The history of money

Historically, the first kind of money people used was commodity money. Various objects of quite different value were used as barter to obtain other goods. People used animals, food and goods as a payment. That was called bartering, which exactly describes a direct trade of goods and services. This system of trading spread across the world, and it still survives today in some parts of the globe.

The first coins – nothing but simple metal pieces – appeared in the 7th century. The first gold, silver and bronze coins were minted in the region of present-day Turkey about 2,700 years ago. At the time, the value of the coins was equal to the material used to make them.

Then in 600 B.C. the first official currency was minted. The coins were made from electrum, a mixture of silver and gold that occurs naturally, and the coins were stamped with pictures that acted as denominations.

Paper money consists of banknotes, with the value of each note printed on it. It was first invented in China, where it made its appearance about 1,000 years ago. Marco Polo became familiar with the fascinating world of paper money when he visited China in 1200 AD. Banks started using paper banknotes for depositors and borrowers to carry around in place of metal coins.

In those early days, a number of banks printed and issued banknotes. To guarantee the value of the banknotes, the issuing bank had to keep gold reserves of equal value in its vaults. Today, that is no longer the case. Only central banks are allowed to print and issue money now.

Today both banknotes and coins continue to change and develop. Even though there are plenty of new ways of paying, for instance with credit cards and electronic transactions, cash is still an important payment form.


Amelie Hoser

Does the corona crisis result in inflation or in deflation?


What do these terms mean?

Inflation refers to a general rise in the level of prices of most goods and services of daily or common use, such as food, clothing, housing, recreation, transport, consumer staples, etc. Inflation measures the average price change in a basket of commodities and services over time. Inflation is indicative of the decrease in the purchasing power of a unit of a country’s currency. This is measured in percentage.
 Its opposite is deflation, a general fall in the price level. A reduction in money supply or credit availability is the reason for deflation in most cases. Reduced investment spending by government or individuals may also lead to this situation.
The consequences:
The purchasing power of a currency unit decreases as the commodities and services get dearer. This also impacts the cost of living in a country. When inflation is high, the cost of living gets higher as well, which ultimately leads to a deceleration in economic growth. A certain level of inflation is required in the economy to ensure that expenditure is promoted and hoarding money through savings is demotivated.
Deflation leads to a problem of increased unemployment due to slack in demand. As prices continue to fall, demand also falls because people stop spending money. The result is a crippled economy.
Financial crisis in the 20th century
 The Corona crisis is not the first financial crisis that mankind has had to go through. Already in 1930 there was the first big one. Here, the right reaction was not taken. Prices became cheaper and cheaper and the unemployment rate increased. The income of the companies became less and less. All this resulted in a crippled economy.
 We seem to be coping better with the current crisis. But..
 Is the great inflation coming?
 There is a very high probability that there will be no galloping price increases throughout Europe. For Peter Brezinschek, chief analyst at Raiffeisen Bank International (RBI), for example, there is no threat of inflation or even hyperinflation in sight: „But the times when central banks spoke of an acute risk of deflation are definitely over. The chief economist of the National Bank (OeNB) estimates the „probability that we will see inflation rates significantly above two percent in the next few years“ as „very low.“ At this point, we must note that even the EU is aiming for an annual inflation rate of around 2%.
 The state provides security through short-time work and thus demand continues to be maintained. So at the moment, we don’t have to fear either major inflation or deflation.


Kathrin Maurer

Cash less society?

What is cash?

Cash is money in physical form like banknotes and coins, which is used in transactions for the payment of goods an services.

What does a cashless future mean?
 Money is cumbersome for consumers and bank. It costs the bank 0.5% of der GDP operating in cash every year. Also the demand of cashless payment is rising more and more. Especially the younger generations are searching for easier, cashless ways to pay.
 Digital payment is efficient but its important to know that every single detail is recorded, which is not always that good. People get controlled, their intersests get saved also their political opinion and companies use all this data for their own benefit.
 What are the negative effects of cashless payment?
 The government and private companies might use data of consumers in ways they do not like it. Also cyber-attacks are a big problem. Capital One bank was hacked in March 2019. The hacker was able to get the personal details of thousands of people. In former times it was easier to stop robbers but now it is much more difficult to prevent and insure against a cyber-attack.
 Today more and more countries are moving towards a cashless society, f.e. Sweden, China
Whats important with that change?
 Its important that the change does not happen to fast. Many people need „real“ money in their hands to know how much they have, elderly people do not understand internet-banking and people living on the streets would suffer a lot of a cashless society.
 With cashless payment it will get much harder for central banks to control the amount of it. But sooner or later the society will go more and more cashless.

Marlene Rieder