Money, as they say, makes the world go around. The exchange of money for goods and services is the foundation of economies. Money is defined by economists, along with its origin and value. Money is a good that is widely acknowledged as a means of economic exchange. It serves as the medium for expressing values and pricing. Different forms of money can also be seen throughout human history.
As a currency, it facilitates trade by moving anonymously from one person to another and from one nation to another. It also serves as the primary indicator of wealth. The currency also differs by nation, but some countries share currencies.
Money’s increasingly elastic nature ensured that money had taken many different forms, and today we’ll look at how it came to be what we know it as today.
In the early stages of human civilisation, money could be made out of any good that was widely desired and selected by consensus. This was called barter exchange or bartering. Goods like meat, salt, produce, weapons etc. were commonly used for bartering. However, early forms of bartering lack the transferability and divisibility that make trading effective. For instance, if someone needs bananas but has cows, they must find someone who both wants meat and has bananas.
Metal coins replaced commodities in the trade as human civilisation advanced. Metals such as gold, silver, copper, etc. were used because they were simple to handle and their quantity could be easily determined. It served as the primary payment method for most recorded history.
People in China took the next step toward modern currency just over 3000 years ago. They used miniature replicas of axes, animal pelts, and other goods as mediums of exchange instead of actual axes, pelts, or other goods. Coins were minted between 700 and 500 BCE in civilisations ranging from Greece to India to China. India and China used hole-punched coins to denote value. Coins were threaded through the string in this style for easy storage and transportation. The first stamped coins were used on the Greek island of Aegina in 700 BCE, specifically in Lydia, what is now, roughly, western Turkey. To learn more about the history of coins, we suggest you click here for more information.
It was acknowledged that transporting gold and silver coins was both inconvenient and dangerous. As a result, the invention of paper money marked a watershed moment in the evolution of money. In 600 BCE, China was again at the forefront of currency evolution. The ancient Chinese used one of their most famous inventions, paper, to create the first paper money system. Paper notes were used for 1800 years when Marco Polo visited China in 1200 CE.
Europeans used metal coins until 1600. Many European kingdoms had empires that stretched throughout the globe by this period. This resulted in tremendous wealth, but it also caused issues for currency manufacture since the expanding remote colonies were shut off from their country and the mint. Banks started issuing paper IOUs that could be swapped for currency and moved considerably more quickly.
Today, The country’s central bank regulates and controls the process of printing paper money and minting it. Currently, most money is made up of currency notes or paper money issued by the central bank.
The Gold Standard
Paper money became the standard, and precious metal coins were finally phased out. Even after precious metal coins were phased out, paper notes could still be exchanged for gold or silver. The United States eventually embraced the gold standard, linking the value of the USD to gold. Following WWII, the USD became the international standard. Currencies in Europe and around the world based their value on the USD, which remained tied to the value of gold.
The fast economic development of the twentieth century quickly meant that the value of the world’s currencies surpassed the amount of gold available. This caused the United States, the world’s economic superpower and currency benchmark at the time, to depart the gold standard in 1971. Leaving the gold standard meant that a person could no longer redeem their money for gold, a practice that had long ago stopped but was still theoretically viable at the time.
Modern Day Money
Today, money comes in many different shapes and sizes. The most common form of money is virtual currencies, e.g credit and debit cards. This form of money has physical and virtual properties, allowing us to make in-person and online purchases from the same money supply. They intend to eliminate the necessity to carry currency when executing transactions.
Another form of “new money” is cryptocurrency. Cryptocurrency has been exponentially changing digital society. Many are investing in cryptocurrency, as it may be the money we all use in the future.
No other subject in economics has been researched as long or as thoroughly as money. As a result, there is a wealth of documented experience and a well-developed body of theoretical analysis. The tendency of laypeople to emphasize their disagreements obscures the amount to which scholars of monetary problems concur in their essential conclusions. However, there are significant disputes among professional economists, centred chiefly on empirical judgements concerning the stability and nature of certain relationships between money and other economic phenomena.