STORIES FROM THE HISTORY OF MONEY
  Original Bank  Currency in 1700's   Greenspan   Yen  Korean funny money

The Original Bank

The original bank was founded nearly seven hundred years ago in the Venice Republic. Its original functions weren’t that of a bank. Venice was at that time in a middle of a war, and it needed urgent funding for its military efforts. It started to force loans out of its population. Contributors to the loans were entitled to an annual  interest payment of 4 percent on the amount of loan lent.

 A corporation called Chamber of Loans was created to handle the payments of interests on the stipulated dates, and also the management of allotted public revenue assigned to these payments. Soon it had the chance to purchase and sell, bills of exchange. The corporation also had a reputable name, and realized that selling bills with its name on it was profitable. It always had spare funds and it found the transactions of these bills good for business, thus it became a regular dealer of such bills. As its reputation grew, the merchants of Venice began to place their excess money in the Chamber of Loans. As a result the concept of deposits started. Soon every merchant in Venice was forced by law to open up an account. It was only a matter of time, when the transfer of payments between merchants was done within the bank itself (the process of paper accounting). Therefore, not having to take money out from the vaults and transporting large amounts in order to change ownership. Eventually bank notes were issued for these transactions and thus the circulation of money began. Eventually similar banks were set up throughout Europe.

References:
http://www.socsci.mcmaster.ca/~econ/ugcm/3ll3/hildreth/bank.pdf
Richard Hildreth, The History of Banks (Ontario: Batoche Books Ltd, 2001

Raj Parekh: Currency in the 1700's

While doing a research project for my history class, I had to research the cost of runaway slaves to owners. During that time period, there were many forms
 of payment. The currency that could have used was termed the pistole. A person could also have used the British pound or the shillings to buy and sell things. The pistole was equivalent to about eighteen shillings and about twenty shillings were equivalent to a pound. It was quite interesting to see how certain people change from one currency to another. The pistole was mainly used in the late 1730's through the 1750's while the pound and shillings were mainly used in the 1760's. Also late in the 1770's people began to use the dollar as a form of currency.



references

Virginia Runaways: Runaway Slave advertisements from 18th century Virginia newspapers.

Timothy Manion: Alan Greenspan's Story of America's Tranformation to Paper Currency


In the United States today, currency consists of copper coins and pieces of paper issued by the Federal Reserve System. 100 years ago, currency consisted of something entirely different: gold. Ironically it is the current chairman of the Federal Reserve System who chronicled the transformation of this country’s monetary standard at the turn of the century and exposed the harmful effects that the Fed had on the nation’s economy in a 1966 article for The Objectivist. In “Gold and Economic Freedom,” Alan Greenspan writes that the earliest mediums of exchange consisted of commodities such as “gold, silver, seashells, cattle, or tobacco.” These commodity currencies, particularly those based on gold, led to the development of banking systems in which bank notes or deposits, instead of gold itself, were used as mediums of exchange. Greenspan notes that neither the United States nor any other society ever created a banking system that was entirely free, or, to be more precise, untouched by government intervention and regulation. Nevertheless, he acknowledges that the pre-World War I banking system in the United States was “more free than controlled.” Greenspan claims that the gold standard played a key role in business cycles. He says that when banks expanded their loans beyond the limits of their gold reserves, interest rates rose sharply, cutting off credit to businesses and sending the economy into a recession. However, “the readjustment periods were short and the economies quickly re-established a sound basis to resume expansion.” Ironically, it was the fact that limited gold reserves cut short unsound credit expansions that led the public to “misdiagnose the cure as the disease” and establish a Federal Reserve System that would provide banks with enough funds to prevent these credit crunches. Greenspan writes that with the support of the Federal Reserve’s “paper” reserves, banks could “continue to loan money indefinitely.” He then claims that the Fed’s paper expansion in 1927 created a “speculative boom” in the stock market. When the Fed realized its error, it was too late, and “the American economy collapsed.” Thus, the chairman of the Federal Reserve System puts the blame for the Great Depression squarely on the shoulders of his own organization. Greenspan’s concludes that the paper currency of the Federal Reserve System let the economy down because it neglected one of money’s essential functions: a store of value. He writes, “banks accept [paper reserves] in place of tangible assets and treat them as if they were an actual deposit. . . . But the fact is that there are now more claims outstanding than real assets.” He thus recommends that the economy abandon its paper currency and return to its superior predecessor: “Under the gold standard, a free banking system stands as the protector of an economy’s stability and balanced growth.”

references

Rand, Ayn. Capitalism: The Unknown Ideal. New American Library. New York, NY. 1966

Takuma Muroi: Origin of the Japanese Yen



Yen has been one of the major currencies in the circulation today. It was established in 1871 as a standard national currency of Japan in order to alleviate the chaotic situation of exchanging goods with the Mexican Dollar, the most recognized currency in the world at the time, because of the existence of various kinds of currencies in Japan. The reason the currency is called “yen” is unknown since there is no document stating how it started to be called so and there are several hypothesis. One is because its shape is circular. A circle is “en” in Japanese. However, the word “en” exists in some other languages, of course meaning differently, and in order to prevent this potential confusion it is written with “y” followed by “en”. The other hypothesis is because of the Mexican Dollar, which was written in Chinese with the character of “en”. As the Mexican Dollar was recognized in the world, Japanese started calling their own currency, at the time the standard currency was called “ryo”, “en”.

references

http://www1.gakugei-hs.setagaya.tokyo.jp/~g46g32/report2.html http://www.imes.boj.or.jp/cm/htmls/feature_42.htm

Sang Yoon Kim: Korean horror  and funny  money story

 

In Korea, there is a famous horror money story among the students including even college students. The story is that there was a girl in Korea. She was kidnapped and then killed by a murderer. To cherish her, her father who worked in the national coinage-agency (Korean Bank) secretly drew the daughter's name which is (Kim, Min Ji) and the picture of her hung head and long hair upside down when she was found by police after the murder. We can find the Korean character her,김 which is her last name, Kim in the tower which is carved in Korean gold color coin, 10 Won (which is Korean money unit) Also, we can find the first name "Min" in the paper money, 10,000 won. Moreover, there is the picture of her hung head and long hair upside down in the beard of famous old general, Lee, Sun Shin who won the sae fight against Japan of the silver color coin, 100 Won, and the hand which was also cut by murderer can be seen in the leg of crane of silver color coin, 500 Won. However, unfortunately, I forgot where the middle name, "Ji" can be seen. However, this story is just a fiction! I became know this fact through TV program which is called "the heaven of curiosity" In both my and my friend's opinion, may be, someone made the story in order to let forged money disappear by making people look the money more carefully.
 

One more! Short story~ In, the other foreign countries including U.S. there is the picture of great men in the middle of the paper money. however, Korean paper money has the picture of great men in the right side of the paper money. There is the historical reason of the difference between Korea and other foreign countries. Most Koreans have a common habit of folding paper money half. however, Syng Man Lee, the first president of Korea did not like the habit because his face on the middle of the paper money was fold by the public. So, he ordered to Korea Bank to move his face from the middle to the right side of the paper money not to be fold, and still the changed paper money is used in Korea!

references
The famous Korean TV program, "the heaven of Curiosity"