Fate of Paper Money
"Paper money eventually returns to its intrinsic value - zero." (Voltaire, 1694-1778)
The first well-known widespread use of paper money was in China during the Tang (618-907 A.D.) dynasty around 800 A.D. Paper money spread to the city of Tabriz, Persia in 1294 and to parts of India and Japan between 1319 to 1331. However, its use was very short-lived in these regions. In Persia, the merchants refused to recognize the new money, thus bringing trade to a standstill. By 1455, after over 600 years, the Chinese abandoned paper money due to numerous problems of over issuance and hyperinflation.
Figure 1. This Kuan note is the oldest known banknote in the world. It was made in China circa 1380.
Paper money did not arrive in Europe till 1633 with the earliest known English goldsmith certificates being used not only as receipts for reclaiming deposits but also as evidence of ability to pay.
In 1656, the Bank of Sweden is founded with a charter that authorizes it to accept deposits, grant loans and mortgages, and issue bills of credit.
By 1660, the English Goldsmiths' receipts became a convenient alternative to handling coins or bullion. The realisation by goldsmiths that borrowers would find them just as convenient as depositors marks the start of the use of banknotes in England.
In 1661, the Bank of Sweden becomes first chartered bank in Europe to issues notes known as the paper daler.
Figure 2. A 50-Daler note from the Bank of Sweden issued in 1666.
At present there are 177 currencies being used in the world. Below is a list containing all currencies currently in circulation. Not all currencies are widely used and accepted, such as the various banknotes of the pound sterling.
The median age for a live currency is 37 years and at least one, the Zimbabwe dollar, is in the throes of hyperinflation.
Excluding the early paper currencies of China up until the 15th century and the majority of paper currencies that existed in China until 1935, there are 609 currencies no longer in circulation. Of these, at least 153 were destroyed as a result of hyperinflation caused by over-issuance. The remainder were revalued, destroyed by military occupation/liberation, renamed for political reasons, or were converted to another currency. The median age for these currencies is only seventeen years.
The status of the 786 paper currencies listed in this article is shown below.