Definition of paper money

The term "paper money" refers to currency that is not made of metallic or precious materials, but rather made of paper. The origin of this phrase can be traced back to the early 1700s, when governments and banks began using paper to issue coins and notes. Paper money was first used in China during the Song dynasty (960-1279 CE). These notes were made of rice paper and served as a substitute for copper coins, which were in short supply at the time. However, the use of paper money declined after the Mongol conquest of China in the 13th century. In Europe, the idea of using paper as currency gained popularity during the 17th and 18th centuries. In England, for example, the government issued banknotes in the late 1600s as a way to provide liquidity during times of economic crisis. These notes were initially called "exchequer bills," named after the government's accounting office. The term "paper money" first appeared in print in 1745, in a publication by the English economist Sir James Steuart. Steuart used the phrase to describe the notes issued by the Scottish banks, which were made of paper rather than metal. In the United States, the use of paper money dates back to the colonial era, when countries like Massachusetts and Connecticut issued their own notes to pay for government expenses. However, the value of these notes fluctuated wildly, leading to inflation and depreciation. It wasn't until the introduction of the Federal Reserve in 1913 that a centralized system for banknotes was established in the US. Today, the term "paper money" is still used to describe banknotes and other forms of paper currency, although many central banks are phasing out paper notes in favor of digital alternatives. Nonetheless, the phrase remains a vivid reminder of the humble origins of modern cash.