A short history of money

Historically, the first kind of money people used was commodity money. Various objects of quite different value were used as barter to obtain other goods. The first coins – nothing but simple metal pieces – appeared in the 7th century. The first gold, silver and bronze coins were minted in the region of present-day Turkey about 2,700 years ago. At the time, the value of the coins was equal to the material used to make them. Commodity money was most recently used in this part of the world in the not-too-distant past: In the years immediately after the end of World War II, people used cigarettes as a means of paying for goods on the black market.


Paper money consists of banknotes, with the value of each note printed on it. It was first invented in China, where it made its appearance about 1,000 years ago. About 250 years ago, paper money began to circulate widely in Europe. In those early days, a number of banks printed and issued banknotes. To guarantee the value of the banknotes, the issuing bank had to keep gold reserves of equal value in its vaults. Today, that is no longer the case. Only central banks are allowed to print and issue money now.


The money in your account is book money, also called fiat money. The concept of fiat money was first introduced in Europe by Arab merchants in the Middle Ages. Instead of dealing with actual notes and coins, they wrote down credits and claims in their account books. We mostly use book money today, for example when paying with a bank card or authorising a money transfer to pay our electricity bill. Only when we withdraw money at a cash machine is book money converted into paper money.