The history of money: this ordinary item has transformed the way we live. How will new types of money shape our future?

One of your friends goes to the bicycle shop to pick out a new mountain bike. When it's time to pay, he plops down six vintage baseball cards, two pairs of running shoes, and a used CD player.

Does this sound like an odd exchange? In the past, people in various cultures paid for their purchases with beads, feathers, shells, chickens, and cows--you name it. All of those things, and many more, have been used as money at one time or another.

For centuries, the Ethiopians traded with salt. The people of the Pacific island of Yap paid for things with massive stone wheels. Some of the wheels were so heavy that they had to be left where they were until changing hands again.

In whatever form it has taken, money has always been a fact of life--for better and worse. And technology is continually developing new ways for us to acquire (get) and spend money--and to pay our bills.

Money as we think of it got its start in the seventh century B.C., in Lydia, a kingdom in what is now western Turkey. Before this, people would either barter (trade one item for another) or offer an agreed-upon amount of gold or other precious metal as payment. Both methods were clumsy and slow, making trade difficult.

To solve these problems, Lydia issued coins made from a mixture of gold and silver. The coins were stamped with an official seal so that everyone knew they were genuine. The new method made trading easier and, because of increased business, the Lydians became rich.

The use of coins spread to nearby Greek city-states, including Athens, which became a hub of trading and business. The new-found commerce and wealth helped spur the Golden Age of Greece, which lasted until about 400 B.C. During that time democracy was born, and art, science, literature, and philosophy flowered.

Hard Times

After the collapse of the West Roman Empire in 476 A.D., Europe became unstable, and trade declined. For centuries, Europe stagnated (did not advance).

In about 1100 A.D., Europe began to experience a renewal in learning and commerce, partly because of a new system of banks developed by Italian traders. If a merchant in Florence needed money for a trip to Paris, he could get a paper contract from his bank instead of bringing bulky, hard-to-protect coins with him. When he reached Paris, a local bank branch would cash the contract.

The system put large amounts of money in to circulation. Italy's new wealth helped finance a burst of creativity in learning and the arts, known as the Renaissance (REH-nuh-sahns), or rebirth, of Western civilization.

Green Stuff and the Future

The Chinese invented paper money, which became common after 1000 A.D. In other parts of the world, paper money was slow to catch on. Few people trusted it as much as they did metal coins.

Paper money was not widely used in the U.S. until the Civil War (1861-1865), when metal was needed for the war effort. The Union issued bills people called "greenbacks" because one side was printed in green ink. After the war, paper money--the green stuff--gradually became standard.

Today, paper money and coins are slowly being pushed aside in favor of electronic money (currency or "value" stored on a card, computer network, or other medium).

Electronic money worries some people. It's too easy to spend, they say, and perhaps too easy to steal. Even so, it is the wave of the future. Only one thing about money will never change: People will always want more of it. JS

Words to Know

* Money:

An item that is widely accepted by a group of people in exchange for goods and services.

* Barter System:

The trading of goods and services for other goods and services without exchanging money. Early American colonists, for example, gave corn to local Indians in exchange for beaver skins.

* Unit of money:

Each country has a basic unit of money. The basic unit in the U.S. is the dollar. Japan uses the yen, Russia the ruble, and most European nations, the euro.

What is money?

In order to be considered money, an object must pass three tests:

* It must be a widely accepted way to pay for goods and services.

* It must be easily broken down into units, such as dollars and cents.

* It must have a store of value, which means that it can be saved and used later. Your Turn

Your Turn

WORD MATCH
1. acquire        A. rebirth

2. barter         B. fail to advance

3. stagnate       C. can be used later

4. Renaissance    D. get

5. store of value E. trade

THINK ABOUT IT

Do you think electronic
money should completely
replace our cash-based system?
Explain your answer.

ANSWERS

1. D

2. E

3. B

4. A

5. C