The evolution of money means the history of money concerns the development of means of carrying out transactions involving a medium of exchange . Money is any clearly identifiable object of value that is generally accepted as payment for goods and services and repayment of debts within a market , or which is legal tender within a country . We always discuss about the functions of money in general term . But why money only can do these works ? It may be other parameter of exchange and medium of transaction. We know that with the help of money we can purchase anything in the market . But no one know that what is the meaning of money in real term? Why money is used to purchase anything ?
The word” money” is derived from the Latin word, “Moneta” which was the surname of the Roman Goddess of Juno in whose temple at Rome , money was coined . The origin of money is lost in antiquity . Even the primitive man had some sort of money the type of money in every age depended on the nature of its livelihood . In a hunting society , the skin of wild animals were used as money. The pastoral society used livestock whereas the agricultural society used grains and foodstuffs as money.
The Roman used cattle and salt as money at different times. It is from these two words that the word ” pecuniary” relating to money is derived from the Latin word ” pecudes” for cattle , and the word “salary” is derived from the latin word ” salarium” which meant salt – money.
Certain Indian tribes on the American continent used Wampun, a beaded belt of sea shells , as money . Squirrel skins were used as currency in Mongolia. Stones , shells , spears , iron , fish-hooks and many other articles have also served as basic money in various parts of the world in place of direct barter of goods . So the first stage in the evolution of money is the use of commodities as money.
Above mentioned article were as money in small societies and they could not be used for trading purposes by larger ones which were having trade relations with other nations both by land and sea even in ancient times . So many nations had been using one or more of the three metals for purposes of exchange. These were silver ,gold and copper.But due to inconvenient with metal in use as money ,this medium did not continue for long-term. So the second stage in the evolution of money is the use of metal as money.
But metal was an inconvenient thing to accept ,weigh , divide and assess in quality . Accordingly , metal was made into coins of predetermined weight. Thus coins came to be accepted as a convenient method of exchange . Thus use of coins is the third stage in the evolution of money.
But some ingenious persons started debasing the coins by clipping a thin slice off the edge of coins. This led to the hoarding of full -bodied coins with the result that debased coins were found in circulation . This led to the minting of coins with a rough edge . Sometimes it led to identity crisis for coins .
Later with passes of time , as the prices of gold began to rise , gold coins were melted in order to earn more by selling them as metal . This led Governments to mix copper or silver in gold coins so that their intrinsic value may be more than their face value . As gold became dearer and scarce , silver coins were used , first in their pure form and later on mixed with alloy or some other metal.
The next stage in the evolution of money is the introduction of paper money. The use of metallic coins had certain difficulties. It was not only inconvenient but also risky to carry gold or silver coins from one place to another by merchants. They had the disadvantage of being stolen and inconvenient to carry over long distances. The development of paper money started with goldsmiths who kept strong safes to store their gold. As goldsmiths were thought to be honest merchant , people started keeping their gold with them for safe custody . In return , the goldsmiths gave the depositors a receipts promising to return the gold on demand. These receipts of the goldsmiths which is commonly called in rural India as “Sonar”, were given to the sellers of commodities by the buyers. Thus receipts of sonar or goldsmith were a substitute for money . Such paper money was backed by gold and was convertible on demand into gold . This ultimately led to the development of bank notes.
We know that the bank notes are issued by the Central bank of the country. As demand for gold and silver increased with the rise in their prices, the convertibility of bank notes in a gold and silver was gradually given up during the beginning and after the first World War in all the countries of the world . Since then the bank money has ceased to be representative money and is simply fiat money which is in -convertible and is accepted as money because it is backed by law.
The use of cheque as money by the people is the another stage in the evolution of money in the modern world. The cheque is like a bank note in that it performs the same function. It is a means of transferring money or obligations from one person to another. But a cheque is different from a bank note. ” A cheque is not money , it is simply a written order to transfer money , only the deposit itself is money.”
The final stage in the evolution of money has been the use of bills of exchange , treasury bills , bonds , debentures, savings certificates , etc. They are known as “near money”. They are close substitutes for money and are liquid assets . Thus in the final stage of its evolution money has become intangible . Its ownership is now transferable simply by book entry.
Thus the origin of money has been through various stages: from commodity money to metallic money , from coinage to paper money and from credit money to near money. In this way , today mode of payment has been changed into digital mode of payment. The base of any changes is due to human new idea and practibilty of any system . Today the place of money is being taken by digital payment due to its fast , transperent and safe way of money transaction .————————————————————————————————————————————————————————————————————————————————————–The End———————————————————————