EVOLUTION OF MONEY: THE CONCLUDING PART.

The paper money we use today originated during the middle ages. In those days, goldsmiths and merchants trading with gold and silver items, kept the values related to these items. The goldsmith, as a guaranty, delivered a receipt to the merchant. With time, these receipts were used to make payments, circulating from hand to hand.

paper money: dollar bill

paper money: dollar bill

The first bank notes were issued by Banco do Brasil in Brazil in 1810. They had its value written by hand, as we today do with our checks. With time, in the same form it happened with coins, the government came to conduct the issue of notes, controlling counterfeits and securing the power to pay. Currently, all countries have their central bank in charge of issuing coins and notes.

Nigerian Naira: 100 Naira note/bill

Nigerian Naira: 100 Naira note/bill

Paper money experienced an evolution regarding the technique used in their printing. Today, the printing of notes uses a specially prepared paper and several printing processes, which are complementary to each other, assuring to the final product a great margin of security and durability conditions.

The set of coins and bank notes used by a country form its monetary system. The system is regulated by appropriate legislation and organized from a monetary unit, its base value. The countries, through their central banks, control and guarantee the issue of money. The set of notes and coins in circulation, the so called monetary mass, is constantly renewed through the process of sanitation, substitution of worn out and torn notes

As coins and notes ceased to be convertible into precious metal, money became more dematerialized and assumed abstract forms. One of these forms is the check that, for simplicity of use and security offered, is being adopted by an increasing number of people in their day-by-day activities. This document, by which one orders payment of a certain amount to its bearer or to a person mentioned in it, aims mainly at transactions with bank deposits. The important role played today in the economy by this form of payment is due to the innumerable advantages offered by it, speeding transactions with large sums, avoiding hoarding and diminishing the need of change by being a document completed by hand in the necessary amount.

The need now came for people to

Money now has an electronic form

Money now has an electronic form

Electronic money, or e-money, is the money balance recorded electronically on a stored-value card. These cards have microprocessors embedded which can be loaded with a monetary value. Another form of electronic money is network money, software that allows the transfer of value on computer networks, particularly the internet. Electronic money is a floating claim on a private bank or other financial institution that is not linked to any particular account. Examples of electronic money are bank deposits, electronic funds transfer, direct deposit, payment processors, and digital currencies.

Electronic money can either be centralized, where there is a central point of control over the money supply, or decentralized, where the control over the money supply can come from various sources. Electronic money that is decentralized is also known as digital currencies. The major difference between E-money and digital currencies is that E-money doesn’t change the value of the fiat currency (USD, EUR) it represents, but digital currency isn’t equivalent to any fiat currency. In other words, all digital currency is Electronic money, but Electronic money isn’t necessarily digital currency. Many mobile sub-systems have been introduced in the past few years including Google Wallet and Apple Pay.

Money, whatever the form it has, is not valuable for itself, but for the goods and services it may purchase. It is a sort of security giving its bearer the faculty of being creditor of society and take advantage, through his or her purchasing power, of all conquests of modern man. Money was not, hence, invented by a stroke of genius, but stemmed from a need, and its evolution reflects, at each time, the willingness of man to harmonize its monetary instrument to the reality of its economy.

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THE EVOLUTION OF MONEY.

Initially, during the course of civilization, money didn’t exist. People who lived during the early ages, had to make exchange for items or goods they did not have. They engaged in trade by barter, which is the exchange of an item for another item and these items weren’t of the same value. So if a fisher man caught more fish that he could use, he exchanged them with a livestock farmer or farmer who had grains, like wheat. This form of trade still exists today in some parts of the world. This exchange, however, is not free from difficulties, since there isn’t a common measure of value among the items bartered or exchanged.

traders exchanging tomatoes for a cup of grain

traders exchanging tomatoes for a cup of grain

Some items became more valuable than others and more sought after. These items assumed the role of currency or money. These items were referred to as commodity money. Items like cattle, spices, milk, cowry shells, were used as commodity money, due to the fact that these items were scarce. Later, these commodities became inconvenient for commercial trades, due to changes in their values, the fact of being indivisible and easily perishable, therefore checking the accumulation of wealth.

items used as commodity money

items used as commodity money

cowry shells, one of the items used as commodity money

cowry shells, one of the items used as commodity money

As soon as metal was discovered, it was used to make utensils and weapons which were previously made of stone. For its advantages, like being durable and divisible, metal became the main standard of value. It was initially used in its natural state, then in the forms of ingots and objects like rings to bracelets. The metal traded with were weighed and assessed of its purity at each transaction. Later, metal money gained definite form and weight, receiving a mark indicating its value and the person who issued it. They came to be valued commodities. The increased value of these objects led to its use as money and the circulation as money of small scale replicas of metal objects.

gold and silver were the most preffered objects used as money

gold and silver were the most preferred objects used as money

Coins were first minted in Lydia during the 7th century B.C, which is present day Turkey. The first metals used in coinage were gold and silver. Minting of gold and silver coins was common for many centuries and pieces were guaranteed by their intrinsic value or importance.Then a coin made with twenty grams of gold was exchanged for goods of even value. Gold were used for higher valued coins, while silver and copper coins were used for lesser value. Later cupronickel and other metallic alloys were used as coins and these coins came to circulate for their extrinsic or face value and not their metallic content. With the appearance of paper money, minting of metal coins was restricted to lower values, necessary as change. In this new role, durability became the most requested quality for coins.

In the next write up we will conclude our story on the evolution of money.