Status: 04.07.2021 3:08 p.m.
The issuer of Europe’s first official banknotes ended up in prison. Today the question arises whether cryptocurrencies threaten the state currency monopoly. Who determines what money is?
“There was an almost Babylonian currency confusion in the Middle Ages,” says Bundesbank board member Johannes Beermann. “Given the large number of aristocratic, urban or clerical minters, there were a correspondingly large number of different types of coins in circulation.” The reverse or head sides of the coins were meaningless to the people at the time. They only showed the face of the respective sovereign. Much more important was the front, which showed the value of the coin.
When paying, such as at the counter in a pub, it was common to “hit” coins on the head to see what number is on the coin. This allowed business to be carried out properly. The phrase has survived to this day – and so do many old coins.
Coins have been accepted as a means of payment for thousands of years.
Image: dpa
The inventor of the banknote ends up in jail
In 1661, the Swedish private banker Johan Palmstruch acquired the royal privilege to print banknotes. These were known as loan notes. Up to this point in time, people in Sweden, as in the rest of Europe, paid with unwieldy copper coins. The purchase of a credit slip included the promise to exchange it for copper coins at any time.
“The credit slips were not fully covered, and when the price of copper rose sharply, the Palmstruch Bank got into trouble,” says Beermann. There was inflation. Banker Palmstruch was sentenced to death, but later pardoned and the death sentence commuted to prison. Despite the temporary loss of confidence in the state moneymakers, the triumphant advance of paper currency could no longer be stopped.
If the state fails, sweets end up in the wallet
The current exhibition at the Frankfurt Money Museum shows how people resort to emergency money or substitute currencies in the event of the failure of the state. In Argentina, the value of the national currency is currently falling rapidly. Ten years ago you got around six pesos for one euro. In 2020 it was already 76 pesos, and today it is already 116 pesos.
The smallest unit of the national currency, the centavos, has almost completely disappeared, and peso coins are also becoming increasingly rare. Many business owners therefore forego change and pay out differences in peppermints.
Money changes, but cash remains true
“The shape of money doesn’t change overnight,” says Beermann, “but it does change over the centuries.” Life is currently becoming increasingly digital – a development that does not stop at the monetary system. New digital forms of money, the so-called crypto tokens, have already emerged. This money is also created internationally by private individuals and companies.
So the question arises: will money still be physical in the future? “Crypto tokens are not a currency, i.e. money in the classic sense, so they are not to be seen as an alternative to state money,” said Beermann. “Consumers in Germany value physical central bank money because it offers the greatest possible feeling of security.”
Special exhibition opened
The special exhibition “Money makers – who determines what money is?” was conceived by the Money Museum together with the Numismatic Collection of the Deutsche Bundesbank. The collection, with its substantial holdings of more than 90,000 coins and around 260,000 banknotes from all over the world, is one of the most important of its kind and can be seen in the Deutsche Bundesbank’s Money Museum in Frankfurt am Main until the end of May 2022.