Islamic Golden Age At around the same time in the
medieval Islamic world, a vigorous
monetary economy was created during the 7th–12th centuries on the basis of the expanding levels of circulation of a stable high-value currency (the
dinar). Innovations introduced by Muslim economists, traders and merchants include the earliest uses of
credit,
cheques,
promissory notes,
savings accounts,
transactional accounts,
loaning,
trusts,
exchange rates, the transfer of credit and
debt, and
banking institutions for loans and
deposits. The history of the rupee traces back to
Ancient India circa 3rd century BC. Ancient India was one of the earliest issuers of coins in the world, along with the Lydian
staters, several other Middle Eastern coinages and the
Chinese wen. The term is from
rūpya, a Sanskrit term for
silver coin, from Sanskrit rūpa, beautiful form. The imperial
taka was officially introduced by the monetary reforms of
Muhammad bin Tughluq, the emperor of the
Delhi Sultanate, in 1329. It was modeled as
representative money, a concept pioneered as paper money by the
Mongols in
China and
Persia. The tanka was minted in copper and brass. Its value was exchanged with gold and silver reserves in the imperial treasury. The currency was introduced due to the shortage of metals. Both the
Kabuli rupee and the
Kandahari rupee were used as currency in
Afghanistan prior to 1891, when they were standardized as the
Afghan rupee. The Afghan rupee, which was subdivided into 60 paisas, was replaced by the
Afghan afghani in 1925. Until the middle of the 20th century,
Tibet's official currency was also known as the Tibetan rupee. Serious interest in the concepts behind money occurred during the dramatic period of inflation in the late 15th to early 17th centuries known as the
Price Revolution, during which the value of gold fell precipitously, sometimes fluctuating wildly, because of the importation of gold from the New World, primarily by
Spain. At the end of this period, the first modern texts on monetary economics were beginning to appear. During the eighteenth century, the concept of
banknotes became more common in Europe.
David Hume referred to it as "this new invention of paper". In 1705,
John Law in
Scotland published
Money and Trade Considered, which examined the failure of metal-based money during the previous hundred and fifty years. He proposed replacing that system with a
land bank system of paper money based on the value of real estate. He succeeded in getting this proposal implemented. However, his bank failed due to a
bubble of speculation collapsing into extreme inflation; perhaps because he failed to take the lessons of the
Spanish Price Revolution seriously. In 1720,
Isaac Gervaise wrote
The System or Theory of the Trade of the World. He criticised
mercantilism and state-supported credit for the inflation problems of his era.
Della Moneta, was published by
Ferdinando Galiani in 1751, and is arguably the first modern text on economic theory. It was printed twenty-five years before
Adam Smith's more famous book,
The Wealth of Nations, which touched on some of the same topics.
Della Moneta covered many modern monetary concepts, including the value, origin, and regulation of money. It carefully examined the possible causes for money's value to fluctuate. The year following, 1752,
Of the Balance of Trade was published by Hume. He argued that one need not worry about the import or export of goods creating a surplus or shortage of either money or goods because an excess or shortage of money will always increase or decrease demand until equilibrium is reached. In modern economic terms, this is as
equilibration through the
price–specie flow mechanism. ==Modern Theory of money==