Lesson 1: The Origin of Money
Unit 3, Lesson 1
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Slide Show Video: The Evolution of Money

Lesson 1: The Origin of Money

Learning Objective:

Students will be able to define money and explain a brief history of its evolution. 

Standard: There are no Jump$tart standards associated with learning about the history or origin of money. 

SEL Competency: Social awareness


Definition of Money and Currency (5 min)

Ask: Does anyone know the difference between the definitions of money vs. currency?

Call on a few students to share out their thoughts.

Say: Many people think that the terms money and currency are interchangeable, but in fact they are not. 

(Pull up slides.) 

Slide: Definition of Money
Say: Before we get into exploring the history of money, it is important to first understand the technical definition of money. Money is a medium of exchange, unit of account, and store of value

What does that mean? 

  • A medium of exchange is an item that represents a value and is used in exchange for goods and services. 
    • Examples:
      • A dollar or coin
      • Fiat, which is government-issued currency not backed by a physical commodity 
  • A unit of account is something that allows for the measurement and comparison of value of different things; it is countable and easy to do simple math with, such as adding, subtracting, multiplying, or dividing.
    • Examples:
      • You  can split a dollar into four quarters or 100 pennies—and it’s still worth the same
      • You can cut a bar of gold in half—put the two halves together and it still equals the same amount 
  • A store of value is an asset that maintains its value over time without depreciating
    • Examples:
      • Gold

Slide: So, is the US dollar money?
Say: Based on what you’ve learned so far, is the U.S. dollar considered “money”? Turn and talk. 

Have students share out. 

Slide: U.S. Dollar and Question
Say: Some say that the U.S. dollar is currency, not money. Some say it is money, but just a lower quality of money because it doesn’t have all three  attributes of money—it is missing a store of value. 

Slide: Money vs. Currency
Say:  Money is a unit of account, a medium of exchange, and a store of value. And fiat or paper currency is a medium of exchange that can be traded for a good or service, but it has no store of value, other than being deemed valuable by a government or central authority.

Slide: Purchasing Power of the Dollar Graph
Say: Why do some people consider the U.S. dollar to be currency instead of money, you might ask? If you look at this graph, you’ll see that the U.S. dollar has lost its purchasing power, or value, over the past 100 years—which means it’s lacking one element of the technical definition of money. Because of this, many people believe that the U.S. dollar should be considered fiat currency, not money. Just some food for thought. 

The History of Money  (20 min)

Slide: Barter
Say: Thousands of years ago, in 9000 BC, people used a system of bartering to exchange goods and services—so they might trade a chicken for a sweater, that kind of thing. 

Slide: Seashells
Say: In 1200 BC, China used cowrie shells to trade for goods and services, because that was easier than carrying around something like a chicken—and it made it easier to trade things over longer distances. The shells represented a medium of exchange for another good/service.  

Slide: Clay tablets
Say: Places like ancient Mesopotamia used clay tablets like this one that people would use to write on and communicate trading over longer distances. This one specifically shows someone trading for beer. 

Slide: Precious metals
Say: In 600 BC, people started digging into the Earth and found precious metals—something shiny! The first precious metal coins we have on record were issued in Lydia, a region of western Asia Minor that today would be part of Turkey.

Slide: Coins with holes
Say: In Ancient China around 200 BC, instead of carrying around shells, people started carrying around small tokens with pictures or representations of the items that people wanted to trade—and eventually, these were replaced by abstract circles that could represent any item. The hole in the center was where a person would string up the coin so they could wear it as a necklace and keep all the coins, which were made out of different metals, together. 

Slide: Chinese paper money
Say: Paper money was invented by merchants in 700 AD in China so they could avoid having to carry around so many strings of coins—especially after the Chinese government started making more and more coins, which eventually led to needing more for more valuable items. Eventually these merchants started trading receipts from deposit shops where they left the money or goods because they were getting quite heavy. 

Slide: Chinese government-issued paper money
Say: This is where we see the first example of a government stepping in regarding the control and creation of money. During the Song period, Chinese government officials chose a few shops to have a monopoly on issuing certificates of deposits—and eventually, in the 1120s, the government took over the deposit system, thus creating the world’s first government-controlled paper money. 

Slide: Marco Polo
Say: After Marco Polo visited China in the 1200s, he brought the idea of paper money back to Europe, which was using the Italian Florin at the time.  

Slide: Coins in America
Say: Then, when Britain colonized America, the government restricted the colonists from minting their own money—and so they rebelled, of course, and used other currencies, like the Spanish dollar. 

Slide: Promissory note
Say: In the mid-1600s, fiat currency became more popular. Banks would issue it as a promise to hold or store gold in their vaults so people didn’t have to lug around their bags of gold. Different banks had different banknotes, or promissory notes, to “repay the bearer on demand.” 

Slide: Revolutionary War (1776)
Say: During the Revolutionary War, both Congress and the States coined money and issued debt in order to fund their war efforts. However, they didn’t have enough gold to fund their efforts, which led to these debt certificates losing value because they were not backed by any physical assets. This is the first instance of the United States Congress taking over the coining of money and prohibiting others from doing so.

Slide: The Coinage Act of 1792
Say: Then in 1792, the U.S. created the U.S. mint, which established regulation around the U.S. coinage system (gold, silver, and copper).

Slide: Civil War (1861)
Say: During the Civil War, the North and South both issued their own currencies to help fund the wars, because there wasn’t enough gold. This was when the Union currency known as “greenbacks” were first issued.

Slide: Creation of the Federal Reserve
Say: Then in 1913, Congress passed the Federal Reserve Act, which created a federal reserve system that mobilized banking reserves and issued federal reserve notes.

Slide: Plastic
Say: In 1946, credit cards came to be—and the idea of debt as money took off. This meant you could give someone a good or service, and instead of paying for it with the money they had, they instead took out a loan or debt to pay—and then had to pay off the loan or debt over time. This was not a popular method of payment up until this time. 

Slide: The end of the gold standard
Say: And very notably, in 1971, the Nixon administration ended the gold standard, meaning the U.S. dollar no longer had to be backed by gold in the bank. This led to the government being able to print as much money as it wanted, whenever it wanted—because it didn’t have to trade the money in for gold when people came to the bank and asked for their “store of value” for their fiat currency. 

Slide: Digital money
Say: Beginning in the mid 1980s, computers and the internet made money more digital, especially the debt method of borrowing something with the promise of paying it back with collateral. 

Slide: Cryptocurrency
Say: In 2009, Bitcoin was invented, which among other things removed the need for banks to store a person’s money. We will learn more about this in a future lesson plan. 

Say: The whole point of this mini-overview is to get an idea of where money came from and where it might be going. 

Video Summary (10 min) 

Slide: Recap
Now we are going to watch a short overview video about the history or evolution of money to sum up what we just talked about in the slides. 

Quick overview: The Evolution of Money (5 minutes) https://www.youtube.com/watch?v=TNjNaULISGs

Ask: What are some things you noticed about the slides and the video? 

Have students share out.

Issues with Money (5 min)

Say: Let’s take a moment and look through issues with money throughout time. We saw the evolution of it—and with evolution comes the pressure for things to improve or be different. So if there was no need to change from bartering to using shells and other items to represent the exchange of items, it would have never happened. But there was pressure on this system because it’s really hard to trade a cow for a pillow, and you don’t need 400 pillows to equal the value of the cow. This is what I mean by pressure. 

Slide: Question
Ask: What are some issues with money that may have made money evolve or change? Any ideas? 

Have students share out.

Slide: Issues along the way
Ideas to talk through: Counterfeit bills, precious metals being mixed with lesser-quality metals, government printing fiat currency whenever they wanted, no regulations on it, wartime efforts, wire fraud, etc.

Exit Ticket (5 min) 

Pass out a sticky note to each person or create a mini-quiz in Stash101 with the task below. 

Slide: Exit Ticket
Say:  In one or two sentences, sum up the evolution of money with a focus on the “big picture.” 

(Answers will vary, but this is one possible response: People traded items for goods or services in a system called bartering. Then they moved to exchanging shells for items, followed by things including precious metals and coins, paper money, digital money, and now a network of money, known as cryptocurrency.)