Shells, Beads, Coins and Money

Welcome to Bitsesize Payments where I try and explain the history of payments, how they work and who does what. 

In this, the first episode, I walk through 8,000 years of payments history in 20 mins... taking us for Bartering to shells, to beads to coins to Money...

Buckle up....

Any question please contact me @ bitesizepayments@gmail.com

Enjoy!

Paul Thomalla

Payments Industry Insights

History of Payments

Payment System Explained

Corporate Payments Strategy

Payment Regulations Impact

ISO20022 Standard

Digital Payments Evolution

CBDC Advancements

Cryptocurrency in Payments

Financial Technology Education

Transcript

SPEAKER_00: 0:00

Welcome to Bite Size Payments, where I attempt to explain the history of payments, how they work, and of course, who does what. In today's episode of Bite Size Payments, we're going to go back some 8,000 years, give or take anyway, when things were very different, of course. Or perhaps they weren't quite as different as you might think. Anyway, let's jump in. So, once upon a time, we did not have money. I know, it sounds crazy, but we didn't. Some 6,000 years BCE, we have records that show there were receipts of trades in Mesopotamia, modern-day Iraq. I have to say, it sounds pretty cool to me that we still have records from all that time ago of a trade. But these early payments were undertaken by bartering, which is effectively a direct transaction of goods or services for other goods or services. We even have the Greek philosopher Aristotle mentioning the concept of bartering in his work in politics. So even at this very early stage, politics and payments, yeah, you guessed it. they were inextricably linked. And as you will see, they will be forevermore. Governments, taxes, regulation, they're all going to be mixed up with payments. Bartering seems to have started about the time we started to communicate verbally with each other. But we still have it today. You know, I can remember trading sweets and marbles at school. But without money or a currency as an intermediary, we have a few issues. First of all, we have to find somebody with something that I want, who wants what I have to offer, whether that's a good or a service. We have to agree on the value of those respective goods, and we have to agree the right units of each to trade. So, for example, let's say I have some sheep and I want some wine. I know, typecast as ever. And if I find somebody who has wine and one sheep, then great. And let's say that one sheep is worth a barrel of wine. So now we found a partner, we've agreed a price, so far so good. But what if I only want half a barrel of wine? Ah, now we're stuck as our units of value are not divisible, i.e. my unit of measure is a sheep and I don't want to divide my sheep. So this can be quite time consuming and frankly hard to do. Finding that perfect partner, the perfect partner, that has the goods that I want, who wants the goods that I have, who is prepared to agree the right value, both for their goods and my goods, and in the unit of value that we can exchange. Turns out, that is really hard. And so, in fact, bartering can only take you so far. And while this went on for thousands of years, there was a need to have a medium of exchange, a more flexible solution. What we really needed was an intermediary, something that has value, something that can help price your goods and something that could be divisible into smaller units. And so clearly the answer to this is shells. You thought I was going to say money. Well, turns out shells were early money. Yes, shells. They were the first money. Shells and beads were used as the intermediary. Yes, money. To be able to exchange across cultures throughout history. Now, shells and beads were often valued because of their rarity, their beauty, and often because of the labour that was actually required to produce them. They were valuable. Many types of shells, cowie shells, spondyloous shells, if I've said that correctly. And of course, wampum beads. I say of course, because clearly you knew about wampum beads. But this intermediary device, currency, money, can be much more flexible in our purchasing and selling. So now perhaps I'll take my sheep to market and I'll trade them for, say, 10 shells. I'll also, perhaps in that market, find somebody else who has grain, who accepts shells. So I could say, for instance, buy five shells worth of grain, then go and find another partner who again takes shells and ask them for two shells worth of wine. Not only that, I can also save the three shells, if my maths is correct, for a rainy day. Intermediary device here being shells means that both parties, in fact all parties, need to accept shells as many. But having this intermediary makes it pretty easy to be able to trade with your partners. Makes it easy to save as well, as I said. But it also creates a community because both parties need to accept that shells are the intermediary. And that's a very important step too. So we now have shells as money, currency. Now, carry shells are probably the most well-known, and they were used in Africa, Asia, and the Pacific Islands. And they were used literally for thousands of years, with some evidence that, in fact, some different types of shells were used in China in 5000 BCE. Shells are easy to carry. They're durable. They have various sizes and shapes, which makes them suitable for the use of currency. They're still used as jewelry, but now, of course, they have limited acceptance, and they went into a huge decline in and around the 19th century. Interestingly enough, though, if you were to Google the image of a cowrie shell, you would recognize it immediately. It's a fascinating thing. Please do do that. You'll see exactly what I mean. Wampum beads were also used by North American tribes, and Spondylus shells were used in pre-Columbian civilizations, and both were used for ceremonial uses as well as currency. So shells, beads illustrate the introduction of money or currency as being a key step, a key phase on our payments journey, because it's the device that makes it easy. So we've talked through bartering. We've talked through the introduction of shells and beads as an intermediary, as this money and of units of currency. So We have a lot of the basics in place. And while they may seem very quaint, I would take you back to the point that actually this was something that I did at school not that long ago. And for that matter, I think it's salutary to think maybe that's not so different from crypto or NFTs. Anyway, let's move on. As societies became more and more sophisticated, so did their forms of currency. And coins gradually started to replace cryptocurrencies. shells and beads. Coins, well, of course, we still use coins. We know exactly what they are. They were the first introduction, in fact, of central bank money. But more of that in a future podcast when I'll also start to break out some of the terminology that we bandy about so freely today that, quite frankly, could do with a little bit more introspection. Coins are, of course, little pieces of metal. And in the early days, they were made of precious metals, gold and silver and what have you. And their value was actually what the gold or the silver they were made from was actually worth. So their intrinsic value was literally because they were gold and silver. So we all know what coins are. We've all used them. But where did they come from? Coins as a currency can be traced back to ancient civilizations. The first known coins were minted in the kingdom of Lydia, in what is now called Turkey, around the 7th century BCE. These coins are made of naturally occurring gold and silver in an ally called electron. They featured designs on one side and had punch marks on the other. The use of coins quickly spread to neighboring regions such as Greece and Persia. And from here, we can track their usage across Greece from the sixth century to the fourth century BCE. And eventually they came widespread throughout Greece. The city-states then minted their own coins with distinctive signs and symbols. Greek coins were made of still precious metals, gold, silver and bronze. The design on these coins often represented the city-states themselves, patrons, deities and other culturally important symbols. Later, in the 5th century, the Roman Empire further developed the use of coins with a highly standardized central system of coinage. Roman canes, still made of gold, silver, and bronze, and copper, featured portraits of emperors, again, deities, and other important characters. The Romans took with them the idea of this many, these coins, across their entire network, and wherever they went, they minted new coins. So, through the expansion of that network, so did the use of coins, so did the use of money. Now, The coins became much more intricate. They became a lot more elaborate. Portraits of rulers and other important characters were symbolically stamped on these coins. But they were minted, and they were minted by the government. Now, this process is really important for a couple of reasons. One, it ensures that the supply of coins is adequate, and it also helps to maintain the value of that coin. Mints also play a very valuable role in preventing counterfeiting, which is the illegal production of fake coins. However, this also started the process of creating monetary policy and control. If you want to trade with my country, you have to use my currency, my coins. And we'll talk a lot more about this next time. So clearly we still have coins. They are no longer made of precious metals. In fact, they're typically made of alloys of nickel, copper and zinc. They do represent a value, but is a nominated value. And the coin is always redeemable for that value. I.e. the coin itself is not actually worth a dollar or a pound, but is redeemable for a dollar or a pound. And the government will ensure that. That's quite a big change. And again, we'll talk more about this nominator value later on. I wanted briefly to just to sidetrack a little bit and talk a little bit about the Knights Templar. Knights Templar, we might think of in a very different way through the use of books and films, etc. But it's also true to say that they were introduced a lot of the infrastructure of what we would use now in banking in the 12th century. Effectively, they were a military order to protect Christians going to the Holy Land. And they were so powerful, they were able to effectively be the banker of many countries. And they introduced us to, amongst other things, safety deposit boxes, money transfers, currency exchange, loans, insurance, and much of the infrastructure that we have now. I'll talk a little bit more about the Knights Temple later on, but I think it's important to establish that they brought along many of the principles and the operational aspects of what we would call banking. And of course, they introduced the tokenization of money, which currently is a hot subject, but in fact, not that new. So. Through the creation of coins with a nominated face value, the infrastructure that the Knights Templar brought in, the use of governments to establish central banking and the monetary policies that they brought in, we pretty much have all the infrastructure that we use today. Salutary to think that most of that was laid down by the 17th century. So much now of the basic principles and processes have been laid down. The next stage is to make it sustainable. more efficient, or at least lighter. Yes, lighter. Wait, what? Lighter? Well, yeah. Just think about it from our point of view. Not that long ago, when we were carrying around coins, if you had a lot of coins and they're in your pocket, they would really weigh you down. And if it was in your wallet, it'd be really very heavy. Okay, that's modern day times. Going back in time, if you were going to move a large amount of money around, that would be both really, really very heavy, hard to move around, to be very physically large, and be a large target for bad actors to try and steal. So the next phase of this monetary journey is to create paper banknotes. And paper banknotes are very simply pieces of paper that a central bank issue that stipulate that if you present this piece of paper, it has a nominated value of, let's say, a pound, five pounds or 10 pounds or whatever it's worth. So in the area that is covered by that central bank issue, it is accepted that this piece of paper now represents the nominated value that's printed on it. The first people to do this were the precursor to the Bank of Sweden. In fact, in 1660, they introduced a paper transport note, which was effectively the first use of paper to represent value instead of just being a coin. In 1694, the Bank of England started to issue banknotes as did other countries, and they soon rapidly spread throughout the world. Banknotes were issued in France in 1795 and in the US in 1860. So by now, nearly every country in the world has some form of cornage, some form of paper, and processes that we would now recognize. We have money that can be saved. And all of this allows governments to have and create their own monetary policies. And all that comes with that, the controls, the exchange rates, et cetera, et cetera. The US dollar is probably the most recognized banknote anywhere in the world. And at any one time, there's approximately 1.2 trillion of them circulating. Yes, 1.2 trillion banknotes circulating worldwide. But it's interesting to note that 40% of those banknotes circulate outside of the US. Yeah, 40% of all the US dollars circulate outside of the US. Truly, the US dollar is the world's currency. Okay, let's call that a wrap for now. We've gone through 8,000 years worth of history. in about 20 minutes. I did say it was bite-sized payments. We've teed up everything from bartering, the introduction of money through shells and beads as intermediaries, the use of coins, and then ultimately the use of paper. Not only that, we've started to introduce the concept of central banks and their involvement in monetary policy. And we'll talk a lot more about that as we go through. But it is very salutary, again, to think through that really we're only in the 17th century and yet we have so many things that we would recognize now. And in fact, most of the processes I said before are almost identical. In the next episode, I'm going to start to put some more things into context. I'm going to tee up some of the layers because layers will become layers on layers as we go through this. And payments is a very layered business. So I'll be talking about currency. I'll be talking about legal tender. I'll be talking about commercial bank money. I'll be talking about central bank money and try and put these things into context. All these things that perhaps you didn't even think you needed to know. I really do hope you've enjoyed this podcast, this taster, the very first one. Let's try and go on this bite-sized journey together. It's my intention to get these out on most of the platforms that you would expect, Spotify, Apple, and hopefully the ones that you use. If you'd like to go on the journey, please do think about subscribing. If you'd like to get in touch, please do send me an email at bitesizepayments at gmail.com. But if I could ask just one favor of you, just one favor, that would be if you've enjoyed the podcast, please recommend it to a friend. Because by far and away, that's the best way to get the message out. Thanks so very much. Cheers.