Money is something you use every day. But what do you know about money? Find out the most interesting facts right now!
We use money every single day. We need it to buy food, pay taxes, travel and study. We need money for everything. But what is money? What is money cost? What makes it so important in our lives?
The barter system
If we want to understand how ‘money works’ we must go to the origins. To the barter system. So how does it work? If a person had a surplus of something (meat, wood, eggs, milk) he could exchange it for something he needs (oil, bread, cloth). People created an exchange rate. For example, 1 bottle of oil cost 10 eggs and so on. So this is how a barter system appeared. People were looking for other people who had the goods they needed and wanted the goods the first ones had. So they exchanged.
Sometimes a person had an apple and he needed a bottle of oil. But the guy who had a bottle of oil didn’t need apples, he needed milk. So the first one exchanges his apples for a bottle of milk, then came to this guy and exchanged a bottle of milk for a bottle of oil. This is how double coincidence of wants appeared.
How does money originate?
People were trying to solve the double coincidence of wants. At first they use gems or precious material. But it was difficult to find them and use. They needed something special. So they created something that everyone needed. Money was created as a medium of exchange. And trading became much easier! Now everyone could provide his goods having money in return.
What makes a commodity useful as money?
Money as one of the most important things in our lives has some strict characteristics. Here are 5 main of them:
- Money must be divisible. So people could exchange their goods for any sum of money.
- Portability. People are rushing somewhere all the time. And they need money. So if it was heavy or huge we wouldn’t have a possibility to carry it. Portability of money is very important.
- Money must be durable. It would be very pity if money got torn in your pocket all the time. Money must be used without any fear to damage it.
- Money must be recognizable. So no tourist is confused where money is. That was very important to prevent money counterfeiting.
- Money must be scarce. Why? Because people exchange money for their goods. If everyone had millions of dollars who would like to exchange products for money? The most important thing what money gives is value. People should know what money cost is. So that’s why money laundering appeared.
History of money
A lot of cultures around the world developed the use of money. Some of them used cowry shells, a unit of rice, gems and others. Then there was the era of coinage. People started to make coins between 700 and 500 BC. Usually they used bronze or alloy of silver and gold. Coins were very useful so people didn’t need other variations of money.
Only in the 11th century Chinese people presented paper money. But the development of the banknote began only with issues of paper currency. People didn’t want to carry heavy coins any more. So they liked the idea to make paper money. People began to make different banknotes in different regions and countries. Sometimes the pictures on banknotes showed the history of the country, sometimes the culture. People were proud of their money. They were trying to make it more durable and beautiful than their neighbors had.
Since then only 1 change has happened. Money has become virtual. After 2000 virtual currency has become so widely spread that sometimes we can say that there more virtual money than real. Credit cards, loans, deposits. These words have become well-known for everyone. MoneyGram is a leading money transfer company that works all over the world. It’s very safe and convenient. Now we can send money wherever we want extremely fast. Could people of the 11th century think it would go so far? Guess not.
What is money market?
Now we can talk about difficult financial systems all around the world. There appeared money markets. It is a segment of the financial market in which financial instruments with high liquidity and very short maturities are traded.
Now you know a bit more about thing that you have in your pocket every single day!
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