Money Fun Facts

Case study: cigarettes as money

The main problem in a barter economy is the need for the double coincidence of wants. I have got cheese and I want chocolate. That means I have to find a trading partner who has chocolate and wants cheese and you can spend a lot of time looking. In order to reduce the search costs, people eventually begin to accept an exchange of almost any good that is portable, durable, divisible, standardizable, and in broad enough demand that people know that they can rid of it anytime they want to trade for something else.

That is, what I’ll do is, I’ll trade my cheese for salt because chances are I’ll eventually find somebody who has chocolate and is willing to accept salt in exchange because he knows he can turn around and trade that salt for what he wants very shortly. This is how commodity money is brought into being. People begin to use some commodity as a medium of exchange in order to reduce search costs and eventually some commodity begins to circulate that is convenient to use and has all the good properties of money.

That brings up the question, “What can you do with your cigarettes after you quit smoking?” Well, if you are in a German prisoner of war camp during World War II, you might have used cigarettes for money. Cigarettes began to circulate as money, quite naturally, in order to solve the problem of double coincidence of wants. The Red Cross brought care packages into the prisoner of war camps and gave prisoners little packages that contained chocolate, cheese, other goods, and cigarettes. If you did not want cigarettes, and you did not want chocolate, you could make a trade. If you had cheese and wanted chocolate, you could trade your cheese for cigarettes, knowing that eventually you would be able to trade the cigarettes for chocolate when you found the right trading partner.

Cigarettes began to circulate as money, the medium of exchange; They also began to fulfill the other roles that money plays, a unit of account.

That is, prices began to be quoted in cigarettes. It cost 80 cigarettes to buy a shirt or 2 cigarettes to get a shirt laundered. Also, cigarettes began to be used as a store of value. People would hoard cigarettes as a kind of savings and spend them whenever they needed to buy something. So cigarettes were a kind of commodity money, circulating, being saved, and being used as a unit of account.

The money lesson extracted from the experience of German POW camps is, first of all, they were not unique by any means. There're prisons in the United States in which cigarettes circulate as money all the time because there're no dollar bills available there. To solve the double coincidence of wants, prisoners use cigarettes as money. Even people who do not smoke cigarettes will accept cigarettes in exchange because they know they can spend them whenever they want something. Also, cigarettes circulated in the countries of the former Soviet Union after the collapse of the ruble in the early 1990’s because the government was printing so much money and sparking inflation. People were afraid to hold rubles and therefore an underground economy developed in which cigarettes were the commodity money and began to use as a unit of account, a store of value, and a medium of exchange.

Anytime people find that commodities serve them better as money than the actual paper money of the government, they will shift and use commodities instead. This raises the prospect we could decide to use commodity money instead of the legal tenders. That could happen any time. The only reason we are so committed to legal tenders is they are very convenient to use because everyone will accept them everywhere.

The reason that is true is they are legal tender and regulated by the government. The government says that any contract you settle with dollars is settled and therefore, you cannot be sued for breach for non-payment. The second thing is, the governments accept payment of taxes only in dollars, so you have to have dollars to pay your taxes and that creates a demand for that paper money. However, if you and I are doing business among each other, we might settle our account in any way that is convenient for us to do so. And it explains more of the use cases of different forms of money throughout the civilization.

Early Romans used salt as a form of money

With refrigeration technology a few centuries away, Romans used salt to preserve food, specifically fresh meat. Like today, their form of currency gave them access to eating.

Even the word “salary” is derived from “sal,” which means “salt” in Latin.

The Romans were the first to stamp the image of a person on a coin

After winning in war, Roman emperor Julius Caesar featured his portrait on a coin in 44 B.C. for circulation. At the time, it was an unacceptable act of political arrogance in Rome.

Siberia valued tea bricks as money until WW2

Tea was the main currency in Siberia. Multipurpose, people would eat tea bricks during times of hunger and brew them into warm medicine which can cure coughs and colds.

Queen Elizabeth II holds the record for appearing on more currency than any other person

She’s featured in 15 banknotes since her childhood. As young as eight years old, she was featured on Canada’s $20 bill. Now at 93 years old, Queen Elizabeth II is the longest-lived and second longest-reigning in the British monarchy.

Paper money was first used in China over 1,000 years ago

Jiaozi (Chinese: 交子) was a form of promissory note which appeared around the 11th century in the Sichuan capital of Chengdu, China. Numismatists regard it as the first paper money in history, a development of the Chinese Song Dynasty (960–1279 CE).

The original value of a British pound was equal to a pound (in weight) of silver

The pound was a unit of currency as early as 775AD in Anglo-Saxon England, equivalent to 1 pound weight of silver. This was a vast fortune in the 8th century. Athelstan, the first King of England adopted sterling as the first national currency. He set up mints around the country to supply the growing nation.

Coins are pickled during minting

Pickling is a common technique in the kitchen, but the US Mint uses it during the production of quarters, dimes and nickels, too. But rather than pickling coins in vinegar, blank coins are soaked in a chemical solution that cleans and polishes their surfaces. This process ensures the coins’ images, lettering and other details remain clear, sharp and easy to read during the pressing process.

Many currencies use the dollar sign $ as a symbol

The dollar sign ($) is the symbol found on the same key as the number four (4) key on United States Qwerty keyboard. The dollar sign is most often used to represent a country's currency value, e.g., $10.00 for ten dollars.