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Money History: When and why they were first used

2022-05-22 21:56:36Lifestyle SHKRUAR NGA REDAKSIA VOX
Money History: When and why they were first used
History of money

Some say that money revolves around the world, while others consider it the source of all evil. But what exactly is money? Why do we need it? Where did it come from? Economists tell the story of one of the key elements of human life.

Exchange problems in early times

Before money was invented, the only way to trade goods was to exchange. If you had a goat too, but you needed wheat, you could find someone to trade it for. But the exchange also had its problems as a process. The problem lay in the fact of wish matching. What if the person who had the wheat was interested in replacing it with just an ax. Then the person who had the goat had to find a person who had the ax, and thus make the triple exchange. But during the search, he may starve to death. Second, what if the person who had the flour really wanted a goat, but not before his daughter's wedding that would take place after three months? Therefore contracts were needed, but the societies of that time were not educated up to this stage.

Therefore the agreement of the two parties had to be based on memory. But this left room for abuse: "What are you saying, I never gave you the word for wheat et .etc etc".

One day a Neolithic farmer, who remains anonymous, came up with a clever solution: Why not decide on something that everyone would admit to having. This theory was later used to buy goats, axes and everything else. The dollar sign came to the farmer's mind. So his idea was what was later called "money". After a period of trial and error, it was decided that people with special characteristics would be involved in this work. The money should have been:

-To show the right value for the goods. The exchange of a goat that someone had raised with effort and love, with a handful of stones collected on the ground, could no longer be allowed.

- Difficult to falsify. A monetary system based on pieces of paper with crosses drawn on them was destined to fail. If money were to be easily earned, people would find it difficult to resist earning it. The result would be a galloping inflation.

- To be portable. Sure you can trade big things like house or mountain land, but these are not things that are sold in stores. That's why money is needed.

- Be consistent. Commodities such as salt can be seen as a good means of exchange, but what would happen if we left it in the rain, would lose everything.

- Easily separable. Imagine a society where the only form of money was the $ 100 coin. This would not be a problem for large transactions, but it would be a "headache" if you just wanted to buy a matchbox.

 - Desirable. Nowadays, we are all amazed and delighted when we receive these pieces of paper, but this only because of the symbolic value they have. With these criteria in mind, our ancestors developed the first primitive forms of money trade.

Primitive banks

Up to this stage there were no coins. But the value of the metal was judged by its weight. Before coins could come to life, banking institutions had to be established. Institutions that should create trust and guarantees that exchanges would be conducted properly. The first banking institutions were royal palaces, temples and state warehouses in Mesopotamia and Egypt. This is because they were well protected. In these deposits were left invoices, through which transactions were performed with other parties. Written on clay tablets or papyrus, they are considered the forerunners of today's checks and banknotes. Over time more bank houses began to open. They are mentioned in the Babylonian Code of Hammurabi (1760 BC).

Early coins

In the year 1000 BC, after two centuries of transactions with real items, bronze and copper began to be used as a means of exchange. Then in the eighth century BC, "swords" and "knives" became fashionable. They were small versions of agricultural tools, so small to be used that their new purpose was something else already. The world's first real coins are widely believed to have been minted in Asia Minor around 640 BC. They were made of gold and silver. These were chosen, probably because they guaranteed the purity of the constituent metals. The lion's head, which symbolized the Mermnad dynasty, was stamped on one side of the coins. This was the result of the primitive method of production. On the other side of the coin was placed the hammer symbol. But as the practice of coinage spread to other Greek-speaking countries around the world, they began to put up distinctive signs of their cities. Later, it was the Persians and other ancient populations who began to produce their own coins.

Banknote development

The next stage in the evolution of currency was the invention of banknotes. The first banknotes were used in China during the regime of Emperor Hien Tsung (806-821 AD). But in the end China did not do well with this new form of money production. Because it printed so much that it led the country to inflation. In 1455, the Chinese abandoned the use of banknotes and did not return to them for a long time. The Chinese experience was repeated when Sweden became the first European country to experiment with the banknote. In 1661 a banker named Johan Palmstruch began inventing banknotes that could be exchanged at his bank in Stockholm for silver coins. But unfortunately for Palmstruch, he did not get the license to print money. He produced more banknotes than the bank had silver coins, and in 1668 he was prosecuted for fraud. He was initially sentenced to death, but his sentence was later commuted to imprisonment.

Despite these banknote failures, it was clear that history was moving towards a new form of currency. As economic activity continued to grow in Europe, it was necessary for money supply to expand beyond the set limits.

This need led to the establishment of the first national central banks. People were beginning to have more confidence in government-backed records than in private institutions. They were even willing to accept some of the government's delays in exchanging silver coins for banknotes, as happened in Britain during the "Restriction Period" from 1797 to 1821.

Gold Standard

Believing the issue of a central authority banknotes removed the risk of bankruptcy, but increased the inflation spectrum. This would happen if a central bank were to print a lot of money. (To understand: imagine if you are an egg seller, and suddenly everyone has twice as much money as they had, you would be foolish if you continued to sell eggs for the same price). It was the risk of inflation, among many other factors, that pushed governments to adhere to the Gold Standard, which showed that money was indeed made of precious metal. The Gold Standard was a mechanism that fixed the value of coins and banknotes of countries participating in the Gold Standard. This standard operated both domestically and abroad. Domestically, kept inflation under control by ensuring that the money supply remained relatively constant. While in the international sphere, you had the effect of fixing exchange rates between the nations involved.

The benefits of exchange rates included stability and a balance of prices between nations. If Britain made a technological breakthrough that boosted economic output, its prices would fall. And assuming U.S. prices would stay the same, that would make British products more popular from an American perspective, and American products would be less likable than the UK. The Gold standard had a very good performance as long as everyone played clean. In the US, for example, inflation between 1880 and 1914 averaged 0.1% per year. The problem was that many nations were prone to cheating. When World War I broke out in 1914, countries began to reject their rule books. They started printing money to fund their war efforts and as a result the Gold Standard was broken. This standard was restored to a modified form in 1925 but was again dropped due to instability caused by the Great Depression.

In 1931, Britain abandoned the Gold Standard as a result of massive gold outflows from the nation's coffers. The successor to the Gold Standard was the Bretton Woods System, named after the New Hampshire resort. Once again the exchange rates were fixed with a margin of error of 1%, but the main feature was that all participating countries except the US were allowed to repay their debts in US dollars. But unfortunately this did not last long, because even the US was running out of gold, which put the whole system at risk. In 1971, President Nixon declared that the US would no longer give gold in exchange for dollars. The Gold Standard came to an end once and for all.

Fiat money

Since 1971, the world economy has been driven largely by a system of exchange rates, with the gold currency being replaced by the so-called "Fiat Money". It was a kind of money that retained its value despite government decree. The use of fiat money placed a greater responsibility on governments than they had when supporting precious metals.

Credit cards, debit cards and checks

Not so long ago, it was difficult to open a bank account. Until the 20th century, owning a checking account was a rarity. If anyone wanted to send money away, use the mail. When all people improved on welfare, banks discovered Marketing. In the 1980s, Westminster National Bank allowed its customers the option of check blocks. Credit cards with PIN significantly reduce the risk of theft and fraud. Everyone uses their own credit card, which they use to withdraw money via personal password.

E-Money: the future of cash

We are not far from a world where E-money will be used soon. E-Money comes in three forms, two of which are web creations. The first is the "non-present card" phenomenon where you have enough confidence in the online retailer. You and the dealer never meet, and there is no need to leave the house or office. Money goes from a physical commodity - a coin, banknote, or plastic card - to a virtual commodity. Secondly, because we have seen recently that online commerce is growing by leaps and bounds. One of the top profiles is Paypal, which is used for purchases on eBay. PayPal has been operating since the 2000s, and now operates in 103 markets, manages more than 133 accounts and allows customers to send, receive and hold funds in currencies ranging from the US dollar to Polish currency.

Even your mobile phone SIM card can be used to pay for small things bought in everyday life, which is being proven in South Korea. However this is a process that will be monitored.

Currency issues: the history of the currencies of the respective countries

Sterling - Sterling was first mentioned in 1078 as sterilensis and in the 13th century took the term it has today. England had a uniform national currency 600 years before France, and 9000 years before Germany and Italy.

The pound was founded in 1560 by Elizabeth I. Today, the pound is used only in Great Britain and Northern Ireland. It is the oldest coin in the world still in use.

Euro

The idea of ​​a single European currency was first used in 1957 in the Treaty of Rome, to increase prosperity and foster ties between the peoples of Europe. 12 years later, at the European summit in The Hague, it was decided on a single currency. It was initially used in a "non-physical" form by banks and traveler's checks. In 2002, coins and banknotes came into circulation. More than 338 million Europeans, from 19 nations, now use the euro as their sole currency, making it the most traded value in the world. According to the European Commission, the symbol of the Euro is the combination of the Greek ypsilon, an E for Europe and the parallel lines that symbolize the stability of the currency.

The dollar

The dollar was approved by the Congress of the Confederation of the United States of America on July 6, 1785. The official British currency was used before the dollar. The use of foreign currencies was banned after the US dollar came into circulation. The word "bucks" or "greenbucks" is also used in everyday American slang. Although the United States declared independence from Britain in 1776, Americans still refer to their 1 cent coin with the word "penny".


Në përputhje me standarded JTI

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