Money, in an economic system, anything accepted as a medium of exchange, measure of value, or means of payment. In primitive societies, barter, or direct physical exchange, was commonly used. The precise origin of money is unknown. It evolved gradually out of the needs of commerce and trade. Many objects have at one time or another been used as money: shells, nuts, wampum, beads, and stones. Gradually, metal was adopted because of its easy handling, durability, divisibility, and—especially with gold or silver—for its own value. The oldest coinage dates back to 700 B.C., when coins of gold and silver alloys were made in Lydia (Asia Minor). Paper money was known in China as early as the 7th century A.D., but it did not develop in Europe until the 17th century. The stability and value of paper currency is usually guaranteed by governments or banks (those invested with legal authority to issue currency) with some bullion holdings.
The monetary system of the United States during most of the 19th century was based on bimetallism, which meant that both gold and silver were legal money. With the passing of the Gold Standard Act of 1900, the dollar was defined only in terms of gold. The Gold Reserve Act of 1934 reduced this dependence on gold, and in 1971 the nation went off the gold standard altogether. The nation's money supply is controlled by the Federal Reserve System, a central banking system created in 1913. Most currency in circulation today consists of Federal Reserve notes.