The currency of a country seems a very simple idea. It’s only money, after all, and that’s just what we use to buy the things we want and need. We are paid to work, and use that money to pay bills, buy our food and buy goods and services. We could put some in a savings account at the bank or invest it, but for the most part, the currency seems like a simple concept.
In fact, the development of the currency has shaped human civilization. Cities and towns as we know them would not exist without the currency. It is difficult to overstate the importance of money in modern life. We have invented the coin and use it however we cannot understand its laws or control their actions.
In this article, we will look at the history of money, from the first coins to online banking. We will also discuss the development of the currency and economic aspects involved in setting exchange rates. Currency or money we will use the terms interchangeably for purposes of this discussion can be defined as a unit of purchasing power.
It is a medium of exchange, a substitute for goods or services. They do not have coins or bills with which you are most familiar being. In fact, over the years from large stone wheels, knives, pieces of salt and even humans have been used as money. If two or more people decide that a coffee bean represents value then that will be its currency.
Currency as Substitute
If you have a barrel of wheat, and want a cow, without currency, you have to find someone who not only have a cow, but also wants a barrel of wheat, and agree to the exchange. Say your neighbor has a cow and wants a barrel of wheat. What if a barrel of wheat worth the same as a whole cow. Your neighbor can not exactly make the exchange, unless you are part of a cow.
If you live in a place where the round and minted coins have a certain value, and can be exchanged for other things, then you just have to find someone who needs wheat. That person gets the wheat in exchange for an agreed amount of coins, you can use later to buy a cow from someone else. Not to mention the fact that carry a handful of coins is much easier than lugging a barrel of wheat or a cow with you every time you try to make a trade.
Currency as Wealth
In addition to serving as a substitute in trade, another important use of money is to use it as a store of wealth. In a system of direct exchange, commodities that are traded are generally perishable. You can gather tons and tons of wheat making shrewd trade agreements, but eventually saved your wheat gets ugly, or rats eat it ultimately loses its value. Money allows people to accumulate wealth.
This had a huge impact on civilization because it meant that power would no longer always from father to son. People who had been excluded from any possibility of political power could amass wealth through trade or providing a service. That wealth could be used to buy political or military power. So money somehow democratized society, removing some power from the hands of the noble families who had monopolized for hundreds of years. We are witnessing the birth of the merchant class, artisans, and Mercenaries (bounty hunters earn well).
Forms of Money
The forms and functions of money have changed over the last 3,000 years or so, usually fall into four categories:
- Paper money
- Currency Electronics
- Merchandise and Money
In a system of goods, money used is not only an object purchasing power to buy it is something that has an intrinsic value in itself.