My Science School

        Have you ever heard of the concept of ‘happy countries’ in the world? For those who haven’t, here is it- as per the World Happiness Index, people in some countries are relatively happier and safer compared to others.

       Switzerland is one country that has always been at the top of the list of happiness. It is also believed to be among the most ‘stable’ nations in the world, in terms of politics economy.

       Its currency, the Swiss franc is considered the safest investment by investors across the world, due to the stability of its government and financial system. It is the Swiss National Bank that issues banknotes and coins in the country since 1907. Before that, there were many independent bodies producing coins locally. Today, the Swiss franc is used as a reserve currency in many countries.

 

 

 

      The official currency of the People’s Republic of China is the ‘Renminbi’. Literally, it means people’s currency.

      Renminbi was introduced by the communist government in 1949.

      It is also known as ‘yuan’, although yuan is a unit of the currency. Jiao and fen are the other units. However, the term ‘yuan’ was used long before the introduction of Renminbi, to refer to silver coins used by foreign merchants.

      The importance of the Renminbi is restricted not to just the mainland of China, but to places like Hong Kong and Macau too, where they are accepted.

          China did not have much exposure to the international markets before 2009. Later, the restrictions were removed and now, the country has business links with countries including Russia, Japan, Sri Lanka etc. in the international trade market, the Renminbi is the fifth most widely traded currency in the world.

 

        The pound sterling or pound, as it is popularly known, is the official currency of the United Kingdom. It is credited to be the oldest currency in the world that has never gone out of circulation since its introduction.

         The currency was first produced sometime in the latter half of the 8th century, during the rule of King Offa of Mercia. It then quickly spread throughout the Anglo Saxon kingdom.

          During the days of colonialism, the pound was circulated in most parts of the British Empire. Even after the British left, some of the freed colonies and dominions like Barbados continued to use pound as their legal tender.

          When it was a member of the European Union, the UK could have switched the currency to the euro, but the country refused. It is the Bank of England, the central bank that has been managing the issuance of the pound since 1694.

         Presently, the pound sterling is considered the fourth most traded currency in the world, standing behind the US dollar, euro, and the Japanese yen. 

         The official currency of Japan, the yen plays a major role in the world economy. It is also the third most traded currency in the global market, standing right behind the US dollar and the euro.

          It was on June 27th, 1871 that the yen became the country’s currency, as part of the developmental process initiated during the Meiji period. This marked the beginning of Japan’s modernization and entry to the global space. The move also made sure that the yen was the single currency used throughout the country.

          The issuance of the yen banknotes began in 1872, a year after the currency was introduced. The Bank of Japan, founded in 1882, has been managing the production and circulation of the yen ever since.

          Today, the country is powerful economically. The trade flow between Japan and other Asian countries is so strong, that any disturbance of the Japanese economy is believed to affect other countries too.

 

          Another currency as important as the dollar, and used by millions of people across a continent is the Euro, the official currency of the European Union.

          It is a union of 28 member countries in Europe. Out of these 28, 19 countries have the euro as their legal tender, making it one of the most widely used currencies in the world.

          To its credit, the euro is also the second largest reserve currency globally-the first being the US dollar. The euro was introduced to the world market on January 1, 1999. The currency however entered circulation only three years later.

          Managed by the Frankfurt-based European Central Bank, the euro is circulated in countries including Italy, France, Ireland, Germany, Luxembourg, Belgium, Austria, Netherlands, Spain, Portugal etc.

          However, few members of the European Union still stick to their previous currencies.

 

      The dollar is something we are all familiar with, although the currency is not circulated for common use in our country. It is perhaps the US dollar that we have most heard of. But how many of us are aware of the fact that the currency is used in over twenty countries in the world?

      Well, the countries include Canada, Hong Kong, Namibia, New Zealand, Ecuador, Singapore, Taiwan, Zimbabwe, Jamaica, Fiji etc., but their values and histories differ from country to country.

       It was in 1792 that the US accepted the dollar as its legal tender. The term ‘dollar’ has been derived from ‘thaler’, a silver coin used throughout the European continent for centuries.

        Today, the dollar is one of the most important global currencies for its trade value and wide range of circulation. Do you know that it is the US dollar that acts as the unofficial global reserve currency in nearly every central bank? Well, it is! 

We know for a fact that currencies have varied from country to country since the very beginning of history. The coins developed in Lydia were vastly different from those in Rome or China. The value of currencies too changes accordingly, since they are set by the respective governments or rulers. In other words, currencies and their values are mostly country-specific.

         Today, every country mints or prints its own currencies under the authority of its government, or a central bank. In the case of our country, Reserve Bank of India or RBI produces our currencies, except one-rupee note, which is issued by the Ministry of Finance.

         In Bangladesh, the currency is Bangladeshi Taka, and in Pakistan, Pakistani Rupee. A few others are Canadian dollar, Chinese Renminbi, Bahraini Dinar, UAE Dirham, Omani Rial, Swedish Krona, Swiss Franc etc.

         Some others - US dollar, euro and yen are important currencies globally, in terms of trade and business.

         However, the currency’s value of no two countries will be the same.

 

         Not just cotton paper, but a wide range of materials have been used to produce bank notes, ever since they were introduced. This included materials like silk and khaki, skin of animals, wood etc.

          Notably, there were bank-notes embedded with silk threads produced in the US in 1844 and those printed on pure silk paper from German towns in 1923. In Germany, they were produced during the time of financial crisis as reserve.

          Besides silk, there were also notes made in leather, velvet, linen etc. A few countries have produced banknotes printed on cloth- including China and East Turkestan. In 1902, emergency money was printed on khaki shirt fabric during the Boer War in South Africa.

          The Americans, apart from cotton, have used leather bank notes as well, in times of emergency.

           But one of the most interesting attempts took place during the Russian administration of Alaska. Quite different from other countries, they used ‘seal skin’ for printing banknotes.

           In an equally strange move, playing cards were used for currency in France in the early 19th century. In the same century, sometime in 1848, wooden checkerboard pieces were used as money in Bohemia.

 

         It is true that with the advent of paper currency, banking became easier. But as soon as these notes entered circulation, their duplicates too, started growing in number.

         Such fake currencies or counterfeit notes pose one of the biggest challenges to our financial sector. Many steps were taken to put an end to this malpractice.

          One such was initiated by countries like Costa Rica and Haiti in 1983 by introducing plastic currency notes. However, the attempt failed, and the earliest notes had a lot of problems including ink wearing off. A decade later, the idea of plastic notes came up again. This time, it was the Reserve Bank of Australia or RBA that re-launched the ‘polymer notes’ after much research.

           Introduced in 1996, the new series of polymer notes had innovative security features that resisted forgery. It was considered the most secure form of currency in the world, and thus totally replaced paper bank notes in the country.

           Not just that, the notes were credited with being environment friendly and long lasting too.

           Since this success, many countries including Canada, New Zealand, Brunei, Papua New Guinea, Singapore and Kuwait adopted the idea of polymer notes. The latest in the list are countries like the UK, Chile, and Nepal.

           In 2005, Bulgaria became the first country to produce a hybrid paper-polymer bank note. 

       We have seen that over a period of time, ancient coin currencies were replaced by paper notes, in order to make transactions easier. They are now user- friendly and lasting. But are these paper notes merely made out of just paper? Are they just like the papers we use in our classrooms? Absolutely not!

        Bank notes are quite different in terms of how they are made, and the materials used to make them. Most of them are made of ‘cotton paper’ and have a specific weight. It is said that cotton paper is stronger and more durable compared to ordinary papers made from wood pulp. This is one of the reasons why the bank notes last longer, in spite of being continuously rough-used. The notes are also infused in polyvinyl alcohol or gelatine to make them stronger. These are some of the techniques used to make bank notes in the modern era.

            But centuries ago when bank notes first appeared in China, they were printed on paper made from mulberry bark. In the case of Japanese bank notes, they used mitsumata, and other fibres to give the notes their colour and texture. 

          Although Marco Polo brought home the concept of bank notes after his journey to China, Europeans found it unbelievable. It took three more centuries for them to have a few in their pockets.

          The first bank notes were produced by a Dutch merchant named Johan Palmstruch, without whom the history of banking wouldn’t be complete. It was Palmstruch’s private bank ‘Stockholms Banco’ in Sweden that first printed bank notes in Europe. This was in the year 1661. The notes were called ‘Kreditivsedlar’ or credit papers.

          In exchange for the silver coins they used till then, the bank would give its customers credit papers of equal value. The notes soon became 'popular, as they were easy to use and transport. It is known that Palmstruch himself signed these notes.

            Although successful initially, the bank started to collapse after it failed in return, the creditors’ money due to bad management. By 1668, the bank was shut, and Palmstruch was arrested. He also lost his banking privilege. Though the banker was awarded death sentence at first, he got it reduced to life imprisonment. But he had to be in prison till 1670! A year after his release, Palmstruch died. 

        The history of paper currency dates back to the 7th century, when they were used in China.

        The idea of paper money was carried to Europe by travellers like Marco Polo. In his book, ‘The Travels of Marco Polo’, he described bank notes used in China. The term ‘bank note’ was first used in the 14th century, referring to the notes from a bank. These notes were like receipts that recognized the right of the user to collect the gold or silver that is deposited at the bank.

         The shift of bank notes as a means of payment happened in the mid 17th century.

          Although paper notes have proved to be better than coins, they too have demerits. Duplicate being produced is a major problem. Yet another one is that they are less durable compared to coins.

 

           The Chinese contribution to the making of not just paper, but that of paper money too, has been great. Bronze or copper coins with a hole in the centre, had been their currency for centuries.

           The first paper currency was developed during the Tang Dynasty in the 7th century. However, paper money became active only centuries later, during the Song Dynasty. It is believed that by 11th century AD, there was a shortage of copper which led to the production of ‘Jiaozi’ bank notes by the Songs. By the 1120s, it is known that they started producing state-issued paper money.

           Kublai Khan, one of the emperors of the Yuan Dynasty, started printing ‘chao’ paper money in his time. This trend of using paper bank notes was introduced in Europe by Venetian traveler Marco Polo in the 13th century. But the Europeans started using the notes only centuries later. It is known that in the 1800s, Napoleon Bonaparte issued bank notes through his ‘Banque De France’.

      Without a doubt, one can say that the usage of a coin system was much better than bartering. But there were as well drawbacks too, in this system, especially with the earlier coins. First of all, the coins did not always come in a uniform pattern. The value of a coin depended solely on its weight. Hence, no official standards were set regarding its value.

      Another problem was breakage. Although the coins were made of different kinds of strong metals, they would break in the course of time. This, in turn, would reduce the value of the coin.

      Counterfeiting, or production of fake currencies, was yet another major challenge. Counterfeiting was mainly done by mixing base metals with pure gold or silver.

      Apart from these, sometimes, the rulers too contributed to the debasement of coins. They would produce more coins than needed, and circulate them, which in turn, reduced the value of the coins.

 

          You might be familiar with currencies like the rupee, dollar, euro, etc. These are standardized currencies accepted in their respective countries. In earlier days too, there were such currencies, widely circulated, and used within a country or empire.

         One of the most stable currencies of ancient times was ‘solidus’ of the Byzantine empire. It was a gold coin issued by Constantine the Great. Yet another was the ‘Dinar’, known to have first issued by the Umayyad Caliphate. Today, the dinar is the main currency unit in many countries such as Iraq and Bahrain.

         The silver denarius or penny, which was considered a standard coin in the Western Europe, was introduced by the Frankish king Pepin the Short. Soon, many European countries started using the ‘penny’. The later kings established that twelve pennies were equivalent to one solidus, as well as one silver shilling.

         The Venetian ducat, first minted in 1284, and the famous ‘florino’ of Florence were the other two currencies widely accepted in their times.

         Another important currency was the ‘thaler’, the forefather of the modern day ‘dollar’.