Evaluation of money
Introduction.
Money has become one of most important invention throughout the human history. It has undergone a long process of historical evolution as well. Money has been instrumental in how society and commerce have evolved over the times. Bartering goods were found to be inefficient, and so humans had to develop another tool that would facilitate trade between people.
As mentioned above, money has undergone a long process of historical evolution, subsequently we can divide different stages of the evolution of money if we take a glance at human history.
Those stages can be named as barter system, commodity money, metallic money, paper money, credit money and plastic money.
Those stages can be named as barter system, commodity money, metallic money, paper money, credit money and plastic money.
Barter system.
Human beings passed through an era when money was not in use. Thus goods were exchanged directly for one another. Such exchange of goods for goods was called Barter Exchange.
barter system may occur even in commercial economies, usually during periods of monetary crisis. During such a calamity, cash may be in short supply, or highly devalued through hyperinflation. In such cases, money ceases to be the universal medium of exchange or standard of value. Money may be in such short supply that it becomes an item of barter itself rather than the means of exchange.
Advantages
- Flexibility
- No money involved
- Networking
- Utilisation the idle
- Impossibility of subdivision of goods
- Lack of information
- Double Coincidence
- Lack of standard of unit of account
Commodity money.
The inconveniences and drawbacks of barter system led to the gradual use of a medium of exchange. throughout the evolution of money, it became clear that all sorts of commodities like seashells, pearls, precious stones, tea, tobacco, cow, leather, cloth, salt, wine, etc. have been used as a medium of exchange (i.e., money).
It is called Commodity Money.
A key feature of commodity money is that the value is directly perceived by its users, who recognise the utility or beauty of the tokens as goods in themselves.
Metallic money.
Inadequacy of commodity money led to the evolution of metallic money (gold and silver). The problem of uniformity of weight and purity of precious metals led to private and public coinage.
Metal ingots, silver bullion or unmarked bars were probably in use for exchange among many of the civilisation that mastered metallurgy. The weight and purity of bullion would be the key determinant of value.
Metal ingots, silver bullion or unmarked bars were probably in use for exchange among many of the civilisation that mastered metallurgy. The weight and purity of bullion would be the key determinant of value.
Thus we can say coins were an evolution of "currency" systems of the Late Bronze Age, where standard-sized ingots, and tokens were used to store and transfer value.
Advantages
- Durable
- It can be stored
- High and stable value
- quickly acceptable
- Not easily potable
- Not easy to carry
- Difficult to asses the value
- Had to be split up at every stage of exchange
Paper money.
Paper currency first developed in Tang dynasty China during the 7th century.
The first bank to initiate the permanent issue of banknotes was the Bank of England. Nowadays paper money or in other words, bank notes are issued by the central bank of a country.
paper money have a natural advantage over coins in that they are lighter to carry but are also less durable.
Advantages
- Economical
- Elastic
- Stable price
- Easy to Store
- Quickly usable
- Easily Countable
- Non Cyclical
- No Automation
- Unstable
Credit Money
Emergence of credit money took place almost side by side with that of paper money.People keep a part of their cash as deposits with banks,which they can withdraw at their convenience through cheques.The cheque (know as credit money ,but it performed the same function as money.
Electronic Money
Electronic money refers to money that exists in banking computer systems that may be used to facilitates electronic transactions
Therefore, be exchanged into a physical,tangible form,electronic money preliminary used to transaction electronically,due to the sheer convenience of this methodology.
Advantages
- More practical
- Global Transaction
- Consumptive
- Low Security
- The left balanced can,t be cashed
