Evolution of Money
The introduction of money as a medium of exchange was one of the
greatest inventions of mankind. Before money was invented, exchange took place
by Barter, that is, commodities and services were directly exchanged for other
commodities and services. Under the barter system, buyers and sellers of
commodities had to face a number of difficulties. Surplus goods were exchanged
for money which in turn was exchanged for other needed goods. Goods like furs,
skins, salt, rice, wheat, utensils, weapons, etc. were commonly used as money.
Such exchange of goods for goods was known as “Barter Exchange” or “Barter
System”.
The history of Barter system starts way back in 6000 BC
Barter system was introduced by Mesopotamia tribes.
Phoenicians adopted bartering of goods with various other cities
across oceans.
Babyloninan’s also developed an improved barter system, where
goods were exchanged for goods.
After the barter system and commodity money system, modern money
systems evolved. Among these, metallic standard is the premier one. Under
metallic standard, some kind of metal either gold or silver is used to
determine the standard value of the money and currency. Standard coins made out
of the metal are the principal coins used under the metallic standard. These
standard coins are full bodied or full weighted legal tender. Their face value
is equal to their intrinsic metal value.
Gold Standard is a system in which the value of the monetary unit
or the standard currency is directly linked with gold. The monetary unit is
defined in terms of a certain weight of gold. The purchasing power of a unit of
money is maintained equal to the value of a fixed weight of gold.
The silver standard is a monetary system in which the standard
economic unit of account is a fixed weight of silver. The silver standard is a
monetary arrangement in which a country’s Government allows conversion of its
currency into fixed amount of silver.
The paper currency standard refers to the monetary system in which
the paper currency notes issued by the Treasury or the Central Bank or both
circulate as unlimited legal tender. Paper currency is not convertible into any
metal. Its value is determined independent of the value of gold or any other
commodity. The paper standard is also known as managed currency standard. The
quantity of money in circulation is controlled by the monetary authority to
maintain price stability.
The latest type of money is plastic money. Plastic money is one of
the most evolved forms of financial products. Plastic money is an alternative
to the cash or the standard “money”. Plastic money is a term that is used
predominantly in reference to the hard plastic cards used every day in place of
actual bank notes. Plastic money can come in many different forms such as Cash
cards, Credit cards, Debit cards, Pre-paid Cash cards, Store cards, Forex cards
and Smart cards. They aim at removing the need for carrying cash to make
transactions.
A digital currency in which encryption techniques are used to
regulate the generation of units of currency and verify the transfer of funds,
operating independently of a Central Bank.
Decentralised crypto currencies such as Bitcoin now provide an
outlet for Personal Wealth that is beyond restriction and confiscation.
Related Topics
Privacy Policy, Terms and Conditions, DMCA Policy and Compliant
Copyright © 2018-2024 BrainKart.com; All Rights Reserved. Developed by Therithal info, Chennai.