inflation after an Allied forces landed in Sicily. Soldiers used similar AMC in Austria, Germany, France and Japan.

$500 Federal Reserve Notes

The Federal Reserve Board issues $500 bills that feature President William McKinley’s portrait. These circulate for roughly two decades and remains legal tender.

"In God We Trust"

Following a 1955 law requiring “In God We Trust” on all currency, the motto first appears on banknotes on series 1957 $1 silver certificates, then on 1963 series Federal Reserve notes.

Currency and Gold

Congress prohibits the redemption of currency for gold.

The First ATM

Automated teller machines (ATM) first appear in New York City. They allow bank customers to retrieve cash from their accounts without needing to visit the bank.

End of Large Denomination Bills

On July 14, 1969, the Federal Reserve and the U.S. Department of the Treasury announced that banknotes in denominations of $500, $1,000, $5,000, and $10,000 would be discontinued due to lack of use. Although they were issued until 1969, they were last printed in 1945.

United States Notes Discontinued

Because United States notes no longer served any function not already adequately met by Federal Reserve notes, their issuance was discontinued and, beginning in 1971, no new United States notes were placed into circulation.

Reintroduction of the $2 Note

On the 233rd anniversary of Thomas Jefferson's birth, and to commemorate the bicentennial, the $2 Federal Reserve note is re-introduced featuring a new vignette: Trumbull's painting "The Signing of the Declaration of Independence."

Azie Taylor Morton

Azie Taylor Morton is the first African-American woman to have her signature on a Federal Reserve note. Morton is the 36th Treasurer of the United States.

Security Thread and Microprinting

A security thread and microprinting are introduced in Federal Reserve notes to deter counterfeiting by copiers and printers. The features first appear in Series 1990 $100 notes. By Series 1993, the features appeared on all denominations except $1 and $2 notes.

Western Currency Facility

The BEP’s Western Currency Facility in Fort Worth, Texas, begins producing currency. It is the first government facility outside Washington, D.C., to print Federal Reserve notes.

Currency Redesign

In the first significant design change since the 1920s, U.S. currency is redesigned to incorporate a series of new counterfeit deterrents. Issuance of the new banknotes begins with the $100 note in 1996, followed by the $50 note in 1997, the $20 note in 1998, and the $10 and $5 notes in 2000.

The Redesigned $20 Note

The new-design $20 note features subtle background colors of green and peach. The $20 note includes an embedded security thread that glows green when illuminated by UV light. When held to light, a portrait watermark of President Jackson is visible from both sides of the note. In addition, the note includes a color-shifting numeral 20 in the lower right corner of the note.

The Redesigned $50 Note

The currency redesigns continue with the $50 note, which features subtle background colors of blue and red. The $50 note includes an embedded security thread that glows yellow when illuminated by UV light. When held to light, a portrait watermark of President Grant is visible from both sides of the note. In addition, the note includes a color-shifting numeral 50 in the lower right corner of the note.

The Redesigned $10 Note

The new-design $10 note features subtle background colors of orange, yellow, and red. The $10 note includes an embedded security thread that glows orange when illuminated by UV light. When held to light, a portrait watermark of Treasury Secretary Alexander Hamilton is visible from both sides of the note. In addition, the note includes a color-shifting numeral 10 in the lower right corner of the note.

The Redesigned $5 Note

The new-design $5 note features subtle background colors of light purple and gray. The $5 note includes an embedded security thread that glows blue when illuminated by UV light. Two watermarks are featured in the $5 note, which are visible from both sides of the note when held to light. A vertical pattern of three numeral 5s is situated to the left of the portrait and a large numeral 5 is located in the blank space to the right of the portrait.

The Redesigned $100 Note

In its first redesign since 1996, the new-design $100 note features additional security features including a 3-D Security Ribbon and color-shifting Bell in the Inkwell. The new-design $100 note also includes a portrait watermark of Benjamin Franklin that is visible from both sides of the note when held to light.

Federal Reserve Currency Website

The Federal Reserve Board launches uscurrency.gov to inform the public about the security and design features of Federal Reserve notes. This website offers multi-lingual educational materials free for public use.

Banknote Recycling

The 12 Federal Reserve Banks repurpose banknotes not fit for circulation. The banks shred and reuse money that is too worn or dirty for a number of purposes, such as insulation or compost.

History Cooperative

History of Money: Discovery and Evolution of Money

Money, in its various forms, has played a fundamental role in human civilization since the dawn of time. It is a medium of exchange, a unit of account, and a store of value that facilitates economic transactions and enables the functioning of societies.

The origins of money can be traced back to the early stages of human development when primitive societies relied on a barter system to exchange goods and services.

As civilizations advanced and societies became more complex, the need for a more efficient and standardized medium of exchange became apparent.

In the modern era, with the advent of digital technology and the internet has ushered in a new era of money with the rise of electronic forms of currency such as credit cards, online payment systems, and cryptocurrencies like Bitcoin. These digital currencies offer new possibilities for global commerce and financial innovation but also raise questions about security, regulation, and the future of money.

Table of Contents

History of Bartering

History of money is complex and before the advent of money, societies relied on barter systems for trade. In these systems, individuals exchanged goods or services directly, often in a straightforward “A-for-B” transaction. For instance, a carpenter might offer his services to a farmer in exchange for some of the farmer’s grain or milk. However, such transactions could pose challenges when immediate needs didn’t align. What would the carpenter do if he desired a muffin or a milkshake but the farmer didn’t require any woodworking?

To address these challenges, early societies often supplemented barter systems with informal credit-and-debt arrangements or gift exchanges. Within tight-knit tribes and communities, individuals supported each other, offering services without the necessity of immediate exchange. For instance, the farmer might provide grain and milk to the carpenter with the understanding that the carpenter would reciprocate whenever needed. This system fostered a sense of mutual support and cooperation.

However, as trade expanded beyond local communities to encompass interactions between tribes and civilizations, the limitations of direct barter became apparent. To facilitate trade across broader networks, traders began exchanging items of tangible value, such as spices, grains, livestock, or animal pelts. While this method enabled commerce beyond immediate communities, it had its drawbacks. For example, commodities like livestock or grains were bulky and perishable, posing challenges in transportation and storage. Additionally, their value could fluctuate with factors like seasonality or market demand, making them less reliable as mediums of exchange.

Ultimately, the evolution of trade necessitated a more versatile and universally accepted form of payment. This led to the emergence of currency, initially in the form of small, shiny objects. Cowrie shells, found abundantly in the Indian and Pacific Oceans, served as one of the earliest forms of currency due to their durability, uniqueness, and aesthetic appeal. Over time , various societies transitioned to using precious metals like bronze, silver, and gold for currency, minting coins stamped with symbols or seals to denote their value and authenticity.

However, the transition to metal currency didn’t eliminate all challenges. While metal coins were more portable and durable than bulkier commodities, they still had limitations. For instance, the value of coins could be subject to fluctuations in metal prices or scarcity. Additionally, transporting large quantities of metal coins posed logistical challenges, especially for long-distance trade.

These historical developments laid the groundwork for the eventual introduction of paper money, which offered greater portability and flexibility in trade. Initially appearing in China during the Tang Dynasty, paper money gradually gained acceptance as a convenient alternative to metal coins. However, its widespread adoption in Europe faced challenges, including concerns about authenticity, counterfeiting, and fluctuations in value.

READ MORE: A Full Timeline of Chinese Dynasties in Order

Despite these challenges, paper money eventually became a dominant form of currency worldwide, ushering in an era of modern banking and financial systems. From the gold standard to fiat currencies, the concept of money has evolved continuously, reflecting changing economic landscapes and technological advancements.

Evolution of Money, Its Inventor, and Production Process

Money, in its essence, is a medium of exchange that facilitates transactions between individuals or entities. It serves as a unit of account, a store of value, and a standard of deferred payment. The process of making money varies depending on its form. Historically, money has been made from various materials, including metals, paper, and even digital code.

In the earliest stages of human civilization, money was made in the form of small, shiny objects, such as cowrie shells . These shells were light, durable, and unique, making them suitable for use as currency. Later, as societies evolved, precious metals like bronze, silver, and gold were used to mint coins. These coins were stamped with symbols or seals to denote their value and authenticity.

With the advent of paper money, the production process became more sophisticated. Paper currency was initially introduced as promissory notes during the Tang Dynasty in China, around the 9th century. These notes were essentially IOUs, representing promises to pay the bearer a certain amount of precious metal upon demand. However, during the Song Dynasty in China, paper money evolved into printed currency issued by the government and backed by reserves of metal currency.

In modern times, money is primarily produced by central banks, which have the authority to issue currency and regulate its circulation. The production process involves designing and printing banknotes with various security features to prevent counterfeiting. Additionally, digital forms of money, such as cryptocurrencies, are created through complex algorithms and blockchain technology.

The invention of money is a complex and gradual process that evolved over thousands of years in response to the needs of human societies. Money, in its primitive forms, emerged as a solution to the limitations of barter systems, where individuals exchanged goods or services directly.

The exact origins of money are difficult to pinpoint, but the earliest forms of currency can be traced back to around 2000–1000 BCE. One of the first known forms of money was cowrie shells, which were used as currency in various societies across Africa, Asia, and Eurasia. These shells were valued for their durability, uniqueness, and aesthetic appeal.

The transition from valuable objects to standardized currency likely occurred gradually, driven by the need for a more efficient medium of exchange in increasingly complex economies. In ancient China, cowrie shells were used as currency as early as the 1700s BCE, as evidenced by inscriptions on bronze vessels mentioning transactions involving cowrie shells.

The invention of metal coins marked a significant milestone in the history of money. The earliest coins were made of bronze and served as a more portable and universally accepted form of currency. King Alyattes of Lydia is credited with commissioning the first official currency made of electrum, a silver and gold mix, in the late 7th or early 6th century BCE.

The five stages of money were:

• Bartering : Before the advent of money, societies relied on barter systems for trade. Individuals exchanged goods or services directly, but this method had limitations, particularly when immediate needs didn’t align.
• Commodity Money : To supplement barter systems, traders began exchanging items of tangible value, such as spices, grains, livestock, or animal pelts. These commodities served as early forms of currency but had drawbacks due to their bulkiness and perishability.
• Cowrie Shells : The use of cowrie shells as currency emerged around 2000–1000 BCE. These shells were valued for their durability, uniqueness, and aesthetic appeal, making them ideal for use as currency in various societies.
• Metal Coins : The invention of metal coins marked a significant advancement in the evolution of money. Coins made of precious metals like bronze, silver, and gold became standardized forms of currency, stamped with symbols or seals to denote their value and authenticity.
• Paper Money : Paper money emerged as a convenient alternative to metal coins during the Tang Dynasty in China, around the 9th century. Initially introduced as promissory notes, paper currency evolved into printed currency issued by governments and backed by reserves of metal currency.

First Metal Money: Coins

The transition from using cowrie shells as currency to utilizing precious metals marked a significant milestone in the evolution of money. In China, for instance, bronze cowrie shells were among the first forms of currency, while in other regions, bronze was fashioned into small knives and shovels for use as currency. Initially, these early coins were rudimentary chunks of metal, lacking standardized designs or markings. However, this changed when King Alyattes of Lydia, in what is now Turkey, commissioned the first official currency in the late seventh or early sixth century BCE. These coins, made of electrum, a mixture of silver and gold, bore the stamp of a lion, serving as the official seal.

King Alyattes ‘ reign, which spanned more than 50 years, facilitated various interactions with neighboring kingdoms through wars, trade, and royal marriages. One of his notable trading partners was the kingdom of Ionia, where he exchanged metals for cereal, addressing Lydia’s shortage of grains. Consequently, Alyattes’ introduction of precious metal coins, minted with a royal image, gained traction, particularly through Grecian traders, spreading across modern-day Greece, Asia Minor, and beyond.

Following Alyattes, his son Croesus continued the tradition of minting coins, favoring pure gold. These coins, known as Croeseids, held significant intrinsic value due to their composition of precious metal, enabling trade well beyond Lydia’s borders. However, Lydia faced defeat in an epic battle against Cyrus the Great around 540 BCE, leading to the adoption of coinage by the conquering Persian empire and its subsequent spread.

The use of coins as currency also emerged in other regions during this time, including the Roman Republic . Initially employed for trade with Greek neighbors, coins gradually gained acceptance as common currency within the Republic. Notably, the Romans contributed to the evolution of money by introducing the term “money,” derived from Juno , the patron goddess of the Roman Republic. The association between Juno Moneta, a temple dedicated to Juno, and the minting of Roman coins influenced the Latin language, with derivatives of “Moneta” used in various Latin-based languages.

Meanwhile, in Mesoamerica, particularly during the Classical Mayan period (200–900 CE), cocoa beans gained recognition as a form of currency among the Mayans. Murals and mosaics from this era depict Mayan kings accepting marked bags of cocoa beans as tax payments. The discovery of counterfeit cocoa pods further supports the notion of cocoa being used as currency. Even today, chocolate retains its value as a form of currency in many households.

First Paper Money

The inception of paper money, a key transformation in the history of commerce and economic systems, can be traced back to ancient China, specifically during the Tang dynasty around the ninth century. Initially, these notes served more as promissory notes or IOUs rather than the printed currency we recognize today. This innovation was born out of practicality; merchants and traders, weary of transporting heavy metals, opted to issue written promises to pay, contingent upon the mutual trust that these metals were indeed held in reserve.

The transition from these early forms of IOUs to the first recognized government-issued paper currency occurred during the Song Dynasty (960–1279), with the earliest notes emerging from Szechuan, the birthplace of China’s printing innovation. These notes, which could be exchanged for metal currency, marked the official advent of paper money, offering a new level of convenience and portability that metal currencies could not match. The widespread circulation and acceptance of these notes underscore the significant leap forward in the concept of money, further popularized by the accounts of Marco Polo, who, upon witnessing the efficiency and practicality of paper money during his travels in China, introduced the idea to the European consciousness.

The introduction of paper currency in Europe, however, followed centuries later, with Sweden taking the lead in 1661. This marked a significant moment in monetary history, as European nations began to explore the possibilities and challenges of paper money, encountering issues of trust, value, and counterfeiting that Chinese innovators had navigated centuries before. Despite the initial success of these notes, backed by the assurance of real coinage and the signatures of numerous officials, the European foray into paper currency soon encountered turbulence. The lack of standardized accountability and rampant counterfeiting underscored the delicate balance between the tangible value of metal coins and the abstract trust required for paper money’s acceptance.

This evolution from metal to paper currency illustrates a broader shift in the understanding and use of money. Initially rooted in tangible goods like cowrie shells, livestock, or metal coins, the concept of money has continuously evolved to accommodate the changing needs of commerce and trade. Paper money, despite its less durable nature, represented a significant advance in this evolution, offering a new form of currency that was both portable and, in many cases, more convenient for large transactions.

The Introduction of Banks and Currencies

The advent of banks and currencies represents a fundamental shift in the economic and social fabric of human societies, marking the transition from basic trade systems to sophisticated financial networks. This transformation was closely tied to the need for a stable, reliable means of exchange and storage of wealth, leading to the establishment of institutions that could facilitate these functions on a large scale.

Currency, in its most recognized form, emerged when societies began to standardize physical tokens of exchange, moving beyond the rudimentary barter systems that had dominated commerce for millennia. The invention of currency can be traced back to ancient civilizations , where the limitations of barter necessitated a more efficient medium of exchange. The earliest known currencies were minted in the kingdom of Lydia around the 7th century BCE, introducing the concept of standardized metal coins which bore official markings to signify their authenticity and value. This innovation provided a basis for the value of goods and services, enabling broader and more complex trade networks.

The introduction of currency was paralleled by the development of banking systems, which originated in ancient Mesopotamia and Egypt . Temples and palaces served as the first banks, safeguarding the precious metal wealth of individuals and facilitating transactions. These early banks played a crucial role in managing and loaning money, laying the groundwork for modern banking practices.

READ MORE: The Cradle of Civilization: Mesopotamia and the First Civilizations

As trade networks expanded and economies grew more complex, the need for centralized institutions to regulate and facilitate financial transactions became evident. This led to the formal establishment of banks, which not only safeguarded deposits but also began to issue their own currencies. This practice was important in the evolution of money, as it introduced the concept of paper money—initially as promissory notes that could be exchanged for gold or silver.

The invention of paper money in China during the Tang Dynasty (around the 9th century) and its formal issuance during the Song Dynasty marked a significant leap forward. Paper currency offered numerous advantages over metal coins, including ease of transport and the ability to represent larger values, thus supporting larger-scale economic activities.

The establishment of banks and the introduction of standardized currencies were closely intertwined developments that addressed the growing needs of expanding economies. These institutions not only facilitated trade and commerce by providing a reliable medium of exchange but also contributed to the development of financial systems that could support economic growth and stability. The creation of currency, whether metal or paper, laid the foundation for the economic structures we see today, enabling the accumulation, investment, and movement of wealth across global economies.

Types of Money

There are four primary types of money, each playing a unique role in the development and function of modern economies.

Commodity Money represents the earliest form of money, directly linked to the physical value of the commodities it represents, such as precious metals, salt, or even livestock. Its value is intrinsic, derived from the material it is made of or the commodity it represents. This form of money facilitated the initial shift away from barter systems, allowing goods and services to be traded more efficiently. However, the limitations of commodity money, such as perishability and the cumbersome nature of certain goods, led to the development of more practical forms of currency.

Fiat Money marks a significant evolution, characterized by its lack of intrinsic value; instead, its worth is derived from the trust and confidence placed in it by its users. This form of money is government-issued and is not backed by a physical commodity but by the stability and economic power of the issuing authority. The value of fiat money is essentially a matter of social convention and legal decree, exemplified by paper currency and coins in modern economies.

Representative Money stands as a bridge between commodity and fiat money, holding value because it represents a claim on a commodity that can be exchanged, such as a gold certificate or silver certificate. This type of money is backed by an actual physical reserve, a specific amount of the commodity on which it can be redeemed, thereby combining the practicality of paper money with the intrinsic value of the commodity it represents.

Digital or Cryptocurrency represents the frontier of monetary evolution, embodying the principles of fiat money but existing entirely in the digital realm. Powered by blockchain technology, cryptocurrencies like Bitcoin offer a decentralized, peer-to-peer approach to financial transactions. This form of money transcends traditional banking systems and government-issued currencies, providing a global, secure, and anonymous method of transaction.

The Gold Standard

One way to eliminate such disorder was for a central bank to adopt a gold standard. The gold standard directly based a country’s currency on a fixed amount of gold. At any time, the country’s bank notes could be redeemed for this amount of gold. Sound familiar? Yes, after more than 150 years of chaos, countries went back to what made Sweden’s initial notes so successful.

Starting in the 1870s, the gold standard was adopted by most of the countries in Europe as well as the US, Canada, Mexico, Japan, and others. Having a set system that allowed currencies to be easily valued against one another allowed trade and international investment to flourish.

Not all countries adhered to the gold standard as strictly as others, but things ran relatively smoothly until the onset of World War I. The Great War caused massive financial disruptions, due to suspended trade, plummeting tax revenues, war-time spending, and bank runs.

READ MORE: What Caused World War 1? Political, Imperialistic, and Nationalistic Factors

The gold standard was reinstated in many countries once the war was over, but the Great Depression proved its ultimate downfall just a little more than a decade later.

Modern-Day Money

At the onset of the Great Depression, bank runs were becoming increasingly common, and too many people were cashing out their paper for gold. England was nearly running out of gold in 1931, and after the head of the Bank of England suffered a panic attack, his subordinates did away with the gold standard .

The US soon followed suit, but only after FDR consulted his groundskeeper, who was also an “agricultural economist.” FDR’s other financial advisors, those who had not devised ways to get chickens to lay more eggs, thought the decision to end the gold standard might destroy Western Civilization as we know it.

Ironically, FDR, who abandoned the gold standard, appears on a gold presidential dollar.

Instead of money tied to gold, the world soon operated with fiat money, or money that has value because a government says it has value.

With the break from the gold standard, money became much more malleable. Interest rates could be manipulated, the money supply could be altered, and economies became things to tweak and manipulate. Some intrepid governments even started currency wars to boost their own exports and diminish the value of imports.

Currencies moved much more freely in relation to one another, and an entire market was born. The foreign exchange, or forex, market soon became the largest financial market in the world, with more than $6.7 trillion now changing hands on a daily basis.

Although the major players in the forex market are multinational corporations, banks, and governments, in the modern world anyone with a connection to the World Wide Web can choose a forex broker and trade currencies. People are making money by selling one currency in relation to another currency… over their phones. It’s incredible to think of when you consider we aren’t so far removed from cowrie shells.

Credit Cards and Debit Cards 

The narrative of money’s evolution reaches another significant milestone with the advent of Credit Cards and Debit Cards. These financial instruments have revolutionized the way individuals access and spend their money, offering unparalleled convenience and security. Credit cards, introduced in the mid-20th century, function on the principle of borrowing. They allow consumers to make purchases or withdraw cash up to a certain limit, with the understanding that the money will be paid back, along with any applicable interest or fees. This system not only facilitated easier spending and borrowing but also helped to build financial histories that could support future creditworthiness assessments.

Debit cards, on the other hand, are linked directly to one’s bank account, allowing for the immediate transfer of funds for payment. Unlike credit cards, they do not involve borrowing or accruing interest, as they utilize existing account balances. The introduction of debit cards represented a significant leap forward in banking convenience, enabling real-time access to funds without the need for physical cash or checks.

Both credit and debit cards have contributed to the dematerialization of money, shifting the perception and usage of currency from physical objects to digital transactions. This transition has been facilitated by advancements in technology and the global financial infrastructure, which have made electronic verification and processing of transactions possible almost instantaneously. As a result, these cards have become essential tools in modern commerce, empowering consumers with greater flexibility and control over their financial resources.

Online Payments

Online Payments further extend the digital transformation of money, encompassing a broad range of technologies and platforms that enable transactions over the internet. This includes direct transfers from bank accounts, payments made through websites or mobile apps, and transactions conducted using digital wallets. Online payment systems have dramatically expanded the scope of digital commerce, allowing businesses and consumers to engage in transactions across vast distances with speed and efficiency.

The rise of online payments has been propelled by the increasing ubiquity of the internet and smartphones, as well as the development of secure encryption technologies that protect sensitive financial information. This environment has fostered an ecosystem of payment gateways, merchant services, and fintech innovations that support a wide array of economic activities, from e-commerce and peer-to-peer transfers to subscription services and digital content consumption.

Digital Currency

Although virtual currencies, such as bitcoin, have lost substantial value as of late, it seems clear that a digital world requires a digital currency. As we saw in the early days of European paper money, currency transitions aren’t always easy. There will be shenanigans. (Mooncoin, anyone?) But it seems certain that the money of tomorrow will bear very little resemblance to what we use today, and even less of a resemblance to what we’ve used in the past.

The Impact of Money throughout History

The impact of money throughout history is profound, influencing virtually every aspect of human civilization. From the earliest barter systems to the sophisticated digital economies of today, the evolution of money has been inextricably linked with the development of trade, the rise and fall of empires, the shaping of cultures, and the advancement of technology. Money, in its various forms, has served as a catalyst for social organization, economic development, and global interconnectedness, fundamentally transforming the way humans interact, exchange, and perceive value.

The introduction of standardized currency facilitated the expansion of trade networks beyond local communities, enabling the emergence of market economies and the specialization of labor. This, in turn, spurred innovation and the accumulation of wealth, laying the groundwork for the rise of cities and the establishment of nation-states. Moreover, the shift from commodity money to fiat currency and the subsequent development of banking and financial institutions have allowed for more sophisticated methods of investment, financing, and wealth management, further accelerating economic growth and innovation.

The control over the issuance and regulation of money has been a source of immense power for rulers, governments, and financial elites, often leading to social and economic disparities. Inflation, currency devaluation, and financial crises have periodically disrupted societies, highlighting the vulnerabilities inherent in monetary systems.

The Future of Money

Looking towards the future of money, it is clear that digital technologies are set to play a huge role in shaping its evolution. Cryptocurrencies and blockchain technology offer the potential for creating more decentralized, transparent, and secure financial systems. Digital currencies issued by central banks (CBDCs) are being explored as a way to combine the benefits of digital money with the stability and regulatory oversight of traditional fiat currencies. Furthermore, the rise of fintech innovations continues to democratize access to financial services, making it possible for more people around the world to participate in the global economy.

The future of money also poses significant challenges and questions. The digital divide, privacy concerns, cybersecurity threats, and regulatory issues are just a few of the complexities that societies will need to navigate. Moreover, the environmental impact of digital financial technologies, particularly energy-intensive cryptocurrencies, calls for sustainable approaches to the development of future monetary systems.

From Barter to Blockchain: The Evolution Continues

The evolution of money, from barter to digital currencies, showcases humanity’s progress in enhancing trade efficiency and economic inclusivity. This has not only transformed commerce but also societal structures and governance. Today, innovations like blockchain and cryptocurrencies signal a new era in finance, offering global access to financial services yet posing challenges in security, privacy, and sustainability. As we envision the future, it’s crucial to balance technological advancements with societal well-being, drawing from history to build a financial system that’s inclusive and sustainable for all.

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What Is Money?

• Bartering to Currency
• First Official Currency
• Paper Currency
• Currency Wars

Mobile Payments

Virtual currency, the bottom line.

• Personal Finance
• Financial Literacy

The History of Money: Bartering to Banknotes to Bitcoin

From bartering to banknotes to Bitcoin

The terms money and currency are often used interchangeably. But several theories suggest they are not identical. According to some theories, money is inherently an intangible concept. Currency, on the other hand, is the physical or tangible manifestation of the intangible concept of money.

According to this theory, money cannot be touched or smelled. Currency is the coin, note, object, or physical representation that is presented in the form of money. The basic form of money is numbers while the basic form of currency is paper banknotes , coins, or plastic cards like credit or debit cards . Though this distinction between money and currency is important in some contexts, for the purposes of this article, the terms are used interchangeably.

Key Takeaways

• Money is a medium of exchange with a recognized value that was adopted to make it easier for people to trade products and services with each other.
• The history of money crisscrosses the world as various cultures recognized the need to simplify trade by introducing a single, portable token of value into the process.
• People bartered before the world began using money.
• The world’s oldest known coin minting site was located in China, which began striking spade coins sometime around 640 BCE.
• Since then, the world adopted banknotes and moved into digital forms of payment, including virtual currencies.

Money doesn't always have value whether it's represented by a seashell, a metal coin, a piece of paper, or a string of code mined electronically by a computer. With global wealth estimated to be about $454.4 trillion at the end of 2022, the value of money depends on the importance that people place on it as a medium of exchange, a unit of measurement, and a storehouse for wealth.

Money allows people to trade goods and services indirectly. It helps communicate the price of goods and provides individuals with a way to store their wealth. It is valuable as a unit of account—a socially accepted standard by which things are priced and with which payment is accepted. However, both the usage and form of money have evolved throughout history.

Investopedia / Sabrina Jiang

From Bartering to Currency

Money has been part of human history for at least the past 5,000 years in some form or another. Before that time, historians generally agree that a system of bartering was likely used. Bartering is a direct trade of goods and services.

For example, a farmer may exchange a bushel of wheat for a pair of shoes from a shoemaker. However, these arrangements take time. If you exchange an axe as part of an agreement in which the other party is supposed to kill a woolly mammoth, you have to find someone who thinks the tool is a fair trade for having to face down the 12-foot tusks of a mammoth. If this doesn't work, you would have to alter the deal until someone agreed to the terms.

A type of currency slowly developed over the centuries that involved easily traded items like animal skins, salt, and weapons. These traded goods served as the medium of exchange even though the value of each of these items was still negotiable in many cases. This system of trading spread across the world and still survives today in some parts of the globe.

One of the greatest achievements of the introduction of money was the increased speed at which business, whether it involved mammoth slaying or monument-building, could be done.

In early August 2021, Chinese archaeologists with the State University of Zhengzhou announced the discovery of the world’s oldest known, securely dated coin minting site in Guanzhuang in Henan Province, China. A mint is a facility where currency is created. Sometime around 640 BCE, this facility began striking spade coins, one of the first standardized forms of metal coinage.

Millions of coins are circulating in the United States. As many as 47,250 coins are minted per minute at the Philadelphia Mint while 40,500 coins are produced per minute by the Denver Mint.

First Official Currency Is Minted

Meanwhile, further west during this era, in 600 BCE, the invention of metal coinage occurred when Lydia's King Alyattes minted what is believed to be the first official currency, the Lydian stater.

The coins were made from electrum, a mixture of silver and gold that occurs naturally, and the coins were stamped with pictures that acted as denominations .

Lydia's currency helped the country increase both its internal and external trading systems, making it one of the richest empires in Asia Minor. Today, when someone says, "as rich as Croesus", they are referring to the last Lydian king who minted the first gold coin.

Investopedia / Alice Morgan

Transition to Paper Currency

During 1260 CE, the Yuan dynasty of China moved from coins to paper money . By the time Marco Polo, a Venetian merchant, explorer, and writer who traveled through Asia along the Silk Road, visited China in approximately 1271 CE, the emperor of China had a good handle on both the money supply and its various denominations. In fact, in the place where modern American bills say, "In God We Trust," the Chinese inscription at that time warned: "Those who are counterfeiting will be beheaded."

Parts of Europe still used metal coins as their sole form of currency until the 16th century. Colonial acquisitions of new territories via European conquest provided new sources of precious metals and enabled European nations to keep minting a greater quantity of coins.

But banks eventually started using paper banknotes for depositors and borrowers to carry around in place of metal coins. These notes could be taken to the bank at any time and exchanged for their face value in metal, usually silver or gold, coins. This paper money could be used to buy goods and services. In this way, it operated much like currency does today in the modern world. But it was issued by banks and private institutions rather than the government, which is now responsible for issuing currency in most countries.

The first paper currency issued by European governments was actually issued by their colonial governments in North America. Because shipments between Europe and the North American colonies took a long time, colonies often ran out of cash. Instead of going back to a barter system, the colonial governments issued IOUs that traded as currency. The first instance was in Canada (then a French colony) in 1685 when soldiers were issued playing cards denominated and signed by the governor to use as cash instead of coins from France.

The gold standard was established in the 1870s. Under this rule, currency printing was permitted based on the amount of gold a country had in its reserves.

The Emergence of Currency Wars

The shift to paper money in Europe increased the amount of international trade that could occur. Banks and the ruling classes started buying currencies from other nations and created the first currency market. The stability of a particular monarchy or government affected the value of the country's currency, and thus, that country's ability to trade on an increasingly international currency market .

The competition between countries often led to currency wars , where competing countries would try to change the value of the competitor's currency by driving it up and making the enemy's goods too expensive, by driving it down and reducing the enemy's buying power (and ability to pay for a war), or by eliminating the currency completely.

The 21st century gave rise to a novel form of payment activated with the touch of your finger. Mobile payments refer to money used to pay for goods and services. They can also be used to transfer money to another individual, such as a family member or friend. This can all be done using a portable electronic device, such as a smartphone or tablet device.

This form of payment first came to prominence in Asia and Europe before moving over to North America. From payments via text message, the technology evolved to allow checks to be deposited using the camera app on smart devices.

Mobile payment services like Apple Pay and Google Pay are vying for retailers to accept their platforms for point-of-sale payments. There are also apps dedicated to this method of payment, including Venmo and PayPal .

Virtual currencies are only available in electronic form. As digital representations of money, this type of currency is stored and traded using computer applications or specially designated software. The appeal of virtual currency is that it offers the promise of lower transaction fees than traditional online payment mechanisms do and is operated by decentralized authorities, unlike government-issued  currencies .

Bitcoin ​ quickly became the standard for virtual currencies. It was released in 2009 by the pseudonymous Satoshi Nakamoto. All of the world's Bitcoin was worth just over $803.74 billion as of Dec. 12, 2023. Keep in mind, though, that virtual currencies like Bitcoin have no physical coinage because they are traded on exchanges. 

Although Bitcoin remains the most popular and most expensive one, other virtual currencies have hit the market. They include Ethereum, XRP, and Dogecoin.

How Long Has Money Been Around, and What Were the First Forms of Value Exchange?

Money has been part of human history for at least the past 5,000 years in some form or another. Historians generally agree that a system of bartering was likely used before this time. Bartering involves the direct trade of goods and services. For instance, a farmer may exchange a bushel of wheat for a pair of shoes from a shoemaker.

When and Where Did Coin Minting Begin?

The world’s oldest known, securely dated coin minting site was located at Guanzhuang in the Henan Province of China. The mint began striking spade coins sometime around 640 BCE, likely the first standardized metal coinage.

When Were Coins Replaced by Paper Money?

The Chinese moved from coins to paper money around 1260 CE. By the time Marco Polo visited China in approximately 1271 CE, the emperor of China had a good handle on both the money supply and its various denominations.

The history of money is still being written. The system of exchange has moved from swapping animal skins to minting coins to printing paper money, and today, we appear to be on the cusp of a massive shift to electronic transactions. Ancient transaction forms have been co-opted: for example, bartering still occurs on the margins in some markets such as the business-to-business (B2B) space and some consumer services. The monetary system will surely continue evolving as long as humans require a medium of exchange.

University of Minnesota Library via Pressbooks. " Principles of Economics: 24.1 What Is Money? "

Credit Suisse AG. " Global Wealth Report ."

Glyn Davies. " History of Money: From Ancient Times to the Present Day ," Pages 9-11, 34. University of Wales Press, 2002.

Cambridge University. " Radiocarbon-Dating an Early Minting Site: the Emergence of Standardised Coinage in China ."

United States Mint. " Coin Production ."

World History Encyclopaedia. " The Importance of the Lydian Stater as the World's First Coin ."

World History Encyclopedia. " The Invention of the First Coinage in Ancient Lydia ."

Hans Ulrich Vogel. " Marco Polo Was in China: New Evidence from Currencies, Salts and Revenues ," Page 94. BRILL, 2012.

The Mariners' Museum and Park. " Marco Polo ."

Hans Ulrich Vogel. " Marco Polo Was in China: New Evidence from Currencies, Salts and Revenues ," Page 173. BRILL, 2012.

Britannica. " The Later Medieval and Modern Coinages of Continental Europe ."

Britannica. " Coins of the British Isles, Colonies, and Commonwealth ."

Bank of Canada. " New France ," Pages 4-5.

World Gold Standard. " The Classical Gold Standard ."

Bitcoin Project. " Frequently Asked Questions ," Select "General: Who created Bitcoin?"

CoinMarketCap. " Bitcoin ."

CoinMarketCap. " Today's Cryptocurrency Prices by Market Cap ."

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Banknotes: a short history

Seventh century.

First recorded use of paper money was in China in the seventh century. The practice did not become widespread in Europe for nearly a thousand years.

16th century

The goldsmith-bankers began to accept deposits, make loans and transfer funds. They also gave receipts for cash, that is to say gold coins, deposited with them. These receipts, known as "running cash notes", were made out in the name of the depositor and promised to pay him on demand. Many also carried the words "or bearer" after the name of the depositor, which allowed them to circulate in a limited way. The similar phrase "I promise to pay the bearer on demand the sum of ...." still appears on British banknotes today.

In 1694 the Bank of England was established to raise money for King William III's war against France. The Bank started to issue notes in return for deposits. These notes were initially handwritten on Bank paper and signed by one of its cashiers. Today, all British banks carry the chief cashier's signature. After 1696, it was decided not to issue any notes worth less than £50 and since the average income then was less than £20 a year, most people went through life without ever coming into contact with banknotes.

18th century

The move towards fixed denomination notes started in the 18th century and from 1725 the Bank was issuing partly printed notes for completion by hand. The £ sign and the first digit were printed but other numerals and details were added by hand. By 1745 notes were being part printed in denominations ranging from £20 to £1,000.

In 1759, gold shortages caused by the seven years war forced the Bank to issue a £10 note for the first time. The first £5 notes followed in 1793 at the start of the war against Revolutionary France. In 1797 the uncertainty of the war caused a series of runs on the Bank and drained its bullion reserve. It was forced to stop paying out gold for its notes and instead it issued £1 and £2 notes. The Bank's nickname "the Old Lady of Threadneedle Street" has its roots in this so-called "restriction period" when gold reserves were short.

Cashiers were finally relieved of the task of signing each note individually in 1853, when the first fully printed notes appeared.

Early 20th century

The first world war broke the link between notes and gold once again. The government needed to preservce bullion stocks and so the Bank stopped paying out gold for its notes. In 1914 the Treasury printed and issued 10 shilling and £1 notes. The gold standard was partially restored in 1925. Britain left the gold standard in 1931 and the note issue became entirely backed by securities instead of gold.

Late 20th century

Since 1970, the Bank's notes have honoured "great Britons", including scientist Isaac Newton, composer Edward Elgar and nurse Florence Nightingale. Final say on these historical figures went to the Bank governor.

The world's first polymer notes began to appear in the 1980s although there were some teething problems with ink sticking to the surface. Australia issued a polymer $10 commemorative banknote in 1988 to mark its bicentenary and went on to become the first country to use solely polymer notes.

21st century

Former governor Mervyn King's announcement that Sir Winston Churchill would be appearing on British banknotes , most likely in place of social reformer Elizabeth Fry, sparked anger at the disappearance of all female historical figures from notes. New governor Mark Carney responded with an announcement that Jane Austen would appear on future notes and he also launched a review of the selection process for such characters "to ensure that our notes represent the full diversity of British people".

Source: Bank of England and Reserve Bank of Australia

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Veteran Collins is named BEP director

• By Arthur L. Friedberg , Coin World
• Published: Apr 1, 2024, 12 PM

Image courtesy of the Bureau of Engraving and Printing.

The U.S. Department of the Treasury announced the appointment of Patricia “Patty” S. Collins to serve as the 27th director of the Bureau of Engraving and Printing. Collins brings decades of senior federal service to the role, including a 24-year career in the U.S. Army. She becomes the first woman to serve as director in the bureau’s 162-year history.

“Patty’s service to our country reflects mission-focused leadership and a strong commitment to public service,” said U.S. Deputy Secretary of the Treasury Wally Adeyemo. “We look forward to Patty leading the talented people of the BEP.”

Patty joins the BEP from the U.S. Government Publishing Office, where she served as deputy director, the agency’s second highest ranking position, and chief operating officer where she led the publishing office’s operations, including plant operations for security and intelligent documents and official journals of government and customer services. These business units are responsible for GPO’s most important products, including the U.S. passport, Congressional Record, Federal Register, White House print materials, secure federal credentials, and other congressional and executive branch products and services.

Prior to joining the GPO in May 2020, she was a principal consultant at the McChrystal Group, where she focused on leadership development and guiding clients through complex challenges in the public and private business sectors.

“It’s an honor to be joining the Bureau of Engraving and Printing,” said Director Collins. “In my prior role at GPO I enjoyed a positive relationship with BEP and knew it was a high-quality organization with a talented workforce. It’s an incredibly exciting time to join the Bureau with the construction of our new manufacturing facility in DC and introducing our new family of trusted and secure bank notes.”

She retired as a colonel, following a 24-year-career in the U.S. Army, spending seven of those years within the Joint Special Operations Command. During her military career, she deployed to Iraq, Afghanistan and the Balkans. A pioneer in her field, she was one of a small number of women to serve in Special Operations and was the first woman in the Department of Defense to complete the Military Free Fall Jumpmaster Course.

In 2006, following her return from Iraq to Fort Liberty, North Carolina, she was hit by a car while riding her bicycle to work. The severity of the injury resulted in an amputation of her leg below the knee. Upon rehabilitation, she served in the military for nine more years, including a deployment to Afghanistan and battalion command. She retired from active duty in 2015.

In 2016, she represented the United States at the 2016 Summer Paralympics in Rio de Janeiro, Brazil, in the sport of triathlon. A native of Hackettstown, New Jersey, Collins holds a master of science degree from The Eisenhower School, National Defense University, and a bachelor of arts degree from Rutgers University. 

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Trump's social media company surges in trading debut in a big boost to Trump's wealth

News of Trump Media & Technology Group public trading is seen on television screens at the Nasdaq Marketplace on March 26, 2024 in New York City. At one point, the company was valued at over $9 billion after trading began. Michael M. Santiago/Getty Images hide caption

News of Trump Media & Technology Group public trading is seen on television screens at the Nasdaq Marketplace on March 26, 2024 in New York City. At one point, the company was valued at over $9 billion after trading began.

Donald Trump's social media venture soared 16% in its trading debut on Tuesday, delivering a windfall of billions of dollars to the former president's net worth. The question now is how soon he can tap into that money.

The surge in shares values the company at over $7 billion, even though it only had over $3 million in sales and lost nearly $50 million through the first nine months of last year.

Trading in Trump Media & Technology Group, the company behind the Truth Social app, was so frantic that it was briefly halted at one point.

The company started trading under the stock symbol DJT, or short for Donald J. Trump, and thousands of the former president's supporters are believed to have piled into the stock.

At the end of trading, Trump's stake was worth more than $4 billion — a paper gain that comes as he faces a slew of legal cases. But as of now, he won't be able to sell his shares for another six months.

The current valuation "is completely detached from any sort of fundamentals," said Julian Klymochko, founder and CEO of Accelerate Financial Technologies.

Klymochko called the windfall "a lottery ticket" for Trump.

"DJT is the mother of all meme stocks, where it's more of a political movement or just a speculative meme stock that's completely detached or unrelated to the underlying business fundamentals of Truth Social," he said.

Trump can post lower bond, judge rules, and hush-money case to start April 15

The company avoided the heavy regulatory oversight that comes with an initial public offering, opting to list instead in the Nasdaq exchange. It did so by merging with an already listed shell company, in a process called a backdoor listing.

Trump is now in the Bloomberg Billionaires Index

The performance of Trump Media has propelled the former president into the ranks of the 500 wealthiest people on the influential Bloomberg Billionaires Index for the first time.

Trump's real net worth has always been disputed however, making it hard to get a true sense of how much he's actually worth.

Reddit IPO: Why does Reddit want to become a public company?

While Trump stands to gain billions thanks to his more than 50% ownership of Trump Media, he can't sell just yet— unless he's able to renegotiate his current agreement.

Trump Media's board, however, is full of friendly directors. It includes his son, Donald Trump Jr., and former administration officials who served under him including U.S. Trade Representative Robert Lighthizer.

Trump Media is also led by former California Rep. Devin Nunes, a strong supporter of the former president.

In less than two weeks Trump must post a $175 million bond in a civil fraud case. If he could sell his shares now, he would be able to use the money to pay off the mounting bills from his legal cases.

A significant sale of shares, however, could hurt scores of Trump supporters who have bought into his company.

• Trump Media and Technology Group
• truth social
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Watch CBS News

Trump's Truth Social platform soars in second day of trading on Nasdaq

By Aimee Picchi

Edited By Anne Marie Lee , Alain Sherter

Updated on: March 27, 2024 / 4:26 PM EDT / CBS News

Former President Donald Trump's Truth Social began trading under the ticker "DJT" on Tuesday, putting the real estate tycoon — and his initials — at the helm of a publicly traded company once again. 

Trump Media & Technology Group shares soared in their second day of trading, rising $8.23, or 14.2%, to $66.22 on Wednesday. That follows a gain of 16% on Tuesday when the company began trading on Nasdaq.

The gains give Trump Media & Technology Group a market value of $9.4 billion. Trump, who owns 58% of the newly public company, now has a stake valued at $5.2 billion — at least on paper.

The company, whose main asset is the social media service Truth Social, has captured the attention of both critics and supporters, with some investors buying stock to express their support for the former president. Others are retail investors who want to cash in on the mania, rather than big institutional and professional investors. 

"DJT has all the makings of a meme stock, given the Trump news factor," noted Ben Emons, senior portfolio manager and head of fixed income at NewEdge Wealth, in a Tuesday research note. "For global macro investors, DJT will be a proxy for how markets price Trump 2.0 policies."

Trump Media is now the most expensive stock to short in the U.S., according to Bloomberg News. Short-selling, which involves betting that a specific stock will decline, is pricey for Trump's company because there are few shares available to borrow and there's high interest in betting against the company, the report noted.

On Truth Social Tuesday, users were posting about being shareholders or seeking tips on how to buy shares. One user urged conservatives to "get behind the DJT stock and sent it over $100 per share" to "drive the liberals insane!" Another declared: "Get yourself a piece of #DJT stock if your a true MAGA supporter."

On Monday, Trump told reporters that "Truth Social is doing very well. It's hot as a pistol and doing great." On Tuesday, he posted "I LOVE TRUTH SOCIAL, I LOVE THE TRUTH!," on the platform. A day earlier, Trump Media CEO Devin Nunes, a former Republican congressman, said that going public will allow the company "to build a movement to reclaim the Internet from Big Tech censors."

Despite the enthusiasm, investors could experience a bumpy ride. For one, they're betting on a company with uncertain financial prospects. Trump Media lost $49 million in the first nine months of last year, when it brought in just $3.4 million in revenue and had to pay $37.7 million in interest expenses.

DJT: an "on brand" ticker

Trump Media & Technology Group said in a statement Monday  that the ticker symbol would be active on Tuesday following its merger with a so-called blank-check company , also known as a special purchase acquisition company (SPAC). SPACs are shell companies created to take a private business public without going through an initial public offering.

In the case of Trump's media business, the shareholders of the SPAC, called Digital World Acquisition Corp.,  voted Friday  in favor of the merger, ushering in the next step of taking the new Truth Social company public without an IPO. The merged company officially changed its name to Trump Media & Technology Group after the deal was completed on Monday, the statement said. 

The eponymous symbol "is so on brand" for Trump, noted Kristi Marvin, chief executive of SPACInsider.com, a service that provides news and data about the SPAC industry.

Ahead of the debut of the new DJT ticker, shares of Digital World Acquisition Corp. soared $13.01, or 35%, to $49.95 on Monday.

Trump: Will he sell DJT shares?

Trump Media & Technology Group's multibillion valuation significantly boosts Trump's wealth at a time he faces mounting financial pressure from a string of lawsuits. On Monday, he got a major break when an appeals court reduced a $464 million civil fraud judgment to $175 million, yet he still faces mounting legal bills related to other cases.

Trump could eventually sell some of DJT stock to help pay for his legal bills, although in the near-term the company has a "lock up" period that effectively bars its executives from selling shares for six months. However, the company's board — comprised of Trump associates such as Kash Patel, an official during the Trump administration; and son, Donald Trump Jr. — could waive or shorten the lock-up period, experts said.

"Trump cannot sell his stock in the company for six months, making it difficult to translate Truth Social's value into liquid cash that can be spent on the campaign," Europa Group analysts said in a report. "That outlook could change over the coming months, particularly if Trump obtains the waiver or can find a lender willing to accept shares in Trump Media as collateral."

But there's a risk if Trump sells his stock, Emons noted. Because he owns a sizable chunk of the company, selling his shares could undermine its trading stability. For instance, "If he goes ahead [with selling], it could sink DJT by at least 15% to 40% based on option pricing," Emons calculated.

Truth Social: Losing money

To be sure, plenty of tech companies have gone public while in the red, yet typically investors want to see that a business can grow its user base and ramp up sales quickly by appealing to a broad range of advertisers. 

Truth Social, which doesn't release its user numbers, had roughly 5 million visits in February, according to research firm Similarweb estimates. 

By comparison, Reddit, which went public last week , had about 73.1 million daily active users last year, while revenue jumped 21% to $804 million in 2023, it reported last month ahead of the IPO filing.

Previous DJT ticker: From IPO to penny stock

It's also not the first time that Trump has overseen a publicly traded company with the ticker DJT. 

The previous iteration of the DJT ticker occurred in 1995, when Trump took his Trump Hotels & Casino Resorts public in an IPO. The idea was to raise money in the public markets that would help Trump expand his casino businesses, according to the New York Times' account of the IPO. 

The shares initially performed well, increasing from its IPO price of $14 to a high of $35 a share soon after. But the stock plunged over the next few years, eventually trading for pennies, according to the Washington Post. 

Trump Hotels & Casino Resorts filed for Chapter 11 bankruptcy in 2004. 

—With reporting by the Associated Press.

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Aimee Picchi is the associate managing editor for CBS MoneyWatch, where she covers business and personal finance. She previously worked at Bloomberg News and has written for national news outlets including USA Today and Consumer Reports.

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April Fools' Day pranks: Apps to translate baby stoner sayings, a ghostbuster at Tinder

Every april 1, brands and companies want to get some laughs – and attention – with goofy new 'product' launches. here are some ideas from companies such as sweetgreen, welch's and omaha steaks..

If you don't like Mondays, this one may especially be grating. It's April Fool's Day , when you should trust no one and question everything.

The roots of April Fools' Day may date back before to before the 15th century. But the modern-day April Fools' Day has become a day to prank a friend, family member, co-worker − or your customers.

Even though some companies have had April Fools' pranks backfire , marketers continue to issue spoof products in attempts to get some laughs and attention.

Already ahead of April Fools' Day, 7-Eleven has hinted at a possible prank product: In addition to new Lemon Lime, Green Apple and Sweet Orange flavored 7-Select sparkling waters, out now with partner Miracle Seltzer, there's a fourth flavor coming April 1: Big Bite Hot Dog.

The hot dog-flavored water "combines the mouthwatering experience of 7-Eleven’s iconic Big Bite Hot Dog into one refreshing beverage – ketchup and mustard included," the convenience chain says in a press release . "Say goodbye to the days of alternating bites of a hot dog with sips of a beverage, now those on the go can swap the bun for bubbles."

Krispy Kreme: A special doughnut deal for April Fools' Day

Will Big Bite Hot Dog sparkling water be sold? Its availability will be announced April 1. However, some reporters were sent a can of the drink. USA TODAY can confirm that it definitely smells like hot dog water and has a smoky aftertaste.

If you are interested in trying it, both 7-Eleven and Miracle Seltzer have hinted at having some to give away on their Instagram pages. (If you get a can, share with a friend as it's 16 ounces.)

Here's a roundup of many of the brand-related April Fools’ gag announcements. You've been warned.

Sour cream & onion flavored soda

Despite the proliferation of crazy-flavored products including Peeps-flavored Pepsi , Frank's RedHot sauce-flavored Vlasic pickles and Doritos Nacho Cheese-flavored liquor , healthy soda brand OLIPOP and Pringles are not really teaming up to bring to market a Sour Cream & Onion soda.

The product would have been "a match made in heaven … to bring the delicious, tangy flavor of Pringles’ Sour Cream & Onion flavor to life in liquid form with prebiotic benefits," the companies said.

Stoner lingo translation app

Another dream team prank product: Rosetta Stoned, a mobile app from Rosetta Stone and medical marijuana company Fluent , that "bridges the conversational gap between novice users and seasoned stoners in any social setting."

Da da decoder

Infant equipment site BabyQuip has its own language-bridging lark: the “Baby Translator” app, to decode your baby's secret language.

"Say 'goodbye' to restless nights as you decode your baby's coos and cries instantly, providing you with the understanding you need as a parent, all in one convenient app," it promises.

An AI-powered plush doll

Custom stuffed animal maker Budsies already makes selfie plush dolls with a built-in voice recorder. Its April Fools' spoof: Artificial intelligence-enabled dolls that "come programmed to learn everything about you and to become your new best friend."

A 50-pound Bearabuddy

Sorry to the 3,500 or so who have already signed up to buy Bearaby's Jumbo Benji plush toy, which is four times the size of its regular weighted plush toys and twice as heavy as its heaviest weighted blanket . This isn't actually going to be sold. But it is real and will be making its home in the lobby at The Child Mind Institute in Harlem to welcome children and their families. More weighted plushies are due the day after April Fools' Day, the company says.

A sleeping bag to go bananas over

The Dole Banana Peel Sleeping Bag, conveniently promoted as being available on April Fools' Day only, is made from actual banana fiber and "allows parents to escape into their own cocoon of sensory deprivation."

A full-body cleaning suit

Outrageous clothing company Tipsy Elves has a special product for April Fools' Day: The Mopsie. You don't need paper towels anymore, you can use your body to clean up those messes, with this "innovative, wearable microfiber towel jumpsuit" for "effortlessly soaking up spills and messes with ease." There's also a Baby Mopsie for "hard to reach places."

Korean BBQ deodorant

Kevin's Natural Foods , which has paleo- and keto-certified ready-to-cook and easy-prep entrées, is touting a new line of personal care products inspired by its food dishes including Korean BBQ Deodorant, Cilantro Lime Toothpaste, Lemongrass Basil Shampoo and Tikka Masala Sunscreen.

"These new face, body and hair care essentials will help fans prioritize self-care inside and out," the company says. 

Omaha Steaks' meaty sprays

Omaha Steaks has its own personal care prank product: Meaty Spritz sprays with flavors such as Omaha Fog, Hog Haze, and Cock-a-Doodle-Dew.

"The world’s first protein-infused, flavor-packed, portable pump spray … (to) enjoy all the mouthwatering flavors of your Omaha Steaks gourmet favorites no matter how far away from the kitchen you are!" the company says.

Sriracha toothpaste

Asian sauce maker Lee Kum Kee , which makes Sriracha Chili Sauce and Sriracha Mayo Dressing, is introducing – not – its Siracha Mayo Toothpaste. It's "fiery and creamy goodness … is sure to spice up your morning dental routine."

Post-salad dental kit

Need some less powerful toothpaste? Sweetgreen offered these fanciful personal hygiene products as part of its Sweetgreen After Salad Kit, which is "designed with your pearly whites in mind … offering everything you need to freshen up post-meal."

Choose from Miso Ginger Toothpaste, Spicy Cashew Mints, Lime Cilantro Dental Floss, and Sweetgreen Toothbrush and Floss Picks.

Fruit juice lip gloss

More personal care prank products: Welch’s Juicyfuls Juicy Fruit Lip Gloss – now available in five flavors: grape, orange, peach, strawberry and raspberry – made with real juice from Juicefuls fruit snacks so "you get that irresistible sweet flavor you love, all in a lip gloss that's as fun as it is nourishing."

Protein-powered seasonings

Quest Nutrition , maker of protein powder, snacks and other products, has a prank product line of seasonings including All Purpose, Lemon Pepper, and Garlic Herb, each of which deliver "21g of protein, 2g of net carbs and less than 1g of sugar."

If you want to try Quest's real products, you can use code NOJOKE for free shipping on online orders over $49 April 1-3.

Superpowered Superfeet?

These would certainly come in hand on a run, but – sorry – it's a jogging joke. Superfeet SuperBoost Power E-Soles gives you 8 hours of continuous battery-powered boost, for almost Iron Man-like propulsion. "All the comfort and support of Superfeet , now with electrifying performance," the company says in a video about the prank product. "It's like having a powerful electric motor in your shoes."

Scotch tape-branded Scotch?

This shenanigan seems like a blend that could stick: Scotch Whisky by Scotch Brand. The whisky "features a nose of cherry wood and a delightfully smooth finish that hits like a well-wrapped gift."

Who you gonna call when ghosted? This new title at Tinder

Dating app Tinder announced a new April Fools' Day hiring quest for a Vice President of Ghost Hunting to help combat "one of dating culture’s most prevalent vices – ghosting," a practice inflicted on 78% of singles already in 2024 (an untrue fact from Tinder).

Patrón's bringing back a beloved liqueur. No kidding.

Patrón patrons get some good news today. The premium tequila maker chose April Fools' Day to announce the return of its Patrón XO Cafe tequila-based coffee liqueur, which was discontinued in 2021. Since production ceased, devotees took to social media and signed a petition asking parent company Bacardi to bring it back.

Made with Patrón Silver tequila and Arabica bean coffee – the dry liqueur can be sipped straight, in cocktails and as dessert topping – Patrón XO Cafe will begin arriving in stores again later this month.

Say it with dead flowers

Don't forget to put roses on your April Fools' Day list. UrbanStems has this "special" delivery, The Dead Inside Collection, "an assortment of dead flower bouquets, dead plants, half empty vases, and more for the pessimist in your life." But, for real, check UrbanStems' social media accounts including Instagram for how to get 20% off an order of real flowers.

Cheesecake Factory's real deals

The Cheesecake Factory  also has a deal that's no joke: Sign up for the chain's Cheesecake Rewards loyalty program on April 1 to get an Any Slice, Half Price reward, redeemable for 50% off any slice of cheesecake or layer cake, with any food or beverage purchase (no gift cards).

Those who were members before April 1 will find something special in their account on Monday, too: either a free slice of cheesecake each month for a year, a free whole cheesecake, a free slice of cheesecake, $5 off $25 purchases, or $10 off $40 purchases. (All rewards redeemable by April 16; can be redeemed for dine-in, to-go and DoorDash.)

New merch from Dunkin', bonus points in app

Dunkin' announced it is going back to its roots and rebranding to just "Donuts'" on Monday, April 1. To celebrate the rebrand, the company is selling "Donuts'" merch, including sweatshirts that read "DONUTS," on ShopDunkin.com .

Additionally, Dunkin' Rewards members will receive 3x bonus points on any donut order through the mobile app on April 1.

Urban Outfitters launches 'Name Three Shirts' movement

Urban Outfitters said it is launching a global movement to "stand in solidarity against band-tee-shaming" by launching a new collection called "Name Three Shirts."

The t-shirt line "playfully mocks the gatekeeping attitudes of older generations who insist that band-shirt wearers should be required to name songs by those artists," the company said in a news release.

The line, which features revamped logos from bands such as The Grateful Dead, Joy Division and Led Zeppelin, is a "playful jab at the attitudes of older generations, and fights back against the misogynistic undertones of the infamous ‘name three songs’ line of questioning," Urban Outfitters said in the news release.

The collection of shirts is available online and in select Urban Outfitters stores starting April 1. You can shop the collection online here .

Auntie Anne's, Frontier Airlines collaborate on Pretzel Plane

Auntie Anne's pretzels and Frontier Airlines announced they have collaborated on the newest addition to Frontier's fleet: the Pretzel Plane.

According to a news release, the plane includes new in-flight entertainment featuring Auntie Anne's pretzels rolled seat-side, the "luxurious" smell of hot, fresh pretzels throughout the cabin and airplane-shaped pretzels if you're feeling hungry.

Moe's Southwest Grill, Sonic team up to introduce a Queso Slush

Two popular fast food chains announced a collaboration that is sure to be polarizing.

Moe's and Sonic announced a new beverage, the Queso Slush, a queso-flavored slushie. "The frozen goodness of a Sonic Slush meets the delicious flavor of Moe's queso."

Follow Mike Snider on X and Threads:  @mikesnider  & mikegsnider .

Gabe Hauari is a national trending news reporter at USA TODAY. You can follow him on X  @GabeHauari  or email him at [email protected].

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Times Insider

A Finance Reporter Who Invests in Readers’ Well-Being

Taxes. Tuition. Cryptocurrency trading. Since 2008, Ron Lieber has answered hard-hitting questions about personal finance as the Your Money columnist.

By Sarah Bahr

Times Insider explains who we are and what we do and delivers behind-the-scenes insights into how our journalism comes together.

When Ron Lieber arrived at The Wall Street Journal’s office in 2002 for a job interview, a couple of editors immediately sized him up.

“They said, ‘We know what your beat is: beating the system,’” said Mr. Lieber, who had last worked as a senior writer for Fast Company covering management, design and careers. “And now you’re going to come here and do that for us.”

After helping found the Personal Journal section of The Wall Street Journal and writing a separate money management column, he was hired by The New York Times in 2008 to take over Your Money , a personal finance column. Sixteen years later, he has gained a reputation for offering readers advice — often tinged with his own experience — on headache-inducing issues, like how to navigate the maze of paying for college or prepare for life after a layoff .

“I love introducing readers to characters who they might not think would be the subject of money columns, but who are actually perfectly suited to teach us a thing or three about how the world works,” said Mr. Lieber, whose column appears online and most Saturdays in the Business section.

As a columnist for The Times, he has witnessed two recessions and a pandemic. (In 2009, he even wrote about how his own financial planner had been charged with fraud.) In a recent conversation, he shared the unexpected lessons he had learned in writing the column and the topics he thought might soon dominate the world of personal finance. These are edited excerpts from the conversation.

How did you first become interested in finance?

When I was a high school senior in Chicago applying for financial aid for college, I found my way to Roger Koester , who was an associate director of financial aid at Northwestern University. He had an after-hours side gig in his office; in exchange for $45, he’d explain the whole financial aid system to local families who were trying to understand it. He knew exactly what he was talking about and gave me terrific advice.

It was a reminder that there’s always a grown-up somewhere who knows how to beat the system, and if you can just find that grown-up and ask questions, you can help other people beat it, too. I don’t think of myself as the grown-up, but every week, I still feel like I’m searching for the grown-ups who know the answer to whatever thorny consumer question is bedeviling our readers.

What makes for a good column?

When I think about personal finance, there’s a kind of a Venn diagram of possible topics: things that are really expensive; processes that are really complicated; and decisions where emotions can lead us astray if we aren’t careful. I like to think that when I’m at the center of that diagram, I’ve found the right topic.

And then there’s the matter of voice. The best compliment anyone can pay me is to say that my column sounded like I was there in the room with them, explaining the topic at hand. I want it to feel conversational, and not lecture-y, preachy or didactic. That doesn’t mean it’s always friendly — I try my best to punch up at institutions or entities that can take it and deserve it.

If I can find the right topic, and do it in the right voice, I’ve won the week.

Last month, an article by New York magazine’s financial advice columnist on how she was scammed out of $50,000 went viral. Do you think you would’ve fallen for that scam?

Never say never. I’m constantly telling myself that there’s never a reason to rush to do something right now. There’s pretty much always time to call one or three or five people smarter than you or just calmer than you who will ask you levelheaded questions and try to pull you back from the edge of making a big mistake.

What writers and publications do you read to stay on top of your beat?

I read The Wall Street Journal religiously. I’m a big fan of Ramit Sethi, who’s the author of the book “ I Will Teach You to Be Rich ” and a newsletter writer. I love reading Michelle Singletary , who writes the personal finance column for The Washington Post. And I also really like the attitude and the message of Tori Dunlap , who most people know from Instagram and TikTok.

What trends are you watching?

All of the people who’ve been in the work force for their entire career without a traditional pension are starting to retire, and a lot of them are going to run out of money. The question of what’s going to happen when that happens is deeply concerning.

I’m also interested in all of the work that Conor Dougherty and other Times colleagues have been doing around our inability to build more housing in a reasonable fashion. It’s not clear where and how people in their 20s and even 30s are going to buy homes.

Anything else you want to add?

If people are seeing things in the world that don’t make sense — whether they think corruption needs to be exposed, or if they just want to say, “I can’t be the only one who doesn’t understand this thing, could you explain it?” — it’s so helpful for me to know . Some of the work I’m most proud of started with a reader comment on one of my columns. We’re all in this together, and none of us are as smart as all of us.

Sarah Bahr is a senior staff editor at The Times. She has reported on a range of topics, most often theater, film and television, while writing for the Culture, Styles and National desks. More about Sarah Bahr

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