TheOriginOf.com

Currency Notes

June 12, 2007 – 9:03 pm

There is hardly anyone who does not know the meaning of currency notes. Currency comes from the word current – that which is in circulation at the moment. Note is a piece of paper with something written on it. To make it clear an example might suffice. I might have a precious coin dating back a few hundred years but with it I cannot make purchases either at the local grocery shop or the sophisticated stock exchange. Why? This is because it might have real value but it does not have currency value.

By currency notes we generally refer to paper money. The story of money began with the age of barter. One person had grains while another had baskets. The two would have to trade with each other to meet daily needs. The problem became complicated when the man trading his goat wanted to buy some grains. Grains and baskets could be divided but the goat would have to be killed. One goat could not be the price of a few baskets. So a common medium of exchange had to be thought of. Thus coins came into circulation. These coins were made of precious metals like gold, silver or copper. But constant wear and tear combined with a dearth of raw material made Man start thinking again. Out of this thinking was born the idea of currency notes.

The question about currency notes now arises is that certain rules have to be framed to see that the amount of paper money in circulation is backed by equal amount of bullion in the reserves of the government. If this is not strictly adhered to then currency notes become meaningless. A whole suitcase of notes might then be required to buy a pair of shoes. This reality has taken place in many countries where economy has collapsed. Whatever it may be – there is no denying the fact that currency notes is the all important factor in our day-to-day lives today.

The currency note or bank note was known as a bill in USA and Canada. It is a negotiable instrument or promissory note made by a bank payable to the bearer on demand. It is also known as legal tender. Coins and currency notes comprise of what is known as ‘money’ in the modern world. Coins are of lesser value than currency notes. Coins became unpopular because of its weight and also it being dangerous to carry about bags and bags of wealth. In this way currency notes became king and emperor of the modern world of give and take.

Currency notes started originally in two forms – drafts and bills. Drafts are receipts for value held on that account and bills are notes with a promise written on it that it would be converted on a later date. Money is based on the coming to importance of some commodity as payment. The oldest monetary basis was agriculture-based stuff like livestock and or grain. In Mesopotamia drafts were given out against stored grain and in Japan it was based on rice per year account. A drachma is a weight of grain and koku in Japanese relates to rice. History says that drafts for used for giro systems of banking in the 1st century BC in ancient Egypt.

Gradually out of all these experiments currency notes has come into circulation all over the world. Today currency notes have come to represent fiat money. The world’s earliest paper money was originated in China during the time of the Song dynasty. In the beginning Chinese merchants used to carry around coins stringed together with a hole in the middle. This became cumbersome. So the coins were deposited with a trustworthy person and notes, with details of the amount were taken instead. From this paper money or jiaozi made its debut in China. In the beginning mulberry bark was used as paper money. In Europe the first bank notes were paper coins issued in Leyden in the Netherlands in 1574. It was the time of the Spanish siege. Leather used to suffice for currency but all the available leather had to be used to feed the starving. In desperation the people tore up paper and began to use it as legal tender. The first modern European banknotes were the ones issued by the Bank of Sweden (then known as Stckholms Banco) in 1660. In 1685 in Canada money hand-written on playing cards came to be used as money during a time crisis. In 1690 Massachusetts Bay Colony was the first to issue permanently circulating bank notes. It was in the18th century that fixed denomination printed bank notes came into use.
Most of the currency notes are made of heavy paper often mixed with line, cotton or other textile fibres. It is different from ordinary paper – being much more strong and resistant to wear and tear.

The use of currency notes or paper money did not seem to be the final answer. New problems arose and are still there. Indiscriminate issuing of paper money without proper backing in terms of real wealth leads to inflation. It is still a cause for worry. Another risk factor is that of duplication. Of late, since the late two decades of the last century, foil application to paper bank notes has come into use. These are known as polymer bank notes. Its optically variable devices are impossible to be reproduced.