No single person is claimed to have invented paper money, but its origins trace back to ancient China, where merchants in the Tang Dynasty (7th century) used promissory notes, evolving into the first true government-issued currency, called jiaozi, during the Song Dynasty (11th century) to help overcome the burden of heavy metal coins.
The Chinese were the first pioneers of paper money due to its early innovations in paper, printing, and flourishing trade, with the state eventually regulating its circulation to manage growing commerce.
Prior to the emergence of money, goods and services were traded, either on a local level, particularly from farming i.e. exchange of grains for cattle, milk for other forms of livestock etc., but as empires grew precious metals were considered as a way to denote value.
However, commodities like salt were used to pay for many things, and even Roman soldiers were paid in sacks of salt, so important was the product to facilitate many activities. Trade routes would open up, where common goods such as dyes, spices, cloth etc. initiated strong value and goods sought for.
Though, when two parties are involved in what was known as a double coincidence of wants haggling occurred (haggling was a way to try and create a better deal, and must not be confused at all as barter). Basically, if one entity doesn’t want what the other person or governance is offering, there can be an imbalance between the exchange, but haggling can still take place to create a deal. Therefore, there needed to be a way to obtain for said goods or services or something that would retain an agreed value, so that such a nomination could be stored for later purchases, or after a sale was accepted. Still, there was an imbalance as many attempts were prevalent to improperly gain the edge in a transaction. One of the biggest reasons for war, was fought for in pilfering by force instead. But how could the value of something stolen be continually upheld? Funding was required, and a value needed to be stored. Artifacts, made of precious metals and stones were considered as a nomination of wealth..
Early coins were then made as a way to communicate value, and therefore were made of gold, silver, bronze or copper. Early issued coins were very basic, and the various peoples realised they could further cheat or manipulate the system by actually scraping the edges off the coins and collecting the filings that could then be melted down into blocks of the relevant metals. It was known as Clipping. This was a severely punishable offence and a form of treason. Penalties included, imprisonment, and even execution. This led a lot of people to start applying distrust in the governments. Barter therefore remained very prevalent, as when somebody had a product in the hand so to speak, they considered a value to be upheld. In other words they could do something with it.
One way to deny this value was initiated by the Greeks who tried to ‘mint’ coins, denoting a particular value with a precious metal exterior, but then covering it with a basic low grade metal interior. This led to massive wars.
Various methods were employed to try and abate this anomaly, as some coins were losing up to a third of their value through so many attempts to gain improperly. One way was to stamp ridges on the circumference of the coin, that would show if ‘clipping had been attempted. That’s why even today, most coins still have these ridges on the circumference.
Therefore, barter was still favourable, and so bank notes were seen as a way to move ahead, especially on larger transactions, for the sheer weight of all these metals was a hindrance. Of course, governments were having an almost impossible time in collecting taxes, when barter remained at the forefront. No record keeping was taking place, though attempts by the Jewish community to offer accountability was frowned upon. Accounting and money was seen as a sin, and so they were persecuted. Some of the world’s largest financial institutions have Jews controlling their finances as a result.
Then, there were the obvious problems with counterfeit bank notes, as early 1000 BC, but again even though the Chinese tried to adopt complex designs, special colours, signatures, seals and stamps on specially made paper to discourage counterfeiters, it was difficult to avoid. Those caught counterfeiting faced the death penalty. Despite this, counterfeiting increased over time. The result of which along with an oversupply of jiaozi, led to massive inflation and in 1024 the right to print and issue currency was restricted to the government only. Counterfeiting at that time had been on the increase year in, year out, with official figures suggesting of up to an incredible 50% in notes in circulation of the early introduction.
For obvious reasons, cash has always been seen as a way to hide things. It has been responsible for creating black markets, and hidden economies, all terribly hard to regulate. This is why we’re seeing a huge international push to do away with cash altogether, so that relevant governments can control our spending habits. Cash is becoming far less frequently used. Though, moving away from cash driven economies by convenience and control, creates challenges like financial exclusion for vulnerable groups, especially the elderly, low-income and remote communities who rely on cash, raising concerns about privacy and surveillance.
While infrastructure adapts as we move forward with instant payments and backup systems, governments and banks are balancing digital innovation, insurances of universal access to cash as a vital safety net, especially during disasters and other such important considerations that ought to be protected at all costs.
Unfortunately, politics is forever playing a much larger pivotal role in how we spend these days, instead of building an economy accordingly, is being forced upon us. As mentioned, it is important to avoid hardship for those in particular communities. That is why, donations are becoming more prevalent and considered as a gift, rather than barter. This is why, Trade Gate adheres to gifting parameters as demanded now by the ATO. It should not be deemed as a tax dodge at all. But a gift in the form of a product or cash, or a trade dollar, should be treated under the exacting regulations. Talk to your accountant about this.
At Trade Gate, we see a return to barter, is now once again gaining traction due to economic pressures, i.e. inflation, uncertainty, upholding values whilst protecting against improperly thought through technological anomalies, is a way to balance our purpose to produce. This will foster local economies, communities, and resourcefulness, as the value of the once mighty dollar, loses significant value if we don’t. The more you allow governments to decide where you can spend, what on and how often you do it, will decide your future outcome.