The History of Currency – Part 3 – Minting, Paper Money & Kingdom of Mali

Find the Introduction HERE

Find Part 2 – Barter HERE

It will be necessary to wait – 630 – 640 years B.C., to see the first Metallic Coins appear. As soon as Man managed to fragment a raw Metal.

The arrival of the Currency will thus allow everyone to know the value of any object, according to a unique reference mark.

The Birthplace of the Currency is undeniably in Anatolia (today’s Turkey), in the Kingdom of Lydia. This Kingdom was at the center of one of the most important trade routes of the Old World.

It’s King Alyatte II and his son Croesus who were the real forerunners, and radically changed the relationship of Men with the Currency.

This Kingdom was crossed by the river ‘Pactole’ in which the King extracted ‘Electrum‘ (a natural alloy composed on average of 40% Gold and 60% Silver). The King estimated that the shells or metals (non precious) were not reliable enough for the exchanges, he thus established :

• Precious and rare Metals as Currency (Gold, Silver and Bronze).
• Standardized and precisely certified Coinage (The King imposes a unified weight on the Electrum coins, and also imposes a face value greater than the amount of metal contained in the coin).

It is at this time that we begin to talk about Bimetallic Currency.

When the son of Alyatte II, Croesus becomes King, he uses the new techniques of Metallurgy to separate the Gold and Silver that make up Electrum. He thus establishes the first Currency Ratio 1:13.5 → 1 Gold = 13.5 Silver.

Metallic coins made of precious metals had their own intrinsic value, linked to their weight.

In the popular culture we use expressions, which relate this history of more than 2500 years: 

• “Rich as Croesus”.
• “I touched the Pactole”.

– 335 – 333: Aristotle, Greek Philosopher, theorizes the principle of balanced exchanges, as well as the three main functions of the Currency. Allowing everyone to better satisfy their needs while developing social relations.

• Unit of Account / Measuring Instrument (Price)
• Intermediary in exchanges (Payment)
• Value Reserve (Ability to transfer in time the Purchasing Power – Savings)

These functions tell us about utility, but not about its Nature.

– 300: Minting the first Coin with the portrait of a person. The ‘Penta Drachme‘ in Egypt, representing Ptolemy.

– 290: The First Coin Workshop (Mint Production Office) is located in the ‘Capitol‘, one of the 7 hills of Rome. At the foot of the Temple of Juno Moneta (the Warning Goddess), ‘Moneta’ would be the origin of the word ‘Money’.

It is in these Offices that the ‘Denarius‘, the first coin to bear a value inscribed, ‘X‘ for 10 in Roman, is Minted.

– 218 – 202: First Monetary Crisis: Faced with serious financial problems, the Roman State proceeds with the first Monetary Manipulations, devaluing the Bronze and Silver Currencies.

– 44: Caesar orders the Minting of Coins with his effigy. This currency quickly becomes an instrument of political propaganda and corruption. “Caesar is the absolute Sovereign of Rome“.

Year 33 A.D.: Serious financial crisis in Rome: Loans made by the Elite of Rome became increasingly scarce, and creditors were struggling to reimburse their credit, this was probably due to the fall in the price of Land. This elite demanded the repayment of creditors by requesting a loan from the Emperor Tiberius. The Emperor granted a loan of 100 Million Sesterces without interest. Money that will restore the people’s confidence in the economy.

1st Century: Establishment of the economic principles of Christianity. Putting special emphasis on the spirit of Poverty “Money can divert from the essential, which is the relationship to God and to others”, while insisting on the separation between the Spiritual and the Material.

162: War Financing Strategy: Polyen, a Greek Jurist, writes a set of war stratagems/ruses, while submitting ideas for its financing: 

• Exceptional taxes
• Public Loans
• Private financing (voluntary or not) of Warships
• Extortion of Loot
• Sale of Religious properties (seized during conquests)
• Monetary Manipulation (Minting of a new Coin in a lower quality metal, and the obligation for traders and soldiers to use it)

3rd Century: First Inflationary Crisis (Rome). Between the end of the expansion of the Empire, the Wars (Spain, Gaul and the Middle East) and the important financial obligations (payment of legionnaires, distribution of wheat to the population …), the War Booty and taxes (only conquered peoples have to pay a tax) are no longer sufficient to maintain the economy of the State. Instead of adopting unpopular budgetary measures, the Emperor’s used Monetary Manipulation, regularly reducing the Silver content of the Denarius:

• In the 2nd Century the Silver content of the Denarius was 90%.
• At the beginning of the 3rd Century it was 50%.
• In 276, there was only 4% of Silver left in a Denarius.

This was the result of an exceptional inflation of the price of wheat, between 218 and 293 its price was multiplied by 16!

294: Reinstatement of the Trimetallic Monetary System: The Roman Emperor Diocletian restored Gold (Aureus Coin), Silver and Bronze, in an attempt to curb wheat inflation. In the year 301, he puts in place the “Edict of the Maximum“: Ceiling prices of consumer goods and the salaries of workers. He also reorganized the tax system.

310: Creation of the Solidus. Emperor Constantine completely overhauls the monetary systems previously established, in order to restore the stability of the Currency. He issues a new Gold coin: the Solidus (Solidus = Solid, to affirm the will to want to stabilize this Currency), its weight is standardized at 4.55 grams of fine gold in 312. As well as the Silver Denarius, the Bronze Pound and the Aureus (25 Denarius) as other coins. The Solidus will remain unchanged until the 10th Century.

Solidus is also the origin of the words : 

• Sou: Currency which will be used about 500 years later in France.
• Sol: which will become ‘Balance’ (Solde) for accounting entries.

600 – 700: Economic principles of Islam.

781: Charlemagne establishes the Duodecimal account system (Duodecimus → Twelfth in Latin), based on a Silver Block of 1 Pound.

• The Sou (inspired by the Solidus) is worth 12 Silver Denarius,
• The Pound is worth 20 Sou (or 240 Denarius)

This system will last for 1000 years, until the French Revolution (1789-1799).

994: Appearance of the first Notes “Paper Money” – “Jiaozi“: in China during the Song Dynasty (960 – 1279) to overcome the shortage of Metallic Currency, it is there that the “Paper Money” appeared, since the invention of the Printing Moving Characters, first in Terracotta and then in Metal, mainly used for internal transactions, Gold and Silver being reserved for international transactions. The Paper Money is not guaranteed by a determined quantity of Metal, which causes an important inflation.

The Felted Paper was however used in 177 B.C., it was better adapted to commercial uses especially between Notables, before them, in ancient Egypt, they used a substance extracted from Papyrus leaves.

12th – 13th Century: Medieval Economic Revolution. Europe knows a great period of economic expansion (which results in the construction of Majestic Cathedrals). This period is also charged with innovations and development of work techniques:

• Agriculture
• Textile
• New sources of energy, animals replace humans (transport, mills)

The imports which are more and more frequent (Paper, Horology, Compasses, Wheelbarrows …) have favored the construction of Bridges, Canals, but also the birth of Great Fairs.

Leonardi Fibonacci, Italian mathematician, introduces Indo-Arabic numbers in Europe in 1202, which replaced the Roman numbers and published his first work, the ‘Liber Abaci‘ (Book of Calculations). This new form of numbering favors the development of Credits, by simplifying the calculation of interest. The ‘Fibonacci Suite‘ is still used in today’s market finance.

13th Century: Marco Polo brings back to Europe a ‘Wonder‘ from the Mongolian Empire, the ‘Paper Money’ (This form of currency was guaranteed by a reserve of Silk or Silver, they could be exchanged for Silk or Silver and were accepted for the payment of taxes. Reinforcing confidence in its use), in addition to his stories of travels to the court of Emperor Kubilai Khan.

13th – 14th Century: Development of the great commercial empires of Africa, especially Mali. Under the reign of Kanku Musa (Mansa Moussa), the prosperity of his Empire was based on Trans-Saharan caravan transport (Copper, Salt, Gold …), but also by the Niger River, which became a major trade route.

The Kingdom of Mali had nearly half of the Old World’s Gold Reserves. Being a Muslim, Kanka Musa wanted to go on a pilgrimage to Mecca, accompanied by a caravan of several hundred Camels carrying tons of Gold, 60,000 members of his court, 12,000 slaves, and an army of 200,000 Men, including 40,000 Archers. During his passage in Egypt, Kanku Musa displays his great generosity, he distributes Gold everywhere he goes, which has resulted in a fall in the price of Gold in this country. On his return from Mecca, he decided to subscribe to as much Credit as possible, at exorbitant rates, to try to save the Egyptian economy. This King is considered by historians as the richest Man of all times, as his fortune was immense and incalculable.

The Mongolian Empire (much larger) also plays an important role in international trade (between Asia and Europe – from China to Antioch (present-day Turkey)) especially with the Silk Road.

1262: Affirmation of Royal Power over the Creation of the Money. In France, King Louis IX signs the Chartres Ordinance, which imposes the King’s monopoly on the creation of the Money. The latter becomes mandatory throughout the Kingdom, and its imitation becomes formally prohibited.

The Currency reflected the economic and military power of a Nation, hence the severe and inflexible repression against monetary counterfeiting.

While the Currency was always more present in the exchanges, but also the attacks of convoys, the theft of Gold, or simply the difficulty to move large sums of money, was born the need to keep all this Currency safe.

To be continued…

See you soon

Christophe WILHELM

Bitcoin Meister

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