What Came First: Banking or Coinage?

coinsPeople connect banking with coinage and we have nothing against it. However, if you think that coins came first, you are rather wrong. The invention of coinage followed that of banking. Let’s go back to the past to understand better the origin of banking!

About 4,000 years ago In present-day Iraq, Ancient Mesopotamia, temples and royal palaces provided secure places for keeping of commodities, such as grain, safely. Receipts were used for transfers to original depositors, as well as to third parties. After a while, even private houses in Mesopotamia got involved in similar operations. In the code of Hammurabi, the laws regulating banking were included, too.

But, the citizens of Mesopotamia were not alone in banking business. In Ancient Egypt, there was a centralization of harvests in state warehouses that eventually led to the development of the banking system. Owners whose crops were deposited there for convenience and safety, or sometimes compulsorily deposited to the credit of their king used written orders for the withdrawal of separate lots of grain. Soon, this method became generally used for paying the debts to other people, including traders, tax gatherers and priests. These grain banks didn’t disappear after the introduction of coinage. In fact, they served to reduce the need for precious metals, since the later were mostly reserved for foreign purchases, especially those connected to military activities.

When it comes to precious metals, in ancient times they were a quite common form of money. What counted was, surely, their weight. In fact, words “pound”, “expenditure” and “spend” come from the Latin language: “expendere” is a verb meaning “to weigh”. Before the introduction of EUR, drachma was the main Greek monetary unit and its meaning is “handful” (of grain).

What can these examples from ancient times show us? The banking systems, in general, grew out of the provision of storage facilities for food. Even without the existence of coins, banking can take place. This might be one of the reasons why, although they have to constantly change their methods, forms and clients, banks are bound to survive any social, demographic and economical challenges.

 

 

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