Did you know? - Financial History - by Peter Gach

Do you know......how money, the idea of banking really started. In our recent situation of our economy and its relations with the banking industry, it was interesting to read about money and interest history. So here is a little bit of it. Money is old, been around, in some sort or another, for about 10,000 years. The first form of currency exchange was actually a bartering system, sort of like " I'll trade you two chickens for a haircut (can you imagine what kind of haircuts they gave, with what kind of tool!). That lasted a period of time until a trade wasn't fair or equal anymore. That is when the history of a "loan" started. Around 3100 B.C., the Sumerians, which is now the area of Iraq, were the first to use writing of numbers and letters as a method of recordingwho owed what to whom. Before the use of letters and number, tokens were used. These worked OK in very small villages but the Sumerians organized the worlds first big cities, they reverted to written record keeping. Lenders couldn't afford to trust using a stranger's future goodwill........hmmmm, sounds familiar doesn't it......too bad for many people, the lenders didn't exercise such care as they did back then! Interestingly, the Sumerians also were the first to charge "interest". Back then, most likely someone's portfolio consisted of cattle, sheep, chickens, etc.......so using cattle as an example, the word for "interest" back then was the word "mash", which was also the word they used then for a baby cow. So when borrower received a herd of cattle, their interest was pad back in "mash", baby cows. So the lender received their original herd back with some additional "mash" included and the borrower made a little for themselves by keeping some of the baby cows and started their own wealth. This was one of the early examples of how wealth reated more wealth...........in theory, you could just loan out your heard and get bigger heard returned to you. Hmmmmmm.........sounds like interest, doesn't it. More to follow next time, when private banking started, when the first time "percentages" were used in interest terms.