Introduction
Before the introduction of money, batter trade was utilized in ancient trade. The exchange of goods and services was quite difficult. However, the advent of money revitalized trade. Over the years, the significance of money outweighed its limitations. The use of money contributed to the globalization of the world. Despite many upheavals, money transcended to become one of the most important means of exchange in the world. This paper will identify and analyze the three most significant events in the history of money (Ferguson 11).
The Creation of Companies
The creation of companies enabled numerous shareholders to pool their resources for a common purpose of investing. The advent of joint-stock corporations, as well as limited liability corporations, prompted the ascent of money. The former refers to a situation where investors own capital while the latter refers to a situation owners are protected in case of failure. Companies had the affluence to span continents for profits. This created what is known as stock, part of the company that is bought based on its potential. This innovative element ensured companies are run efficiently to increase their stock market prices. Stock valuation ensured that companies are kept on the edge. However, the stock market is also an environment on its own. Decisions that lie with potential investors may vary. Moreover, fear may grip investors when stock prices fall thereby causing them to sell off (Ferguson 120).
Poor strategies can lead to the fall of companies. For instance, shares can rise to untenable levels thereby causing a crash. In most cases, insider investors reap from naive investors in the event of a financial bubble (Shiller 45). The stock market has its cycle; the cycle is in five main stages namely displacement, euphoria, mania, distress, and revulsion. Only insiders have adequate knowledge on the stage at which stock of a company can be. In other words, most speculative buyers lose out. Prevailing political conditions can raise inflation, which in turn can lower stock prices. Stock bubbles have led to world depressions in the past, companies can easily contribute to such stock bubbles (Silber 16).
The Creation of the Bond Market
The creation of a bond market is considered as one of the most revolutionary events in the world. During Clinton’s tenure, a bond was touted as the single most important economic stimulus in the world. Usually, multinational corporations or governments borrow money from the public through the issuance of bonds. Bonds have created a huge debt for governments as seen in Japan’s case. Of great concern is the fact that the bond market decides the face value of bonds, which may arise, thereby increasing government debts. Bond issuance began some eight centuries ago in Northern Italy but has evolved to about $18 trillion in international trade. Moreover, a domestic bond has reached high levels of about $50 trillion as observed in Japan’s case (Ferguson 66).
The bond market affects everyone. For instance, retirement benefits are usually invested in bonds. Additionally, it sets lasting interest rates for countries. That is when prices for bonds decrease then interest rates increase. This can have painful repercussions for citizens. In essence, such a move can lead to a decline in the capital as well as an increase in mortgage rates. Essentially, the bond market is the foundation for every other market since it affects the value of every commodity in the market. Moreover, it influences every fiscal policy in a country with its ability to increase the cost of borrowing. The government can opt to raise taxes or default on bonds or cut expenditures (McGregor 1). American civil war authenticated the importance of the bond market. Faltering activities led to the South’s fall because they could not continue with their cotton-backed bonds (Weidenmier 875). Moreover, the Rothschilds did not invest in their bonds. Ultimately, they lost the war as financial repercussions crept in. Moreover, investing in government bonds to finance the German war ended up in national insolvency.
The advent of Property Ownership
The advent of property ownership was an essential event in the history of money. Property ownership was left to the elite in the past; however, this has changed. In fact, anyone can now own property (Ferguson 235). In the early nineteenth century, landowners were so powerful that they selected members of parliament in England. It should be noted that although aristocrats do not have political influence in England now, land ownership is still monopolized by a few people. For instance, two-thirds of the land in Britain is owned by just 189, 000 families. Property has been seen to entice lenders more than anything else does because it does not disappear. In this regard, a borrower pegs the risk of losing property on salary while the lender pegs risk on the property. This is unfair to borrowers since they have a higher risk of default than lenders (Lefebvre 1).
People like the third Duke of Buckingham owned numerous acres of land yet he still found himself in debt. The Duke’s fall was an indication of a new order, the democratic era in British history where a regular job was considered more important than an inherited title. This was quite clear when the Duke’s son became the chairperson of London and North Western Railway Company despite owning thousands of acres of land (O’Hara 14). America is credited with creating property ownership policy. The advent of mortgages revolutionized property ownership. Yet it had its challenges especially during depressions that led to auctioning of homes. The FHA did well to revive property ownership by granting insurance cover for mortgage lenders. Moreover, the FHA formulated structures for long-term mortgages. This prospect revitalized property ownership in the United States and the world at large. In essence, the advent of property ownership was a significant event in the history of money.
Conclusion
Money has revolutionized trade in the world. In fact, its inception came with great changes to the business environment. Nonetheless, three of the most important themes/events in the history of money were the creation of bonds, the establishment of companies, and the commencement of property ownership. These three themes/events revived fiscal policies in the world. In fact, they helped shape international monetary policies across the globe. Nonetheless, it is worth noting that the three have their risks, especially the bond market that is unpredictable due to its high volatility.
Works Cited
Ferguson, Niall. The Ascent of Money: A Financial History of the World, New York: Penguin, 2008. Print.
Lefebvre, Ben. “Justice Dept. Accuses Detroit Bank of Bias in Lending.” New York Times 20 May 2004:1. Print.
McGregor, Richard. “Chinese Buy into Conspiracy Theory.” Financial Times 26 Sept. 2007:1. Print.
O’Hara, Glen. From Dreams to Disillusionment: Economic and Social Planning in 1960s Britain, Hampshire: Basingstoke, 2007. Print.
Shiller, Robert. Irrational Exuberance. 2nd ed., New Jersey: Princeton, 2005. Print.
Silber, William. When Washington Shut down Wall Street: The Great Financial Crisis of 1914 and the Origins of America’s Monetary Supremacy, New Jersey: Princeton, 2006. Print.
Weidenmier, Marc. “Turning Points in the U.S. Civil War: Views from the Gray back Market.” Southern Economic Journal, 68.4 (2002): 875-90. Print.