Economic Growth and Change in a Material World
A.1 MONEY, CREDIT AND BANKS Barter and bargaining between individuals has probably existed as long as humans walked upright. All organized societies of which we have any knowledge engaged in trade. In most cases trade was mostly barter, but in time barter was supplemented by at least one ‘established’ medium of exchange. The Aztecs used cacao beans. Berbers used salt. Coconuts and ivory were used in some places. Many societies bordering the Indian Ocean used cowrie shells. Mountain people sometimes used olive oil or sheepskins or goatskins. And, of course, many societies used metals, ranging from gold and silver to bronze and even iron (Weatherford 1997). The ﬁrst recognizable gold and silver coins, actually produced by a mint in standard sizes (and stamped with a lion’s head), were introduced around 560 BC by the King of Lydia, in Asia Minor. This innovation so facilitated retail trade and local production (mainly of cosmetics) that Lydia quickly became a regional trade center. In fact Croesus’ wealth is legendary.1 Croesus’ monetary innovation quickly spread throughout the Greek world, and later, the Roman world. The second major innovation in the history of money came 1500 years later. The innovation was credit. The ﬁrst ‘bank’ offering credit (but only to the feudal nobility) was the Order of the Knights of the Temple of Solomon, later known as the Templars. The order was founded in Jerusalem in 1118 AD to defend the Christian enclaves in the Holy Land, and the sea and land routes thereto. The...
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