| Money dates back
thousands of years and is derived directly from primitive hunter
gather societies and systems of bartering. At one time, man most likely traded
one thing for an entirely different thing they saw as having
equal value. A certain number head of livestock could buy other
things you might need, even a wife. 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 on one endeavor
(farming, hunting, building) and trade those goods and services for
other goods and service they may need. Anything that is of value to
many can be used as a type of money or a system of valuation, and has.
Salt, tobacco, livestock, and fur are a few examples of goods
commonly used as a medium of exchange and valuation. Money and trade
became a
valuable and indispensable tool in the development of civilization.
As civilization grew the system
became more complex and standardized. Soon humans looked for more
representational ways to trade. They looked for a standard medium
they could use to represent value. Anything a person wants or needs
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
goods and services they need, and so on. This created an economy and
allowed people to concentrate on highly specialized tasks in trade
for this medium and use it to buy what they need from merchants, who
can in turn use it to buy more inventory which allows the person who
produces the goods to buy what he needs and keep producing it. 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 and 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 that immerged from
Asia Minor thousands of years ago and was embraced by almost every
society on earth. Eventually a whole spectrum of metals would be
used.
In this system gold and other
precious metals act as a standard to calculate worth. Thus all goods
are given a value as it relates to a standardized value of gold. Other metals such as bronze, copper,
even iron were used. Because the metal was of a lower value so in turn was the coin
worth less, the smaller the coin the lesser its worth relative to
the metal content.
It can be tedious paying for
everything you need in numerous heavy coinage thus governments and
businesses began creating promissory notes and 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 moved to a system of Fiat money.
Fiat Money is money NOT backed by
commodity reserves but on decree. Fiat in Latin means "Let it be
done". The money is issued on the authority of the government
and they say what it
is worth. A dollar or a pound no longer represents
reserves of precious metals and other things of value. A dollar,
pound, franc or lire is worth what any given society, governing
bodies, 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. Because much international currency
was fixed to the dollar 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 pound or dollar
is worth far more than a dollar issued for circulation. Very little
silver and no gold is used in commerce today. Most money is either
printed on paper or minted using alloys of lesser metals like copper
and nickel. Any silver coin 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 become far more than the value stated on the coin.
The history of money and trade
is a history of human civilization.
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