Introduction
Money is a medium of exchange of a certain value, which one cannot consume or utilize directly. Thousands of years ago people exchanged useful items with one another. Later, objects used for exchange, which had a generally known value, were used as the mode of payment. When requirement of exchange increased, the first coins were made, later followed by paper money. Banks took over the money business. They lent money or printed bank notes during a strong inflation.
What was the first means of payment?
Earlier, people paid with ‘natural money’, i.e., with valuables, useful or beautiful things such as stones, shells, rings, animal skins, pieces of iron, or salt etc. In Africa and South Asia, cowries were a recognized means of payment and these are used even today in some islands of the Pacific Ocean to make a payment. Natural money was easy to store, count, and transport. That is why, silver and bronze were used in the form of bars and wires and in North Africa, payment was often made with salt.
When did we first use coins?
Coins were introduced as a means to trade items of daily usage in India and China in 6th century BC. In Europe, the Lydians were the first people to use embossed coins in the Mediterranean area starting from 7th century BC. Coins were very useful in trading. They always had the same size, same weight, and always looked the same. There was no need to weigh them separately because they could be counted. Trading with coins was also done by the ancient Greeks and in the Roman Empire. Alexander the Great was probably the first man to be embossed on a coin.
When did banking begin?
According to historical evidence there were banks in Mesopotamia as early as 2nd century BC. In 1460 AD, banks in the European region were active only at important trading places for exchanging coins. After 1609 AD the note-issuing banks came into existence, which traded in bank notes. Trading with notes mainly developed in northern Italy. The word ‘bank’ is derived from the Italian word ‘banca’-which were the tables used by the money changers on trading routes. Today, banks also provide loans to people.
Who invented paper money?
The first paper money was probably used in 806 AD in China. The first banknotes in Europe were issued in 1661 by the Bank of Stockholm, Sweden when there was a shortage of coins. The increasing trade demanded increased payment, and it was inconvenient to pay large amounts with heavy coins.
Therefore, banks began to keep coins and to issue receipts-also called as bank notes-for them. These were valid means of payment. They gave their owners the right to demand the corresponding amount of coins from the bank at any time. Similarly, today we have plastic ATM cards issued by a bank that can be used for money withdrawal and other types of transactions, often through interbank Networks.
What is inflation?
Inflation is a Latin word that means ‘to blow up or swell’. This is exactly what happens in inflation. The amount of money in circulation increases. As a result, money loses its value and purchasing power, because the value of goods increases more as compared to that of money. In 1923, Germany experienced one of the most severe inflations of all time. During the First World War and thereafter a lot of money was printed, but there were no groceries and the other essential goods. The prices increased rapidly, for one US Dollar (today around 80-82 rupees) one had to give around 4 billion mark-that is a 4 followed by 12 zeroes!
What is barter system?
The barter system is an ancient method of exchange where goods and services are traded directly without the use of money. In a barter system, people swap items for items when they need, based on mutual agreement of value. For example, a farmer might trade a portion of crops for tools from a blacksmith. The system was widely used in earlier societies when currency was not available.
One key challenge of the barter system is the “double coincidence of wants.” This means both parties must have something the other wants at the same time. For example, if a weaver wants bread, but the baker doesn’t need cloth, the trade cannot occur. This inefficiency made the system burdensome as economies grew more complex. Over the time, societies developed money—whether in the form of stones, metals, or paper—as a standardized medium of exchange. Money solved many of the problems inherent in bartering by providing a common measure of value, making trade easier and more capable.
Read more: https://testyourgk.in/stone-age-period/
Which is the most valuable currency in the world?
The most valuable currency in the world today as on 2024 is the Kuwaiti Dinar (KWD). Introduced in 1961, the Kuwaiti Dinar is used in Kuwait, a small, oil-rich country in the Middle East. Its high value is due to the country’s vast oil reserves, which provide significant wealth and economic stability. Unlike many currencies that fluctuate considerably, the Kuwaiti Dinar has remained strong for several reasons. The government pins the Dinar to a basket of currencies rather than relying solely on the US Dollar, which helps maintain its strength despite global financial shifts.
Additionally, Kuwait’s small population and high per capita income contribute to the currency’s value. The country’s oil exports, which form the backbone of its economy, are traded in dollars, further stabilizing its economy and maintaining the Dinar’s dominance. While the Kuwaiti Dinar is not widely used outside Kuwait, its high value reflects the strength of the country’s economy.
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