We all want money. We work for it. We think about it. If you do not know what money is, then you should be hibernating throughout this phase of opportunistic economy. However, the task of defining what money is, where it comes from and what it’s worth belongs to only those who dedicate themselves towards the discipline of economics. Now let us take a look at the evolution of money and its multifaceted characteristics.
Firstly, before the development of a medium of exchange, people followed the barter system to obtain the goods and services they needed. It only worked when people possessed a commodity which satisfied both the parties by coming to an agreement to trade their commodities. Therefore this method lacked transferability and divisibility that makes this trade more inefficient because, you cannot divide a cow for a banana. Second stepped in what is known as commodity money. This time, people experimented with various commodities starting from dried corn to gold. The Colonialist people were known to have used beaver pelts and dried corn as their currency.
Then, after the World War II, at the Bretton Woods Conference, various countries fixed their currency to the US dollar. The US dollar was in turn fixed to gold. In 1971 the US government suspended this system as gold turned out to become very expensive. After 1971, came the fiat money, where the money is distributed by a country’s respective central bank. Reserve Bank of India (RBI) is the central bank of our country. The central bank forecasts the demand for money in its country depending upon their citizens’ demand and then prints the currency accordingly. This is a brief introduction about the evolution of money.
Now let us have a glimpse about money’s multifaceted characteristics. Money functions as a medium of exchange, a unit of account, a standard of deferred payment, and as a store of value. Money as a medium of exchange, money is used to intermediate the exchange of goods and services. As a unit of account, money is a “measure” or “standard” of relative worth used for measurement of market value of goods, services and other transactions. Store of value, money is a form, a commodity or financial capital which must be able to be reliably saved, stored, and retrieved- and be predictably useful when it is so retrieved. Finally, money as standard of deferred payment; it can be accepted to settle a debt.
Now since we had discussed what money was in the past and how money is now at present, it is important to note that money is not only essential for exchange, but also to be venerated in the society. Therefore money has to be respected, worshipped and desired, but without greed.
