History and development of money

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History and development of money

Money existed in the past and also exists today in various forms. Practically anything people generally consider a means of exchange can be regarded as money. People in distinct historical periods used different forms of money.

Self-sufficient economy

With the development of human society, the first commodity relations gradually began to emerge between individuals and families. There was a self-sufficient economy at the beginning of human development as people acquired all the necessary goods and services through their own work or activities. For example, if a person needed a weapon to hunt game, they had to make it themselves. This period, lasting from the first beginnings of human development until roughly the Stone Age, was the most prolonged era of humankind.

Barter economy

A new type of economic relationship begins to emerge in the Stone Age. People did not have to make everything themselves. Instead, they could use barter if they needed some goods they could not produce independently. This change marked a significant economic leap forward and accelerated the human race’s development.

However, barter also had its significant shortcomings. It was not easy to find an equivalent consideration at the same time. It was also impossible to divide  some goods, and others were fast to degrade or spoil, such as fruit, meat, etc. One could quickly get into many subsequent commodity relationships due to one type of goods, which significantly increased time costs and restrained earning opportunities.

Monetary economy

These factors eventually led to the appearance of the first money at the beginning of the Iron Age. Various commodities started to be used as money in closed communities.

Commodity money

Commodity money is one type of goods used for measuring values and paying. Tribes or individuals accepted a particular commodity as a medium of exchange in the form of unspoken agreement.

However, such a commodity had to meet certain conditions. It had to be rare, portable, durable, storable and manipulable material with chemical and physical stability. Moreover, it had to exist in small quantities, which guaranteed superior value due to its limited availability. And so ancient Maya considered cocoa beans, the Slavs handkerchiefs tied to a belt, and the northern and marine nations seashells as money.

Metals became the last phase of commodity money. Initially, they were iron staples or bars, later copper prisms and coins, and then silver and gold came into play. The first coins appeared around 600 BC in Lydia and quickly spread worldwide.

The first hyperinflations in history occurred with the discovery of America and new gold deposits as coins quickly lost value. Good and bad harvests could reduce or increase money’s value in agricultural product-based economies, causing inflation or deflation. As the number of economic transactions multiplied, there was not enough gold in the world to meet the economy’s needs. First, the content of gold in the coins decreased, and when it was not enough, paper money emerged.

Paper money

The first banknotes appeared around the year 1,000 AD. in China. They found their way to Europe and America in the late 17th century. The first banknotes in our country called “bankocetle” were introduced during the reign of Maria Theresa. They guaranteed that the monarch would pay for the precious metal after a certain period. Bankocetle were issued due to the lack of gold in the treasury.

Bank money

The last type of money in today’s economy is bank money, intangible, imaginary money created within commercial banks. These are, for example, credit and debit cards, savings accounts, checks, bills of exchange, travellers’ checks, etc.

With their emergence, the reckless printing of money also returns, in this case, associated with short-term price increases and mainly with massive indebtedness. The current situation in the Czech Republic perfectly demonstrates this situation. After all, every department store, insurance company or leasing company has its own bank money, and the citizens of the Czech Republic use these products massively. And with that comes massive debt.

 

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