994

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.