History of Money

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The History Of Money

The first major treatise on monetary policy (De Moneta) was done by Nicole Oresme, the medievil philosopher, theologian, scientist and economist. Employing arguments in De moneta (ca. 1355) that would eventually reverberate in the later Salamancan theologian Juan de Mariana’s Treatise on the Alteration of Money (1609), Oresme states that coinage is not the property of the sovereign but belongs to the entire community (cf. De moneta of Nicholas Oresme and English Mint Documents, ed. and trans. Charles Johnson [London: Thomas Nelson, 1956], 11, 37-38). According to Oresme, regulation of minting and coining is not the prerogative of the monarch alone but of a gathering of the realm’s inhabitants. Coinage, he insists, cannot be altered without the consent of the people’s representatives. Sherman observes that Oresme borrows essential arguments from Aristotle’s Politics in formulating his own position: “From the Politics come the distinction between tyranny and monarchy and the warning that power should not be unduly concentrated in any one segment of the community. Oresme’s argument that the king’s economic powers are subject to regulation by law and custom also derives from the Politics” (14).

Some immortal passages taken from De Moneta(he could have written this stuff about our present monetary system):

"I am of the opinion that the main and final cause why the prince pretends to the power of altering the coinage is the profit or gain which he can get from it; it would otherwise be vain to make so many and so great changes. I propose therefore to give fuller proof that such gain is unjust. For every change of money, except in the very rare cases which I have mentioned, involves forgery and deceit, and cannot be the right of the prince, as has previously been shown. Therefore, from the moment when the prince unjustly usurps this essentially unjust privilege, it is impossible that he can justly take profit from it. Besides, the amount of the prince’s profit is necessarily that of the community’s loss. But whatever loss the prince inflicts on the community is injustice and the act of a tyrant and not of a king, as Aristotle says. And if he should tell the tyrants’ usual lie, that he applies that profit to the public advantage, he must not be believed, because he might as well take my coat and say he needed it for the public service. And Saint Paul says that we are not to do evil that good may come. Nothing should therefore be extorted on the pretence that it will be used for good purposes afterwards. Again, if the prince has the right to make a simple alteration in the coinage and draw some profit from it, he must also have the right to make a greater alteration and draw more profit, and to do this more than once and make still more. . . . And it is probably that he or his successors would go on doing this either of their own motion or by the advice of their council as soon as this was permitted, because human nature is inclined and prone to heap up riches when it can do so with ease. And so the prince would be at length able to draw to himself almost all the money or riches of his subjects and reduce them to slavery. And this would be tyrannical, indeed true and absolute tyranny, as it is represented by philosophers and in ancient history."

"The usurer has lent his money to one who takes it of his own free will, and can then enjoy the use of it and relieve his own necessity with it, and what he repays in excess of the principal is determined by free contract between the parties. But a prince, by unnecessary change in the coinage, plainly takes the money of his subjects against their will, because he forbids the older money to pass current, though it is better, and anyone would prefer it to the bad; and then unnecessarily and without any possible advantage to his subjects, he will give them back worse money. . . . In so far then as he receives more money than he gives, against and beyond the natural use of money, such gain is equivalent to usury; but is worse than usury because it is less voluntary and more against the will of his subjects, incapable of profiting them, and utterly unnecessary. And since the usurer’s interest is not so excessive, or so generally injurious to the many, as this impost, levied tyrannically and fraudulently, against the interest and against the will of the whole community, I doubt whether it should not rather be termed robbery with violence or fraudulent extortion."

"If the Italians or Romans did in the end make such alterations, as appears from bad ancient money sometimes to be found in the country, this was probably the reason why their noble empire came to nothing. It appears therefore that these changes are so bad that they are essentially impermissible."

Though the inflation of Oresme's day was considerably different to the present (it involved the debasement of gold and silver coin), it is every bit as relevant to the present inequities of the inflationary practices utilized by the Central Banks of the modern world by debasing their own fiat paper currencies. His is a treatise on common sense and honesty as regards monetary policy; principles that defy the arrow of time.

Another major influential economist was Juan De Mariana. Mariana's most important book was the work published in 1605 with the title De monetae mutatione (On the alteration of money). In this book, Mariana began to question whether the king was the owner of the private property of his vassals or citizens and reached the clear conclusion that he was not. The author then applied his distinction between a king and a tyrant and concluded that "the tyrant is he who tramples everything underfoot and believes everything to belong to him; the king restricts or limits his covetousness within the terms of reason and justice."

From this, Mariana deduced that the king cannot demand tax without the consent of the people, since taxes are simply an appropriation of part of the subjects' wealth. In order for such an appropriation to be legitimate, the subjects must be in agreement. Neither may the king create state monopolies, since they would simply be a disguised means of collecting taxes.

***It is important to note that Mariana was the first one to advocate Tyrannacide (the removal of a prince or king from power, if he violates the public trust). It is likely that Thomas Jefferson got many of his views contained in the Declaration of Independance from Mariana's works.

And neither may the king, this is the most important part of the book, obtain fiscal revenue by lowering the metal content of the coins. Mariana realized that the reduction of the precious metal content in the coins, and the increase in the number of coins in circulation, is simply a form of inflation (although he does not use this word, which was unknown at the time), and that inflation inevitably leads to an increase in prices because "if money falls from the legal value, all goods increase unavoidably, in the same proportion as the money fell, and all the accounts break down." It is from Mariana's work that the Austrian school of economics was derived (Von Mises etc.).

Mariana describes the serious economic consequences to which the debasement and government tampering with the market value of money lead as follows: "Only a fool would try to separate these values in such a way that the legal price should differ from the natural. Foolish, nay, wicked the ruler who orders that a thing the common people value, let us say, at five should be sold from ten. Men are guided in this matter by common estimation founded on considerations of the quality of things, and of their abundance or scarcity. It would be vain for a Prince to seek to undermine these principles of commerce. 'Tis best to leave them intact instead of assailing them by force to the public detriment."

JESUS FLIPS (many coins) 33 A.D.

Jesus was so upset by the sight of the money changers in the temple, he waded in and started to tip over the tables and drive them out with a whip, this being the one and only time we ever hear of him using force during his entire ministry.

So what caused the ultimate pacifist to become so aggressive?

For a long time the Jews had been called upon to pay their temple tax with a special coin called the half shekle. It was a measured half ounce of pure silver with no image of a pagan emperor on it.

It was to them the only coin acceptable to God.

But because there was only a limited number of these coins in circulation, the money changers were in a buyers market and like with anything else in short supply, they were able to raise the price to what the market would bare.

They made huge profits with their monopoly on these coins and turned this time of devotion into a mockery for profit. Jesus saw this as stealing from the people and proclaimed the whole setup to be. "A den of thieves". Jesus' exposing of the money changers made him a target for them.

Once money is accepted as a form of exchange, those who produce, loan out and manipulate the quantity of money are obviously in a very strong position. They are the "Money Changers".

A brief time-line on the history of money

A sample of info from A Comparative Chronology of Money from Ancient Times to the Present Day Roy Davies & Glyn Davies, 1996 You might also want to review The History of Money by Jack Weatherford. Random House 1997.

9000 - 6000 BC Domestication of cattle and cultivation of crops. After this time both livestock, particularly cattle, and plant products such as grain, come to be used as money in many different societies at different periods. Cattle are probably the oldest of all forms of money, as domestication of animals tended to precede the cultivation of crops. The importance of cattle as a money can be seen in the fact that cattle and capital, a word used to describe money, are both derived from the same Latin root. But there are many other examples. In the Philippines and Japan it was rice, in Mongolia it was bricks of tea, and among the Aztecs in Mexico it was cacao beans that were used as money. You could also add to the list of monies leather in China, whale's teeth in Figi, grain in Egypt, animal skins and furs in Canada and Siberia, bags of corn in Guatemala, tobacco in Virginia, reindeer in Siberian, buffaloes in Borneo, sheep among the ancient Hittites, and oxen in greece during Homer's time.
? - c. 3100 BC Writing invented in Mesopotamia. The main use, and probable motivation for its development, is for keeping accounts. This would certainl be necessary to keep financial accounts and also to later print paper money and mint coins.
c. 2500 B.C. Mesopotamians were using silver as a means of payment.
c. 1200 BC Cowries used as money in China. The Chinese character for "money" originally represented a cowrie shell. Cowries have been used as money in many different places at different periods. In parts of Africa they were used for this purpose as recently as the middle of the 20th century.
1000-500 BC Tool currencies adopted in China. These were metal models of valuable implements that had previously been accepted in commercial exchanges, e.g.spades, hoes and knives.
687 BC Crude "coins" invented in Lydia (according to Herodotus)
640 - c. 630 BC The first true coins produced in Lydia. The earliest coins made in Lydia, Asia Minor, consisted of electrum, a naturally occurring amalgam of gold and silver. This was a major step forward since
c. 600 BC Pythius operates as a merchant banker in Asia Minor. Pythius, who operates throughout western Asia Minor at the beginning of the 5th century BC, is the first banker in the area of Greece and Asia Minor of whom we have records. Many of the early bankers in Greek city states were Greek city states were "metics" or foreign residents.
c. 600-300 BC Round, base metal coins invented in China. The date is uncertain but these were probably at least roughly contemporary with the development of coinage in the West, and possibly much earlier. Being made of base metal the Chinese coins were of relatively low value and therefore inconvenient for expensive purchases.
c. 600 - c. 570 BC Use of coins spreads rapidly from Lydia to Greece. Aegina (c. 595 BC), Athens (c. 575 BC), and Corinth (c. 570 BC) start to mint their own coins. Prior to the introduction of coinage the Athenians had used iron spits or elongated nails as money.
c. 550 BC Lydians produce separate gold and silver coins. During the reign of Croesus the Lydians began to produce coins of pure metal instead of electrum. This is the world's first bimetallic coinage.
546 BC Croesus King of Lydia is captured by the Persians. As a result, use of coins spreads to Persia. Unlike the Greeks the Persians use mainly gold coins in preference to silver.
c. 490 BC Discovery of a Rich Seam of Silver in the Laurion Mines. Themistocles subsequently persuades the Athenians to use some of the proceeds to build a fleet of warships.
390 BC The Gauls attack Rome. The cackling of geese in the capitol, where the city's reserves of money are kept, alerts the defenders. The grateful Romans build a shrine to Moneta, the goddess of warning, and from Moneta the words money and mint are derived.
c. 350 BC Normal rate of interest in Greece is 10% except for risky business. According to Demosthenes 10% is the normal rate of interest for run-of-the-mill business. For risky business such as lending for shipping rates of between 20% and 30% are normal.
336 - 323 BC Reign of Alexander the Great. During the conquest of Asia Minor the cost of maintaining Alexander's army reaches about 20 talents or half a ton of silver a day but later enormous quantities of Persian bullion are captured. The coining of the previously stagnant Persian gold stocks and payments to Alexander's soldiers, many of whom settle in new towns founded by him, give an enormous stimulus to trade throughout his empire. Alexander also simplifies the exchange rate between silver and gold by fixing it at 10 units of silver equals one of gold.
323 - 30 BC Empire of the Ptolemies in Egypt. For long before Egypt came under Greek control grain had been used as a form of money in addition to precious metals, and state granaries functioned as banks. The Ptolemies transform the local warehouse deposit system into a fully integrated giro system with a central bank in Alexandria. Payments are made by transfer from one account to another without money passing.
269 BC Regular issues of silver coins are minted by the Romans and widely circulated. Despite the example of the Greek colonies on the southern Italian mainland and Sicily, and of Carthage, the Romans are relatively late in adopting coinage.
218 - 201 BC 2nd Punic War between Rome and Carthage. Because of the enormous demand for coins to pay troops the Roman rulers debase their coinage in purity and weight, causing inflation.
118 BC Leather money issued in China. This consists of pieces of white deerskin, about one foot square, with a value of 40,000 cash. (The cash was the name of a base metal coin).
55 & 54 BC Julius Caesar raids Britain. In his account of his two raids Caesar notes scornfully that the Britons still used sword blades as currency. However a number of the Celtic tribes had begun to mint their own coins of gold, silver, bronze and potin (alloys of copper and tin).
30 BC - 14 AD Reign of Augustus Caesar. Augustus reforms the Roman monetary and taxation systems issuing new, almost pure gold and silver coins, and new brass and copper ones, and also introduces three new taxes: a general sales tax, a land tax, and a flat-rate poll tax.
54- 68 AD Reign of Nero. Nero slightly debases the gold and silver coinages, a practice copied by some later emperors, starting mild but prolonged inflation.
250 AD Silver content of Roman coins is down to 40%. After this level is reached inflation accelerates.
270 - 275 AD Reign of Aurelian. Aurelian issues new, nearly pure coins, using gold from his eastern conquests, but raises their nominal value by 2* times hoping in this way to stay ahead of inflation. However this "reform" sends inflation soaring. A rebellion by mint workers led by Felicissimus costs Aurelian's army some 7,000 casualties.
295 Diocletian reforms the coinage. This fails to halt inflation, probably because the older coins remain in use and, in accordance with Gresham's law, drive the good coins out of circulation.
301 Diocletian issues the Edict of Prices The Edict introduces direct controls of prices and also wage rates. This, too, is defeated by market forces.
307 One pound of gold is worth 100,000 Denarii. The value of the denarius is only half that stipulated in Diocletian's edict of prices 6 years earlier.
324 One pound of gold is worth 300,000 Denarii. Later, in Egypt by the middle of the 4th century the denarius'value collapses completely so that a pound of gold is worth 2,120,000,000 denarii: another early example of runaway inflation.
410 Rome falls to the Visigoths. Banking is abandoned in western Europe and does not develop again until the time of the Crusades.
c. 561 Coins are minted again in England by Bishop Liudard. The minting of coins in Britain had been abandoned after about 435 as a result of the Anglo-Saxon invasions. Bishop Liudard came over from France with the Merovingian Princess Bertha who married Prince Aethelbart who later, in 590, becomes King of Kent.
c. 604-616 Bishop Mellitus issues gold coins from a mint in London
752 Pepin the Short of France starts minting the Denier. This new silver coin serves as a model for the English penny.
c. 765 King Heaberth of Kent produces the first English pennies. After the conquest of Kent by Offa, King of Mercia, production of the silver penny increases enormously and it replaces the older, more crudely designed sceat as the main English coin, except in Northumbria.
806-821 Reign of Emperor Hien Tsung and the development of paper money. In China a severe shortage of copper for making coins causes the emperor to issue paper money notes.
925-940 Reign of Athelstan Athelstan reconquers the Danelaw and unites the whole of England. This leads to the establishment of a single national currency.
c. 1020 Quantity of Chinese paper money reaches an excessive level. The total amount is nominally worth 2,830,000 ounces of silver. Vast amounts of cash are used to buy off potential invaders from the north and to pay for imports causing a cash famine. As a result the authorities increase the note issues thus fuelling inflation.
1066 Battle of Hastings. William the Conqueror's invasion is financed partly by debasement of the currency in Normandy but in England he introduces an efficient system of taxation, thus avoiding debasement. Subsequently, throughout the Middle Ages England's coinage tends to maintain its value to a greater degree than most continental currencies.
1095-1270 The Crusades. The need to transfer large sums of money to finance the Crusades provides a stimulus to the re-emergence of banking in western Europe.
1124 Punishment of the mint masters. At the Assize of Winchester on Christmas day all the mint masters are punished by having their right hands cut off. Not surprisingly this produces a temporary improvement in the quality of the coinage.
1156 Earliest known foreign exchange contract. Two brothers borrow 115 Genoese pounds and agree to reimburse the bank's agents in Constantinople the sum of 460 bezants one month after their arrival in that city. In the following century the use of such contracts grows rapidly particularly when profits from time differences are seen as not infringing canon laws against usury.
c. 1160-c. 1200 English wooden tallies evolve into instruments of credit. Tallies were wooden sticks originally used as receipts. Notches whose sizes represented a particular sum of money would be cut into the stick which would then be split down the middle. One part would be kept by the creditor, the other by the debtor. Sometimes the loans were fictitiously swollen to get round the prohibition of usury. During the 12th century the English Exchequer starts issuing tallies as a form of credit. Tallies were not finally abolished until 1826.
1166 Hyperinflation in China. The nominal value of the official paper note issues reaches 43,600,000 ounces of silver. In addition there are various local note issues.
c. 1250 Gold coins are issued by several Italian states. Under the influence of Byzantine and Arab coinage Messina and Brindisi (1232), Florence (1252) and Genoa (1253) issue gold coins. The type minted in Florence, the florin, becomes widely copied in other parts of Europe.
1275-1292 Marco Polo lives in China From his subsequent account of his Travels, Europe learns of paper money.
1403 Charging interest on loans is ruled legal in Florence Despite the traditional Christian prohibition of usury, Italian banks such as the Lombards, who have agents in the main economic centres of Europe, have been making charges for loans. The lawyer and theologian Lorenzo di Antonio Ridolfi wins a case which legalises interest payments by the Florentine government.
1440 Gutenburg invents the modern printing press. Although Europe already knew of the use of paper money in China, the printing press design is subsequently modified, by Leonardo da Vinci among others, for use in minting coins nearly two centuries before printed banknotes are produced in the West.
1448 Hyperinflation in China. The Ming note nominally worth 1,000 cash has a market value of only three.
c. 1450 Portuguese start voyages along the coast of Africa. In the 14th and 15th centuries Europe suffers from a "Great Bullion Famine." This is partially alleviated as the Portuguese open up a new route for sub-Saharan gold via Ghana and Mali.
1452-1519 Life of Leonardo da Vinci. Among Leonardo's drawings are designs for a press to produce more uniform coins quickly using a water driven mill. This innovation is widely adopted and the new money is termed milled money.
1453 Fall of Constantinople The capture of Constantinople by the Ottoman Turks and the disruption caused to existing trade routes is a motivating factor in the subsequent European voyages of exploration.
c. 1455 China abandons paper money There are no known references to paper money being in circulation after this date. Thus after well over 500 years of experience with paper currencies, during which there have been repeated episodes of inflation and currency reform, China ceases to use paper money.
1489 Henry VII slashes Mint charges and issues the first gold sovereigns. By reducing the mint charges Henry encourages people to bring gold and silver to the mints, causing a huge increase in their output of coins in the following years. Up to 1489 the English pound has simply been a unit of account. Now, with the issue of the sovereign, it is also a coin.
1492 Columbus discovers America
1494 First book on double entry bookkeeping is published in Italy Double entry bookkeeping has been in use for probably well over a century in Italy before the publication of the Summa de Arithmetica, Geometrica, Proportioni et Proportionalita by Friar Luca Pacioli.
1500-1540 Huge supplies of New World gold reach Spain. On average between 1,000 and 1,500 kg. of gold reach Spain each year during this period. Initially these supplies are obtained by plunder, especially from the Aztecs and Incas, and later by applying new mining methods to the New World gold deposits.
1504 Henry VII issues shilling coins. Up to this time the English shilling has simply been a unit of account.
1511 The Protestant Reformation begins. Although Luther, Calvin and Zwingli condemned traditional forms of usury they weakened the church's power and influence over economic affairs. Later on in England, Henry VIII, after breaking with Rome, legalises the charging of interest and seizes monastic property.
1526 Nicholas Copernicus writes his Treatise on Debasement. With many provinces of his native Poland, and other parts of Europe, suffering from debasement the great astronomer argues that it is the total number of coins in circulation, rather than the weight of metal they contain, that determines the level of prices and the buying power of the currency.p 193-194
1540-1640 The Price Revolution in Europe. Europe, including Britain, experiences a prolonged period of inflation, partly because of the huge influx of gold and silver from the Spanish colonies in America and partly because the increase in population is not matched by an increase in the output of the economy. Compared with many earlier and later inflations this hardly deserves being described as a revolution.
1542-1551 The Great Debasement. Henry VIII debases the coinage of England as a means of raising revenue. In Ireland the debasement started earlier, in 1536, and does not finish until 1560.
1545 Henry VIII legalises interest charges on loans. An upper limit of 10% per annum is set.
1553 The first English joint stock company is founded. This is the Russia Company which is the product of the search for the North-East passage to Asia.
1560 Elizabeth I begins the reform of England's debased coinage. This is a first step towards the complete replacement of the debased coinage she inherited from her predecessors. Thomas Gresham, after whom Gresham's law ("bad money drives out good") is named, is an influential adviser. The debased coins are recalled and melted down and the base and precious metals separated. The recoinage programme is completed in 1561.
1577-1580 Francis Drake's circumnavigation of the globe. The booty seized from the Spaniards (estimated at between ÃƒÆ’Ã†’ÃƒÂ¢Ã¢â€šÂ¬Ã…Â¡ÃƒÆ’Ã¢â‚¬Å¡Ãƒâ€šÃ‚Â£300,000 and ÃƒÆ’Ã†’ÃƒÂ¢Ã¢â€šÂ¬Ã…Â¡ÃƒÆ’Ã¢â‚¬Å¡Ãƒâ€šÃ‚Â£1,500,000) has been described by Keynes as the fountain and origin of British Foreign Investment.
1599 The Dutch attempt to corner the pepper market. Pepper has a high value-to-weight ratio especially at times of real or artificial scarcity. On some rare occasions it is worth even more than its weight in gold. The Dutch action prompts the formation of the London East India Company the following year. A Comparative Chronology of Money
1601 Poor Law introduced in England The aim is to establish a national pattern for parishes to copy in dealing with the problems of the destitute, which have become more obvious since the dissolution of the monasteries, 1534-1540.
1609 Bank of Amsterdam is founded. This public bank is established to provide a superior and more controlled service than that available from private bankers. Later its example inspires the establishment of the Bank of England.
1615 First balance of trade and balance of payments calculations. The calculations for England by Sir Lionell Cranfield and Mr. Wolstenholme are referred to by Sir Francis Bacon in an essay written in 1616 (though not published until 1661).
1619 Hamburg Girobank founded
1619 Tobacco begins to be used as currency in Virginia. Barely a dozen years after its introduction to Virginia tobacco starts being used as currency and this use continues for nearly 200 years.
1621 Edward Misselden's Circle of Commerce or Balance of Trade is published. Misselden, who is the first to use the term balance of trade in print, argues (like Aylesbury 240 years earlier - in 1381) that bullion outflows do not matter if trade is balanced.
1621 The Act Against Usury. The maximum legal rate of interest in England is reduced to 8% per annum.
1633-1672 The Rise of the goldsmith-bankers. Some British goldsmiths, by dealing in foreign and domestic coins and by letting their safes be used for deposits of valuables, gradually evolve into bankers.
1634-1637 Tulip mania in Holland. The high prices commanded by tulips with unusual patterns and colours encourages the general public to take part in speculative deals. A nationwide mania develops and sends the prices of bulbs soaring but when the bubble bursts they drop to one-twentieth, or less, of levels prevailing a few days earlier.
1635 Bank of Rotterdam founded
1637 Wampum becomes legal tender in Massachusetts. This is only for sums up to one shilling. Wampum is a type of shell used by the native Americans as currency and adopted by the settlers.
c. 1640 Reduction in silver imports causes slump in Chinese economy. China has become dangerously dependent on New World supplies of silver for its currency. Supplies from this source start to dry up with disastrous consequences for the late Ming economy.
1645 Paris mint is fully mechanised and starts production of milled coins. With the replacement of the ancient technique of hammering coins, minting has become fully mechanised. Improved productivity is not the only advantage. The milled edges prevent clipping and cutting and make counterfeiting more difficult.
1656 Bank of Sweden founded
1661 Bank of Sweden issues notes. It becomes the first chartered bank in Europe to do so.
1661 Wampum ceases to be legal tender in New England
1663 First British Guineas produced. This is a new milled coin, initially worth ÃƒÆ’Ã†’ÃƒÂ¢Ã¢â€šÂ¬Ã…Â¡ÃƒÆ’Ã¢â‚¬Å¡Ãƒâ€šÃ‚Â£1, using gold from west Africa, hence the name guinea.
1666 Act for the Encouragement of Coinage. English mint charges are abolished and replaced by import duties on wine, beer, cider, spirits and vinegar.
1668 Pepys refers to banknotes in his diary. In his entry for 29 February he mentions sending his father a note for ÃƒÆ’Ã†’ÃƒÂ¢Ã¢â€šÂ¬Ã…Â¡ÃƒÆ’Ã¢â‚¬Å¡Ãƒâ€šÃ‚Â£600 issued by a goldsmith.
1672 First state issues of copper coinage in England
1672 Charles II introduces the Stop of the Exchequer. The goldsmiths refuse to lend more money to the king who has already borrowed huge sums and therefore he prohibits most payments from the exchequer, initially for a year and later indefinitely. In the late 1670s and the 1680s several of his largest creditors go bankrupt.
1681 First public note-issuing bank founded in Massachusetts. In this context the term bank means simply a batch of bills of credit issued for a temporary period. This example is followed subsequently in other British colonies in North America.
1682 Sir William Petty's Quantulumcunque concerning Money published Petty, a founder of Britain's Royal Society, argues that banking will provide a major stimulus to the English economy and world trade.
1690 The Massachusetts Bay Colony issues official paper money. These notes are used to pay soldiers returning from an expedition to Quebec. They can be used to pay taxes and are accepted as legal tender. Other colonies subsequently copy the example of Massachusetts.
1694 Bank of England is founded. The main purpose of the Act founding the Bank is to raise money for the War of the League of Augsburg by taxation and by the novel device of a permanent loan on which interest would be paid but the principal would not be repaid.
The creation of the Bank of England and the national debt in 1694 were both the result of an external challenge to the sovereignty of the English government which was desperately short of cash for the war against Louis XIV, the most powerful ruler in Europe. The lending resources of the goldsmiths combined with taxation, including new forms of taxation copied largely from the Dutch, could not supply the money needed. If the English government could raise a perpetual loan at a rate of interest acceptable to it, then instead of having to repay the capital only the interest would ever be repaid and the additional taxation required at any time would be just a fraction of the total loan. The lenders agreed to these terms because of various benefits to themselves that were attached to the deal. This, and other official borrowings, formed the "national debt" because it was not the personal debt of the monarch, which might be repudiated as Charles II did with his infamous "Stop of the Exchequer", but the debt of the government itself, guaranteed by parliament.
The role of the Bank of England was not confined simply to enabling the government to raise the money needed for the prosecution of the war. Michael Godfrey, the Bank's deputy governor (who was killed by a French cannonball during the siege of Namur in 1695) succeeded in establishing a system whereby the army received its funds promptly. After an interval of 4 years of peace a fresh war against Louis XIV broke out, the war of the Spanish Succession, and Britain and her allies were completely victorious, thanks largely to the military genius of John Churchill, Duke of Marlborough (an ancestor of Winston Churchill).
1698 Coins form less than half the English money supply
Davenant, a contemporary writer, estimates that the total value of coins in circulation is less than that of tallies, bills, banknotes etc. Increasingly the power of money creation is passing from the King, in charge of the mint, to the London money market and provincial banks. Political and constitutional power is also affected by this transfer of financial power.
1705 John Law publishes Money and Trade Considered. After travelling widely on the Continent, Law returns to his native Scotland and publishes Money and Trade Considered: With a Proposal for Supplying the Nation with Money. He argues that metallic money is unreliable in quality and quantity. Bank notes issued and managed by a public bank would remove the brakes on the economy. He is probably the world's first Keynesian; but compare Sir William Petty, 1682.
1708 Britain sets American colonies' exchange rate for Spanish dollar. The British parliament specifies that 6 shillings should be the maximum rate any of the colonies should use for the Spanish peso or dollar which is widely used as currency by the colonists. However the Act has little effect.
1715 North Carolina makes 17 different forms of money legal tender. All the British colonies in North America tend to suffer from a dearth of the official British coinage. Consequently they use a variety of substitutes including wampum, copied from the native inhabitants, tobacco and other natural commodities, and Spanish and Portuguese coins. The importance of these substitutes varies according to location.
1723 First issue of notes by the Pennsylvania Land Bank. These are secured by mortgages on the property of the bank owners.
1727 Tobacco notes become legal tender in Virginia. Certificates attesting to the quality and quantity of tobacco deposited in public warehouses circulate more conveniently than the actual leaf, already used as money for over a century, and these notes are made legal tender.0
c. 1750- The Industrial Revolution in Britain. In the mid-eighteenth century, at the start of the Industrial Revolution there are barely a dozen banking houses in England and Wales outside the London area.
1760 Wampum factory opened in New Jersey. Demand for wampum as currency, and later ornament, remains strong. In the factory steel drills are used to make the holes that are used for stringing the shells together. This increases output of wampum enormously causing inflation. The factory remains in production for 100 years.
1762 Barings Bank founded. When Barings goes bankrupt in 1995 it is Britain's oldest merchant bank.
1764 Britain forbids all its American colonies to issue paper money as legal tender
1766 Benjamin Franklin fails to persuade British parliament to allow use of paper money in America.
1768 Russia's first two public banks established. They are created by Catherine the Great to finance Russia's war with Turkey.
1770 Rhode Island's paper money rendered worthless by hyperinflation. Many of the British colonies in North America have over-issued notes causing inflation but Rhode Island is the worst.
1771 The first of the German Landschaften created in Silesia. The Landschaften are state cooperatives which grant mortgages, and other credit based on land, for the improvement of agriculture. Other Landschaften are established in the 1770s and 1780s.
p 566
1772 Scotland has a nationwide banking network. By this time 31 banks are operating in Scotland with branches and agencies covering most of the country. Thus Scotland is the first country in the world to establish an almost nationwide system of branch banking.
1775 First British building society formed. Richard Ketley, an inn proprietor in Birmingham, and a group of his customers and friends form a society for saving money for building and purchasing houses for their own occupation.
1775-1783 The American Revolution or War of Independence. The American Congress, and individual states. finance their war effort overwhelmingly by printing money. This eventually leads to hyperinflation rendering the continentals worthless - but the Revolution is successful.
c. 1780-1810 Rapid spread of country banking in England and Wales By 1810 the total number of licensed and unlicensed banks is probably over 800. In most cases their founders have strong ties with particular industries or trades and the banks meet the need of small workshops, mines etc. for working capital. Without these banks the Industrial Revolution would have been strangled in its infancy.
1780 Bank of Pennsylvania founded. This is the first American bank to be established since the declaration of independence from Britain. It is basically a temporary means of raising funds for the American army which is in a desperate financial situation.
1782 Bank of North America begins operations. It was granted a charter by Congress the previous year. It fulfils a wide range of banking functions and is a great commercial success.
1784Bank of New York and Bank of Massachusetts both open
1785 Bank of America's Congressional charter is revoked. However the bank subsequently acquires a new charter from the state government of Delaware.
1791 Bank of the United States receives a 21 year charter. Because of opposition to the bank and fears that it would contravene the Constitution, Washington is going to use his veto but is persuaded not to by Alexander Hamilton.
1792 US Coinage Act The Dollar is adopted as the unit of account, based on a bimetallic standard, subdivided into 100 cents. Foreign coins are supposed to lose their status as legal tender within 3 years of the US coins coming into circulation.
1795 Hyperinflation in France. The total nominal value of the assignats in circulation reaches 20 billion livres. Riots in Paris pave the way for the rise of Napoleon.
1799 William Pitt introduces income tax
c. 1780-1810 Rapid spread of country banking in England and Wales
c. 1800-1860 Five hundred fold depreciation of the cowrie in Uganda
When cowrie shells are first introduced to Uganda at the end of the eighteenth century two are sufficient to purchase a woman. Thereafter the wholesale importation of cowries causes inflation with the result that by 1860 one thousand cowries are needed for such a purchase.
1800 The Bank of France is founded
1800 Number of banks in the US reaches 29
1806 President Jefferson suspends the minting of silver coins. This is because of the tendency of these new coins to disappear from circulation, as an unintended consequence of the US 1792 Coinage Act.
1811Bank of the United States' charter is not renewed
1812-1814 War between the United States and Britain. Inflation takes off in the United States. This is only partly because of the war. Without the restraining hand of the Bank of the United States there is a huge increase in the number of banks issuing notes with very little specie backing. This experience swings opinion in favour of creating a new national bank.
1816 Second Bank of the United States founded
1816 Privy Council recommends establishment of the gold standard This proposal is accepted and, in accordance with a related proposal, a new British one pound coin made of gold, the sovereign, is produced. p 207
1824 Clearing system developed by Boston banks The Suffolk Bank of Boston, in co-operation with 6 other local banks, begins the development of a system of clearing inter-bank accounts.
1829 New York State passes Safety Fund Act. This tightens up conditions for chartering banks and contains provisions foreshadowing later developments in deposit insurance.

A less brief history of money