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domingo, 10 de diciembre de 2017

Banknotes history

The origin of banknotes (also known as paper money) go further in time than we can imagine. It's believed that the first banknotes were coined in China, under Song dynasty (960 AD-1279 AD), although they were used unoffcially since the 7th century. This invention was of vital importance, enhancing trade and making it easier. These first banknotes were called jiaozi (in Chinese, 交子; you can see a copy of them below) and what characterises them is that there are a lot of stamps on them, whose aim was to avoid counterfeiting (which had harsh punishment, death penalty). Around the 10th century, banknote circulation system was very organised and, despite its good qualities (banknotes are lighter, more portable and comfortable than coins), paper money and coins were both used. In the 13th century, with Marco Polo or William of Rubruck's travels' to China, European civilitation discovered this way of paying, though it was thought to be uncomprehensible, unreliable and phony.

 

In Europe paper-money isn't printed until the17th century, in particular 1661 AD. In that year, the Stokholm Bank (first Central Bank in the world, founded by Johan Palmstruch) in Sweden printed some "receipts"  for the people who deposited gold or other precious metals in that institution. From that moment, the use of banknotes spread around the world.
Gold standard was taken as pattern, setting the change of paper-money in established values of gold between the 17th and 19th century (this fact made gold coins go out of use, gold was valuable than the coin). In fact, gold standard was adopted by almost evey country in the beginning of the 20th century.
After WWII and Bretton Woods conference, most of the countries adopted fiat currencies attached to US dollar. Money emition was backed by gold till the 1970's (in 1971 USA suspended the convertibility of the US dollar to gold). After this many countries de-pegged their currencies from the U.S. dollar, and most of the world's currencies became backed by anything except the governments' fiat of legal tender and the ability to convert the money into goods via payment (according to proponents of modern money theory, fiat money is also backed by taxes, which is how states create demand for the currency they issue.
Nowadays, the use of both coins and banknotes is decreasing due to the implementation of other paying methods like credit cards or cheques and the creation of virtual currency (like bitcoin).

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