Bank Notes

I have always been fascinated by currency, coins and notes; it is amazing how all countries are heading towards the same plastic based monetary notes which I dislike intensely as they do not fold and are not user friendly and can spring out of a trouser pocket easily. I was in China once and nobody would accept one of the plastic notes I was carrying because it had a small tear and everyone insisted that the plastic notes could not be torn which drove me insane. I have been to several note printing factories including the plastic note printing factory and the history is extremely interesting and so I thought that I would share a little knowledge with you now.
All currencies are units of exchange facilitating the transfer of goods and services; one form of money where money is anything that serves as a medium of exchange or a store and standard of value. Currency is the dominant medium of exchange, hence currency zone or region. In order to trade between currency zones there are exchange rates or prices at which currencies and the goods and services of individual currency zones are able to trade. Currencies can be classified both as floating currencies and or fixed currencies based on their respective exchange rate regime. Both coins and paper money are accepted forms of currency and not only paper notes as is often believed. In most cases every sovereign state has its own monopoly or control system in place to oversee the supply and production their own currency. An exception is the European Union Economic and Monetary Union whom have given control of monetary policy to the European Central Bank.

Where a country does not have control of its own currency the control is exercised either by a central bank or by a Ministry of Finance and in either case, the institution that has control of monetary policy is referred to as the monetary authority. Monetary authorities have varying degrees of autonomy from the governments that create them. In the United States it is the Federal Reserve System that operates without direct interference from the legislative or executive branches. It is important to note that a monetary authority is created and supported by its sponsoring government, so independence can be reduced or revoked by the legislative or executive authority that creates it. However, in practical terms, the revocation of authority is not likely. In almost all Western countries the monetary authority is largely independent from the government. All countries are linked by the Central Bank monetary system allowing countries to trade currency. Some countries will share the same currency and system of other countries such as the British pound or United States dollar.

The origin of currency is the creation of a circulating medium of exchange based on a unit of account which quickly becomes a store of value. Currency evolved from two basic innovation; the use of counters to assure that shipments arrived with the same goods that were shipped and later with the use of silver ingots to represent stored value in the form of grain. Both of these developments had occurred by 2000 BC and originally money was a form of receipting grain stored in temple granaries in ancient Egypt and Mesopotamia. This first stage of currency, where metals were used to represent stored value and symbols to represent commodities formed the basis of trade in this region for over 1500 years. However, the collapse of the Near Eastern trading system pointed to a flaw: in an era where there was no place that was safe to store value; the value of a circulating medium could only be as sound as the forces that defended that store Taxes were used to raise armies to defend these territories and were a heavy burden on the society but was the only way to insure trade could continue in a safe environment. However the late Bronze Age saw a series of international treaties established safe passage for merchants around the Eastern Mediterranean that reached from Minoan Crete and Mycenae in the North West to Elam and Bahrain in the South East. Although it is not known what functioned as a currency to facilitate these exchanges it is believed that ox hide shaped ingots of copper produced in Cyprus may have functioned as a currency.