Evolution of money…from playing cards to e-currency

Superb speech from Carolyn Wilkins of Bank of Canada.

In particular she points to this picture placed in one of BoC  halls which shows evolution of money.

When you look at history, money and payment systems reflect the societies they serve – and like societies, they have been transformed by technology. The image you see above, is a painting by Canadian artist Blair Ferguson. It hangs in one of the Bank of Canada’s meeting rooms. The reason I’m showing it to you is because it illustrates how money has changed throughout history. At one time, playing cards served as money, as well as cowrie shells, cocoa beans, gold and, eventually, bank notes and coins.

None of these objects, except for the gold and cocoa beans, has any meaningful inherent value. They are money because people accept them as money. For this to happen, money must do three things.

First, money must serve as a medium of exchange: you pay tuition; you receive an education in exchange. The alternative is bartering, but that is complicated and inefficient.

Second, money must serve as a store of value. When you work during the summer you need to be confident that every dollar you earn is still going to be worth a dollar when it comes time to pay your tuition.

Finally, money must serve as a unit of account, which you need in order to compare prices – like comparing the value of the new BlackBerry with other mobile devices on the market.

The form of money we know best is bank notes. They were issued primarily by commercial banks in Canada and the United States before those countries created central banks in the early 20^th century. These privately-issued bank notes ultimately failed to provide what the economy needed and so central banks were given this responsibility. The Bank of Canada has been issuing bank notes since 1935.1 The cash you have in your wallets perfectly meets the three criteria of money. It is accepted almost everywhere, there’s very little counterfeiting, and the issuer – the central bank – won’t go bankrupt.

She goes on to discuss e-money and how BoC is looking at developments in this space..