Jun. 30, 2005 - The History of Money

This is Part II of a five-part series called Money 101. 

Why We Use Money

Without money we would operate on a barter system – exchanging goods or services with each other on an “as needed” basis.  For example, a mechanic might fix a farmer’s tractor in exchange for food.  Bartering is a simple concept but it becomes extremely complex when contemplating exchanges between billions of people!  Bartering is a terribly inefficient and inconvenient system on any sizable scale.  In contrast, a money system provides a more efficient and convenient means of exchanging goods and services.  We trade our goods and services for money that can be spent anywhere for anything.  Thus, money simply serves as a tool – nothing more, nothing less.  It’s not money that we ultimately value, but the goods and services we can purchase with it.  We value money because it allows us to purchase the goods or services we need or want.    

What We Consider Money

In this sense, the concept of money is much more important than the physical item we use for money.  For example, throughout history many different items have served as money:

• Living Animals (cattle, horses, oxen, sheep)
• Animal Parts (skins, leather, ivory, sea shells)
• Crops (various grains, spices, tea, sugar)
• Tools (agricultural implements such as spades and hoes)
• Weapons (spears, arrows, knives, swords)
• Minerals (salt)
• Stones (diamonds, rubies, emeralds)
• Metals (gold, silver, copper, bronze, iron, brass, tin, platinum)
• Crafted Objects (beads, garments, wampum)
• Coins (made from various metals)
• Paper (currency, checks)

Today we use coin and paper.  In the future it may be electronic units!  It doesn’t really matter so long as we all ascribe value to it and universally accept it.

Next we will explore the characteristics of money.

Other posts in this series:

• Part I - Money 101 An Introduction
• Part III - The Characteristics of Money
• Part IV - Money Represents Time
• Part V - Money Represents Priorities

Jun. 30, 2005 - Odd currencies

Jun. 30, 2005 - Untitled Comment