From day one, money has been a valuable tool to facilitate trade and exchange. In the early days of human civilization, people used precious metals such as gold and silver as their universal form of currency. Eventually, this evolved into using particular types of currency named for the metal that makes up its content: paper currency. Throughout history, different cultures have developed their unique viewpoints on how money works and what it means to have money. However, from an economic standpoint, there are some universal principles that all currencies share. With this in mind, let's dive deeper into the history of currency and how it affects our economy today.
How Does Currency Work?
Currency is a form of payment that consists of a medium of exchange that is accepted as legal tender and a Sheen of value that acts as a money store for that particular country. Currency is usually a stable asset, but it can fluctuate in value based on international trade, demand, and supply conditions. This means that when one country runs a trade surplus with another, the importance of their respective currencies will rise against one another. However, when one country runs a trade deficit with another, the values of their respective currencies will fall. This is one of the essential principles of currency: the nation with the most dominant currency also has the most desirable currency options for goods and services.
What is the History of Currency, and Why is it Important?
At the beginning of recorded history, there was no specific name for money. Instead, people used various forms of currency, including animal skins, precious metals, and even shells. This diversity of currencies allowed different cultures to develop distinct currencies with many unique features. Some of these special features involved but were not limited to different designs and weights of the currency, the usage of specific metals in particular designs, and the addition or removal of distinguishing marks. These additional features made it easier for different cultures to develop other currencies associated with their specific culture.
How money became Common
Currency first emerged as a form of payment when the Sumerians developed a system of proto-bills dating back to the 3rd millennium BCE. This system of bills was later known as the Chyaxi currency and was used in the city-states of ancient Mesopotamia. The Sumerians also developed some of the first writing systems, which helped them formulate early marks of value, such as the shekel, known universally as the Babylonian tin.
When Did Monies Start to Exist?
Currency first came into being when people started to trade with each other. This can be traced back to the beginning of human civilization. The first trade between people may have occurred between Homo erectus and Homo sapiens some 200,000 years ago. From there, trade gradually grew in complexity as people began to form communities. For example, the first towns appeared around the 12th century BCE and cities around the 4th century BCE.
How Does the Economy Benefit from the Use of Money?
The benefits of having money are numerous and can be divided into three categories: financial, economic, and social. For financial reasons, most importantly, having money allows people to transact business and make purchases without depending on an unknown quantity for their value.
Summing up
In short, money is used to facilitate trade and exchange. It is the universal tool used to regulate the flow of goods and services in society. Currency is not a store of value by itself, but it can be used as a medium of exchange when coupled with a stable currency such as the Euro or the US dollar.