Paper money first appeared in China in the 7th century. This post is from the Ming dynasty • WIKIMEDIA COMMONS Like so many other inventions, paper money finds its origin in China, where it has been used since the IX e century. Europeans discovered its existence three centuries later, thanks to the chronicles of Marco Polo, but the Old Continent did not adopt this system until 1661, when the banker Johan Palmstrucch decided to give a written receipt to people depositing gold or any other precious metal in Stockholm Banco, the bank he founded. Banking panic Although he was born in Riga, Latvia, Palmstrucch knows all the secrets of the Dutch banking system, since he belongs to a family of Flemish merchants who settled in the Latvian city. Determined to exploit his knowledge, he traveled to Sweden, where King Charles X Gustave granted him the privilege of founding the Stockholm Banco in 1656. In 1661, when he realized that the daler, the Swedish currency indexed to the copper standard, was very fluctuating and impractical because of its weight, he decided to introduce the kreditivsedlar , paper credit notes convertible into gold or silver currency. At first, Stockholm Banco's business prospered. But fluctuations in the price of copper, which is more unstable than that of gold, lead to the devaluation of the daler. The bank panic wins the inhabitants of the city, who come to withdraw their copper plates guaranteeing the value of their money. But the bank, which used much of the metal it had in its deposits for loans, cannot meet all the demands. Credits without guarantee Palmstruch then decided to separate the daler from the copper. But success is fleeting. The granting of credits exceeding the assets of the bank and the printing of notes without guarantee caused an economic recession and the bankruptcy of the Stockholm Banco in 1667. Palmstruch was imprisoned until 1670. He died a year later, with the prohibition to engage in banking activities, but recognized as the inventor of paper money in the West. In 1715, the British John Law followed the path traced by Palmstruch by offering his services as an economist to the Duke of Orléans, regent during the minority of Louis XV. The shortage of precious metals in France led to the decline of trade and the stagnation of the economy. Law proposes to found a bank administering the royal finances by replacing gold with notes of credit to increase the monetary circulation. The new entity, the General Bank, was born a year later and in 1718 became the Royal Bank, guaranteed by the king and under the control of Law himself. Law's system was borrowed by other European countries, such as the United Kingdom, which put the first banknotes into circulation. in 1718. However, speculation and rumor seized the cogs:the system collapsed in the fall of 1721, after a Parisian riot, ruining many shareholders. Timeline 812 The use of paper money, which appeared in the 7th century century, is formalized in China.1661 Johan Palmstruch, owner of the Stockholm Banco, issues the first credit notes.1715 In France, John Law sets up a system increasing the circulation of money.1718 Based on Law's system, the United Kingdom puts banknotes into circulation .1780 Paper money arrives in Spain, where its use is rapidly becoming popular.
