For most of human history, money took the form of coins made from precious materials, such as gold, silver, and bronze. These were extremely tiring materials to harvest, as it meant that there had to be a constant flow of precious materials coming into the kingdom or empire. This was actually part of the downfall of the Roman Empire, so inflation was a serious problem in ancient times.
Paper currency made its debut in the ninth century in China, but it only began to be widely used in the late 1600s. The original paper currency was used as a sort of IOU for gold and silver, with banks promising to pay customers with precious materials as soon as they got a new shipment. Later, traditional paper money stopped including promises to pay back in gold and silver and the notes began to become the universal currency.
The switch to paper money bailed out a lot of declining governments because it stopped the need for constant gold and silver. One notable instance is actually the United States. During the Civil War, gold and silver were a pain to mine and almost all money went to the war cause. Banknotes bailed out the United States.
Fun Facts:
- Paper money isn't made out of paper! It's actually made from a mixture of linens and cotton.
- The Secret Service, which now protects the president, was created to stop the counterfeit bill epidemic in the mid-1800s.
- Mangled money can be sent to the treasury for a free replacement, as long as one of the serial numbers is present.
One of the first Chinese paper currencies:
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