|Money dates back
thousands of years and is derived directly from primitive hunting
gathering societies and early systems of bartering. At one time, man most likely traded
one thing for an entirely different thing they saw as having
equal value. A man could trade something ( a certain number of livestock
as an example) for other things he might need but is unable to find
or produce himself. The two parties had to agree to
the equal value. Surely standards of valuation for bartering arose.
This tendency for men to
barter and trade allowed people to specialize in trades (farming,
hunting, building) and develop skills that would make human
civilization possible. Even after civilization was well established,
people continued to trade goods and services for
other goods and services they may need. Anything that is of value to
many can be, and has been, used as a type of money or a system of valuation.
Salt, tobacco, livestock, fur or even other human beings are just a few examples of
the different valuable resources
commonly used as a medium of exchange and valuation. Money and trade
valuable and indispensable tool in the development and advancement of civilization.
As civilization grew, the system
became more complex and standardized. Soon humans looked for more
a more convenient way to trade. They looked for a standard medium
they could use to represent value. Anything a person might want or
need must be able to be valued in this medium. Instead of directly
trading goods and services, people could now receive objects of
stated worth for their goods and services and, in turn, trade them
for the goods and services they need. This created an economy
An economy based on a commonly
accepted standard of valuation had extremely beneficial effects on
early society. It allowed people to concentrate on highly
specialized tasks which they would perform in exchange for this
medium of exchange. No longer must a person farm or gather their own
food, they can buy from farmers. They do not need to milk their own
cows, butcher their own meat, make their own bread, or sew their own
You pay others who specialize in such
things and others pay you for the goods you produce or the services
you offer. As generation after generation specializes in one
discipline, they improve their methods and make advancements. Such a system can only succeed with the acceptance and
cooperation of the majority. It will only work if all who are
compensated in this way can trade what they are given for all that
they need to live.
Many things have been used as money
in this way but the use of metal (especially specific precious
metals such as gold) eventually became a universal standard. The rise of metallurgy and mining, an
increasingly complex society, a system of government, and the
simple touchstone (a method of rubbing stone and testing the purity
of soft metals) paved the way for a monetary system based on gold
and other precious and semi-precious metals. A system that emerged from
Asia Minor thousands of years ago and was eventually embraced by almost every
society on earth.
In this system, gold and other
precious metals act as a standard to calculate worth. Thus all goods
are given a value as they relate to a standardized value of gold. Other metals such as bronze, copper,
and even iron have been used. These metals were deemed less precious so coins
made of these metals were
worth less. The smaller the coin, the less it is worth relative to
the metal content.
It can be tedious paying for
everything you need in large amounts of heavy coinage thus governments and
businesses began creating promissory notes. The advent of
printing made it simple to move from hefty sacks of coins to
relatively light stacks of paper. Eventually the gold standard was
dropped and most of the world moved to a system of fiat money.
Fiat money is NOT backed by commodity
reserves but on decree. Fiat in Latin means "Let it be done". Money
is no longer made of precious metal nor does it represent reserves
of precious metals. Modern money consists of slips of paper and
cheaper metals issued on the command of an authority, usually a government,
and whose value is dictated by a governing body. The paper and
coins they issue have value, in essence, because they say so. A dollar,
pound, franc or lire is worth what any given society, governing
bodies, or international financial committees say it is worth in relation to goods
it can purchase.
At one time fiat money was used by
societies that were in crisis and could not back the notes and coins
it produced. The United States eventually
switched to fiat money in 1971. Most international currency
was fixed to the dollar thus this event meant that most other nations
would also switch to this standard.
Many governments will still issue
coins made of gold or silver in many denominations but because of
the precious metals it is made of, a gold or silver dollar
is worth far more than a dollar issued for circulation. Very little
silver, and no gold, is used in day to day business transactions today. Most money is either
printed on paper, plastic, electronic transfers or coins minted using alloys of lesser metals like copper
and nickel. Any silver coins in circulation today are older coins
that have yet to be found by a collector.
Coins are collected by people for
many reasons. The precious metal content, the artwork, the country
who issues it, the person who created it, the politics behind it,
and the history. Through time, old coins are retired and new coins
are released. They become historical objects and their value will
over time, become far more than the value stated on the coin.
The history of money and trade
is a history of human civilization.