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 The History of Paper MoneyOctober 10, 2004The Chinese were the first to invent paper around 100 AD. They were also the first to invent paper money, which in its early form can be traced back to the 7th century. In the year 812, the Chinese Emperor used it as a temporary solution because of the copper shortage. This money was called "flying money". It was so popular that by the year 970 it dominated as a monetary unit. These first bank notes carried a guarantee that it could be traded at any time for coinage. The name of this bank note was "cash". The oldest existing bank note is the 1000 cash note of the Ming dynasty from the era of the Great War 1368-1398. It is 225 x 340 mm with a pile of coins centrally depicted. The picture was to show people who couldn't read that they could trade the bill in for the depicted number of coins. When Marco Polo came back from his travels in China (1275-1292), people in Europe didn't believe that the Chinese used paper for money. Paper money in Europe came 300 years later. The use of paper money in China stopped in 1455. The history of paper money in Europe is interesting. It started as emergency money substituting for regular money. The first emergency paper bills are from 1483. The first bank notes were printed in the 17th century. The first European banknotes were printed in Sweden. In 1644 copper plate money was minted, but besides being very heavy it was quickly devalued because of the 30 Years War (1618-1648). Therefore, Johan Palmstruch, who in 1657 founded the Stockholm’s Banco, suggested as a new monetary unit - a temporary "Kreditivsedlar" (credit paper). He printed the first banknotes in 1661. Unfortunately for Johan Palmstruch, all this came to a bitter end. The bank very quickly got into trouble for printing too many bank notes. Palmstruch was taken to court and was made accountable for damages and was sentenced to prison. Not many Stockholms Banco-Notes remain today and are a rare collector’s item. A battle had raged for decades between the King and the merchants, for control over England's money system. The arrival of William III of Orange in 1688 with his "glorious revolution" heavily financed by merchants tipped the scales in favor for the often spoken wish for an independent credit institute. Following the suggestion by William Patterson, the Bank of England was founded in 1694. The Bank of England printed "Goldsmith notes" as promissory notes from English gold smiths for account deposits. The clause "(I) promise to pay the bearer on demand the sum of (...) pounds" (i.e. in gold) originally meant that they could be exchanged for gold, although in practice this was not always possible. The state received a loan in exchange for the right to print banknotes. In time the Bank of England developed into the most influential bank of issue bank in the world. One year after the founding of the Bank of England, the Bank of Scotland was initiated. It held the bank note monopoly for Scotland until 1717. Also in Norway, which at the time was a Danish province, in1695 the businessman Thør Møhlen, circulated banknotes (without interest) with the approval of the government. The notes had 5 wax seals. Unfortunately the population didn't find them acceptable and brought them immediately to the bank to cash them in. As a result, Thør Møhlen came into financial difficulty. It wasn't until 1713 that Denmark began circulating paper money during the war with Northern Ireland. It was also served as a form of emergency coinage and emergency money. France also began printing paper money in the year 1703 under Louis XIV. Because of uncertainties connected with paper money, other states waited until the late 19th century. One problem with paper money was the paper itself. Several companies experimented with the processing of special paper in the 18th and 19th century. |
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