We all love money. We all want money. Money they say, makes the world go round. It can be used to purchase all the things an individual needs in life. People earn money. People can do anything for money. They can do good and bad things to earn that valuable paper of exchange called money. We have even given it so many names like, “dough, owo, kudi, ego, benjamins” and so forth.
Money is an abstraction, idea, concept or token instances of which are the physical bills or coins which are carried and traded. The word “money” is believed to have originated from a temple called HERA, located in one of the seven hills of Rome, called the CAPITOLINE. The temple of JUNO MONETA at Rome, was the place where the mint of ancient Rome was located.
Before money was invented, people traded using the trade-by-barter system were they exchanged goods and services of equal value. This system evolved into a unit of weight and currency called the SHEKEL, which was a specific weight of barley/wheat that was related to other values in measure with silver, bronze, copper and other precious metals. They were both weighed carefully on sensitive scales before an exchange of goods took place. Some other societies in the Americans, Asia, Africa and Australia used shell money in the shape of the cowry shell.
Money was first minted in the shape of coins in Lydia (modern day Turkey) around 650-600 B.C. Some civilizations also used precious stones, glass, porcelain, enamel, beads and vanilla (used during the slave trade) to represent money. Receipts later replaced commodity money as a means of payment and were used as money. They were redeemed for the commodity deposited in the hands of money changers, tax collectors and bankers, who came into the picture during the first century.
Paper money or bank notes were first used in China during the Song Dynasty and used alongside coins but did not displace commodity money. They were first issued in Europe by Stockholm Banco (The Bank of Stockholm) in 1661. The gold standard replaced the use of gold coins in the 17th-19th centuries in Europe and redemption into gold coins were discouraged. This was a monetary system, where the medium of exchange were paper notes that were convertible into preset, fixed quantities of gold.
After World War 2, at the Bretton Woods (the location of the World Bank) Conference, most countries adopted fiat currencies that were fixed to the United States dollar, which was in turn fixed to gold. But in 1971, the U.S government suspended the convertability of the dollar to gold and other governments followed suite, de-pegging their currencies from the U.S dollar and become un-backed by anything except the governments’ fiat of legal tender.
As earlier mentioned, money was of three types, which are commodity money, representative money and fiat money. Commodity money was anything that had value and it’s value comes from the commodity out of which it was made of. The commodity itself was the money and the money was the commodity. Examples of commodities that have been used as mediums of exchange include gold, silver, copper, rice, salt, peppercorns, large stones, decorated belts, shells, alcohol, cigarettes, cannabis, candy, Manila and so on.
Representative money is money that consists of coins or certificates that can be exchanged for a fixed quantity of commodity such as gold or silver. The value of representative money stood directly and in fixed relation to the commodity that backed it, while not itself being composed of that commodity, for example bank notes or cheques.
Fiat money or currency is money whose value is not derived or obtained from any intrinsic value or guarantee that it can be converted into a valuable commodity (such as gold). Instead, it has value only by government order (fiat). Usually, the government declares the fiat currency (notes and coins from a central bank) to be legal tender, making it unlawful not to accept the fiat currency as a means of repayment for all debts, public and private. Fiat currencies are the naira, the dollar, the pound, the yen, the euro etc.
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