The first banknotes or paper money
During the Song Dynasty, the shortage of metal coins and the practical difficulties in using bronze coins led to the development of « paper money ». It took on a major role in domestic transactions, gold and silver being used for international transactions. Because this paper money was not backed by a given quantity of metal, this resulted in high inflation. This invention is one of the « wonders » that Marco Polo brought back to Europe in his travel journal in the late 13th century. In Europe, the first banknotes were issued in 1661 by the Bank of Stockholm, founded by Johann Palmstruch, which went bankrupt for lack of sufficient reserves. Banknote issuance only became well-established in the 18th century in Europe.