Money – its evolution and utility.

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———————————————————————

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