Kids Corner

Bartering

Barter only works as long as the things people are trading are worth approximately the same, and as long as two people want the things each other have. Thousands of years ago, when most people were hunters or farmers, bartering worked pretty well. A sheep farmer could trade wool for vegetables, or a hunter could trade meat for bread. As lives became more complicated, bartering did too. A farmer might give vegetables to the pot-maker, who would give pots to a hunter, who gave meat to the farmer. Confusing, isn’t it? They needed a better way to do business.
Have you ever traded the bananas from your lunch for somebody else’s cookie? Trading like this is called barter, and it is probably the oldest way of buying and selling.

Currency

Almost every society eventually created its own form of currency. Currency is anything that people agree to take in exchange for goods, like food, or services. Throughout history, people have used many different things as currency: seashells, cows, animal teeth, even salt.

People have chosen their currency because it’s useful, like grains or spices; or because it’s pretty, like seashells or jewels; or because it is hard to get, like sharks’ teeth.

To do business with each other, communities had to decide how much their currency was worth compared to someone else’s currency. When settlers first came to Massachusetts, the native Americans used a currency called wampum, made of seashells strung together. Dutch settlers bought the island of Manhattan from native Americans for strings of wampum that were worth about sixteen dollars in Dutch money.

Metal Money

People around the world used many different things for currency, but eventually metal coins became the most popular form of money in most of Europe and Asia.
People used gold, silver and copper as money because it was pretty, and useful, and hard to get. The first metal money was in lumps and bars, and how much it was worth depended on how much it weighed. This wasn’t very convenient, because if someone only wanted to spend part of their money, they had to melt down the metal to divide it up.

Eventually, people figured out that they could make metal into pieces of equal size and weight. They stamped the weight on the piece of metal, along with some design that proved it was real, like a picture of the king. These were the first coins.

The problem with using metal as money is that it’s very heavy, and hard to carry around. People needed an easier way to make big payments, so they invented paper money.

Paper Money

The Chinese were probably the first to invent paper money as we know it. Around 86 BC, Emperor Wu declared that squares of white deerskin, decorated with the designs of a plant, would each be worth 400,000 copper coins.

In Europe, people wanted safe places to keep their coins, so that they would not have to carry them around everywhere. People left their money with goldsmiths, who gave them pieces of paper to show how much gold they had in safekeeping. Eventually, these goldsmiths became bankers, and the pieces of paper became “bank notes.” People could trade these bank notes for metal coins.

Do you have a dollar bill? Look at the words at the top: “Federal Reserve Note.” Our paper money is still a kind of bank note, and you can still trade it for metal coins. See the line that says “This note is legal tender for all debts, public and private”? This means that our government says you can use this piece of paper to pay for anything, and it will always be worth one dollar.