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Previous Money

What about paper money? 

"The first banknotes were produced in China", says John Winchcombe, Marketing Manager of De La Rue Currency, which prints banknotes for more than 150 countries. "The first recorded use of a paper banknote was in 1024."

Those early notes were a handwritten promise of payment - in effect an IOU.

The Bank of England introduced paper notes in 1694. "The economy was growing fast and there was a need to have a convenient and easy form of exchanging value and wealth," says John Winchcombe.

Across Europe, the development of paper money was closely linked to the development of the banking system. "The origin of paper money goes back to the beginning of Central Banks in the later part of the 17th Century," says Andrew Bailey. "The point of a Central Bank and the money it issues is that we guarantee it." Andrew's signature appears on all Bank of England notes - guaranteeing the money on behalf of the bank. 

"Historically, banknotes were linked directly to gold. There was something called the Gold Standard and, originally, every banknote was backed by its value in gold", says John Winchcombe. This meant that at any point, you could exchange your bank note for that amount of gold which it represented. But within a few decades, cracks appeared in this system as the world's economy developed - banks just could not hold the amounts of gold to support the value of money in circulation. "The UK left the gold standard in 1931, the US abandoned it in 1971." 

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