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Banknotes were invented by which ancient civilization?

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Paper money, also known as banknotes, was invented by the Song Dynasty in China during the 11th century CEThis remarkable development occurred nearly 20 centuries after the earliest known use of metal coins1. The introduction of paper money revolutionized economic transactions and facilitated trade and commerce.

Here’s a brief overview of the history of money and the invention of paper currency:

  1. Ancient Origins of Money:
    • Money was invented before written history began, making it challenging to pinpoint its exact origin.
    • Evidence suggests that various items were used as a medium of exchange in ancient markets. These included not only practical goods like livestock and grain but also attractive items like cowrie shells and beads.
    • The complexities of ancient history, varying development rates among civilizations, and the lack of accurate records make it difficult to trace the true origin of money.
    • Ancient economic systems had two main forms of money: money of account (recorded on ledgers) and money of exchange (tangible media made from clay, leather, paper, bamboo, or metal).
    • The tally stick, dating back to the Aurignacian period (about 30,000 years ago), was an early form of money of account.
    • The Ishango Bone, discovered near the Nile in the Democratic Republic of the Congo, used tally marks for correspondence counting.
    • Accounting records from ancient Mesopotamia (more than 7,000 years ago) pre-date the use of coinage and demonstrate the existence of money of account2.
Banknote
Banknote
  1. Paper Money in China:
    • During the Song Dynasty (11th century), China introduced paper money as a means of exchange.
    • The development of banknotes began earlier, in the 7th century, with local issues of paper currency.
    • The Chinese used clay tokens and other materials as evidence of claims upon goods stored in warehouses.
    • The transformation from the unquantifiable obligation of “I owe you one” to the quantifiable notion of “I owe you one unit of something” played a crucial role in the emergence of money as a unit of account.
    • Representative money (evidence of claims) pre-dated coinage in ancient empires like Egypt, Babylon, India, and China12.
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The concept of banknotes was first introduced by the Chinese during the Tang Dynasty in the 7th century.
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