Mesopotamian Clay Tablets: The First Telling Witnesses of Finance
Numerous clay tablets have been found from the areas that used to be ancient Mesopotamia. Most depict writing in cuneiform and take the form of laws or claims. Some, however, say things like “this or that much barley is to be paid to the person presenting this tablet” or “this or that much silver is to be paid to the person presenting this tablet”. In essence, we’re dealing with money.
There’s also reason to believe that a system of loans based on complex compound interest was used in Mesopotamia under the rule of king Hammurabi. This is revealed by math problems from the time that include a reference to compound interest. The logic behind the calculation of interest most likely originated from the natural growth of a herd. This, however, began when people settled the area within the Tigris-Euphrates river system that would become Mesopotamia and tried their hand at irrigation agriculture and herding. The credit system was based on the good faith that the debtor would settle the debt. The common term “credit” originates from the Latin word “credo”, which means “I believe”.
There’s no doubt that Hammurabi was not only a great military leader but also an excellent economist. When he became the ruler of Babylon after his father’s death, Babylon was merely one of several feuding city-states in Mesopotamia. His successful military campaigns and the alliances he made with other states, along with the laws he put into effect and his efforts in promoting the economy allowed Hammurabi to create an empire that ruled nearly all of Mesopotamia.
The term “shekel” also appears on Hammurabi’s tablets and referred to a unit of measure that equaled 180 nice looking grains. This was a sort of commodity money that allowed expressing and comparing the prices of different items and services.
Gold and other precious metals were also used as commodity money at the time (as indicated on a clay tablet). However, life forced people to come up with something more innovative than mere chunks of metal and this is how coins came to be.
Coins: The Synonym of Money and Wealth
The fact that coins made of precious metals became the synonym of money the world over was somewhat of a coincidence but also not entirely. Money needed (and continues) to be a method of exchange that made concluding transactions more effective and convenient. Money was also something to be collected and, thus, had to withstand the effects of time. This made precious metals the perfect material for money. Rocks and the desert sand were quickly chucked as an option – “money can’t just lie around on the streets” they used to say; plus there couldn’t be too much of it. The role of money could only be served by something that most, if not all, coveted. Furthermore, it had to be obvious to everybody that the method of payment was truly valuable.
Precious metals and their alloys were already in use before the era of coins. However, this brought about a problem – the value of the alloys differed and villains made quick use of this fact. Since people couldn’t tell the difference between the alloys, they were often easy to deceive.
Of course, the adoption of coins did not bring an end to counterfeiting, but coins were much more resistant to being counterfeited than chunks of metal. Once the state monopolized the minting of coins, harsh punishments awaited counterfeiters.
The oldest coins originate from the temple of Artemis at Ephesus in former Lydia. The area is situated near Izmir in modern Turkey. Sadly not much more than a few columns and bits of stone on a field remain of the temple.
Lydia was known for its wealthy king Croesus (from 595 to 546 BC). He was the one to order the minting of the gold and silver alloy coins that would become the forbearers of the famous coins of Athens. Croesus, along with the majority of the rulers to come after him, forced those in their territory to use the coins as the official means of payment.
However, the coin did not become a method of payment overnight – for a long time it merely served as something to compare the value of various goods to. Silver rarely changed hands and most payments were made in agricultural produce.
The spread of coins is primarily associated with powerful leaders, who would monopolize the minting of coins to reinforce their power and income. Julius Caesar (the dictator of the Rome, 100–44 BC) took things a step further. He created the precedent that would be followed by all leaders to come – he was the first to issue coins depicting his own face. It was the best PR trick of the time because the coins spread across the country and further, telling tales of great leaders and their accomplishments.
As such, coins served another purpose – they were the medium that spread (relatively) quickly over vast distances. As with every product, coins too evolved over time. For example, grooves were pressed onto the edges of coins to deter greedy merchants who attempted to file gold or silver off the edges of coins.
However, the age of coins was not even close to unproblematic for Europe. Around 800 AD, when Charles the Great, who believed himself to be the descendant of the Romans, became emperor, the caliphate area south of the Mediterranean that included several major cities (Jerusalem, Alexandria, Heliopolis, Gaza, Cairo, etc.) became an active economic region and the silver from Europe flowed to these cities.
Europe faced a difficult decision – to (re)adopt squirrel hides instead of silver coins, to attempt to export goods to the caliphate or to bring the silver and gold back with the sword. Naturally, spreading Christianity was an important task, but bringing back the precious metals was no less crucial. It makes sense that the combination of the sword and the good word brings better results than the good word alone.
Fighting each other and the caliphate was not cheap for European countries. As such, it was a true blessing for Europe when Incan gold was discovered in Peru in the 1500s.
It’s somewhat of a paradox that the Incas that had vast amounts of gold and silver didn’t use the metals as money but rather attributed an aesthetic value to them. Gold was dubbed the “sweat of the sun” and silver the “tears of the moon”. The state had central planning and a labor obligation.
All this was brought to ashes by Francisco Pizarro in only a couple of years in the 1530s. The Spanish used whatever means necessary to find out where the Incan silver and gold mines were located. However, when vast quantities of silver were discovered in Cerro Rico, i.e. the “rich mountain”, the economic history of the world was forever changed. Granted, the Incas did help this process along – with two brothers waging a civil war, it was easy for the Spaniards to lure one of them to join forces with the conquistadors.
Once the Incan Empire had fallen, tens and tens of tonnes of pure silver were hauled to Spain across the ocean. The coins minted from the silver jumpstarted the European economy and the Spanish silver coin became the first truly global currency that spread far further than the ancient coins of Athens. The wars in Europe continued in full force – now there was something to fight over.
Sadly, Spanish kings had not read our contemporary theories of finance. Spain mined so much silver to fund its wars that the value of silver plummeted compared to that of other goods. It became apparent that, paradoxically, a constant influx of precious metals does not make a country wealthier. The Spanish saying, “If money grows on trees, it is no more valuable than leaves” originates from this time in history.
