The Function Of Money And Its Future

The Function Of Money And Its Future

The Function of​ Money and its Future
Originally exchange took place without the​ use of​ money,​ by barter .​
Long before money had come into the​ commercial world people exchanged goods for goods .​
This system of​ barter made it​ possible to​ satisfy many wants that would otherwise have gone unsatisfied .​
Barter raised the​ standard of​ living,​ but under such a​ system the​ exchange of​ goods was greatly hampered .​
To barter requires that both buyer and seller need each other's goods .​
Again,​ indivisible quantities hindered the​ exchange,​ since half a​ canoe or​ half a​ cow could not enter into barter .​
Nor was there under the​ barter system any standard of​ value .​
a​ ratio was expressed between canoes and arrows if​ they were traded for each other,​ but such an​ exchange gave no hint as​ to​ the​ ratio of​ bread to​ meet,​ or​ even of​ canoes to​ meet .​
Because of​ these disadvantages money was introduced into the​ commercial system as​ an​ intermediary,​ for which all goods could be sold and with which all goods could be bought .​
Thus money serves its first function,​ as​ a​ medium of​ exchange.
Money is​ a​ medium of​ exchange universally acceptable for goods and services .​
Originally the​ medium was the​ commodity most common in​ the​ trade of​ the​ time and place .​
Cattle served in​ Greece in​ the​ days of​ Homer .​
Grain,​ furs (in the​ Hudson Bay region),​ oil,​ salt,​ ivory,​ tea,​ wampum (among the​ American Indians),​ tobacco (in the​ colony of​ Virginia),​ and many other commodities served in​ various parts of​ the​ world as​ media of​ exchange .​
For them all things were sold; with them all things can be purchased .​
They were the​ money of​ the​ time .​
But gradually a​ tendency developed to​ use the​ metals,​ iron,​ copper,​ silver,​ and gold.
When first used the​ metal was not in​ the​ form of​ coins,​ but consisted of​ a​ certain weight .​
To guarantee the​ weight (and later the​ fineness) it​ became customary to​ stamp the​ metal with a​ government seal .​
We still have as​ the​ British standard coin,​ the​ pound,​ originally a​ pound of​ silver .​
But this stamp piece did not prevent sweaters from clipping off bits,​ and making the​ money short in​ weight .​
To prevent this,​ the​ seal or​ stamp was then affixed to​ both top and bottom of​ the​ piece .​
Sweaters then clipped the​ sides .​
Now coins are milled; that is,​ the​ sides are marked with corrugations to​ prevent clipping .​
Today money has come to​ consist of​ coins and cash that perform a​ function as​ a​ medium of​ exchange.
Under barter there is​ no standard of​ value,​ no least common denominator of​ values .​
With money we​ have a​ medium in​ which all values may be expressed,​ and money enters into its second function,​ to​ serve as​ a​ standard of​ value .​
Under a​ money regime we​ express all values in​ the​ commercial world in​ terms of​ a​ standard coin,​ in​ the​ United States in​ terms of​ dollars .​
With all goods related to​ one common standard,​ we​ know it​ wants the​ relation to​ one another of​ all commodities whose value is​ stated in​ money .​
If one product has its value stated as​ one dollar and the​ second as​ five dollars,​ we​ know that the​ ratio value of​ one to​ the​ other is​ one to​ five.
Money performs a​ further service .​
Borrowing and paying of​ debts has always constituted an​ important phase of​ commerce .​
The difficulty that we​ experience in​ using money as​ the​ standard of​ deferred payment is​ due to​ its instability and the​ change in​ its purchasing power .​
People are not interested in​ money,​ but in​ what it​ will buy .​
The purchasing power of​ money depends upon price level,​ which depending on​ government stability,​ changes drastically over periods of​ time.
The future for money in​ the​ global economy will enable quicker and more seamless transactions .​
Those with goods and services in​ countries worldwide will efficiently be able to​ process exchanges .​
As money continues to​ evolve so will its availability .​
The Internet is​ rapidly changing the​ face of​ money and with this change will come new opportunity to​ profit from it.

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