A brief history of money. Where all begins.
1792 - 1750 BC: Money and banking originates in Babyloniaout of the activities of temples and palaces which provided safe places for the storage of valuables. Initially deposits of grain are accepted and later other goods including cattle, agricultural implements, and precious metals.
640 - 630 BC The earliest coins made in Lydia, Asia Minor, consisted of electrum, a naturally occurring amalgam of gold and silver.
640 - 630 BC: Athens issues bronze and silver coins. The Athenian public hoards silver coins which, as a result, quickly disappear from circulation, leaving only the inferior bronze ones
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.
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.
The need to transfer large sums of money to finance the Crusades provides a stimulus to the re-emergence of banking in western Europe.
Requires that the demand for money equals the supply of money
Is a function of natural resources
Nature doesn’t care if the PM wants to increase the money supply
To keep up with demand
Seignorage means more wealth for the issuer
Seignorage = face value of money - cost of issuing money
Henry VIII debases the coinage of England as a means of raising revenue.
When debasing of coins is prohibited:
1659 The earliest British cheque is issued This is an order to the London goldsmiths Morris and Clayton to pay a Mr Delboe £ 400.
Because notes are accepted as evidence of ability to pay they are a convenient alternative to handling coins or bullion.
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.
1704 Promissory Notes Act
This confirms the legality in England of goldsmith's notes as negotiable, i.e. payable to the bearer rather than to a named person.
1832 Capital punishment for forging banknotes abolished in Britain
The maximum penalty for forgery is reduced from death to transportation for life (e.g. exile to Australia).
1848 Bank of France is given a nationwide monopoly of note issues
The national bank is given a monopoly of note issuing to fill the gap left by the failure of numerous local banks. The Bank of France also begins to develop a large network of branches in different parts of the country.