History of Money

   History of Money

 What is the meaning of money? In 21 century everything is money. When now all are depending on money, profit, revenue, expenses, salary. but this situation not build on one day. This situation has long history. We can study following stages as the main money developing stages.

• ·         Barter System
• ·         Commodity Money
• ·         Metallic Money
• ·         Paper Money
• ·         Credit Money
• ·         Plastic Money

Barter System

in trade barter is a system of exchange where participants in a transaction directly exchange goods or services for other goods or services without using a medium of exchange, such as money. Economists distinguish barter from gift economies in many ways, barter for example, features immediate reciprocal exchange, not delayed in time. Barter usually takes place on a bilateral basis, but may be multilateral. In most development countries, barter usually only exists parallel to monetary systems to a very limited extent. Market actors use barter as a replacement for money as the method of exchange in times of monetary crisis, such as when currency becomes unstable or simply unavailable for conducting commerce.

Commodity Money

Commodity money is money whose value comes from a commodity of which it is made. Commodity money consists of objects that have value in themselves (intrinsic value) as well as value in their money. Examples of commodity commodities that have been used as medium of exchange include gold, silver, copper, salt, peppercorns, tea, large stones (such as rai stones), decorated belts, shells, Alcohols, cigarettes, cannabis, silk, candy, nails, cocoa beans, cowries and barley. This items were sometimes used in a metric of perceived value in conjunction to one another, in various commodity valuation or price system economies.

Metallic money

Metallic money is money made of some metal with the drawback of commodity money and with economic advancement of the people, metals came to be used as money. This existed during the town economy stage of during the pre-machine age. In the beginning iron, copper, tin, bronze, nickel, lead, gold, silver etc. were used. The final choice however was favor of gold and silver of different sizes and shapes were used.

Advantage of Metallic Money

• ·         It had all qualities of good money
• ·         Durable
• ·         It could be stored
• ·         It had a high and stable value
• ·         It was readily acceptable

Disadvantages of metallic money

• ·         Necessary to carry in bulk in case of large transactions
• ·         Difficult to assess the value of metals
• ·         Not easily portable

Metal Coins

Due to the drawback of metals money, metallic coins were introduced. Introduction of metallic coins is considered to be an important stage in the evolution of the modern monetary system. Metallic coins were introduced by the kings resulted in the development of the coinage system which removed the imperfections of metal money. A coin is a piece of metal of a given size, shape, weight and fineness whose value is certified by state.

Coins of standard weight and degree of fineness were issued in all countries by their rulers. They had different seals of rulers stamped on one side and value on other certifying the purity and weight of the coin on. Coins came to be accepted at face value. Coins were introduced in different denominations and therefore were useful in all kinds transactions.

Advantages of metallic coins

• ·         Stamps of rulers therefore generally accepted
• ·         Accepted at face value
• ·         Fixed weight and purity of metal
  

Disadvantages of metal coins

• ·         Not safe to carry from place to place
• ·         Difficult to carry out large transactions

Paper money

A bank note is a type of negotiable promissory note, made by bank payable to the bearer on demand. Bank notes were originally issued by commercial banks. National bank notes are generally legal tender, meaning that medium of payment is allowed by law or recognized by a legal system to be valid for meeting financial obligations.   

Credit money

Credit money is any future monetary claim against an individual that can be used buy goods and services. There many forms of credit money such as IOU, bonds and money markets accounts. Virtually any form of financial instruments that cannot or is not meant to be repaid immediately is credit money.

Plastic money

Plastic money is a term that is used predominantly in reference to the hard plastic cards we use every day in place of actual bank notes. They can come in many different forms such as cards, credit cards, debit cards, pre-paid cash cards and store cards.