What is money?
Modern culture is gradually changing, and the demand for money continues to transform. Money seems to control all aspects of life, ranging from food to health. It was developed due to the transferability and divisibility issues associated with the traditional barter trade and other outdated currency systems. It is difficult to live without money today as it has become an integral part of the daily lives of humans. It has the ability to simplify all aspects of commercial trade as it acts as a unit through which commodities are bought and sold. In the absence of money, it would be impossible to carry out trading activities. Thus, the impact of the absence of money in the economy would be catastrophic.
The period during the Great Depression in the 1930’s is a good example of how money was important in the economy. The era was characterized by the disappearance of money, leaving very little of it to circulate among people and businesses. Although there were goods and services waiting to be purchased, there was no money to do so, and the world came to a standstill. Developed countries such as America were the most affected, and most citizens were robbed of their earnings and savings.
This is an indication that money is important, and life would be meaningless without it. However, it is important to note that money in itself is not everything as historical communities survived without paper or coin money. What is important is the value that people place on whatever unit they refer to as ‘money.’
Money acts as a medium of exchange and an element of measurement of the value of goods and services. This means that it allows individuals to understand how much items cost and promotes saving. Once an individual understands the cost of a commodity, it becomes easier to plan and save money to buy that commodity. In addition, the valuable nature of money is based on the fact that it is a universally accepted form of payment. In this regard, it promotes international trade as the dollar, for example, can be exchanged with the Indian Rupee. The provision of basic needs and wants to depend on the availability of money.
Based on this view, money is an important unit in determining the survival, and the social and economic status of individuals and families. In this respect, one can say that money is a necessity that gives meaning to life. In summary, money forms a critical part of the modern life as it majorly operates through this basic unit called ‘money’.
How the purpose and significance of money has changed through history
During the barter trade era, there was no medium of exchange. Goods were simply exchanged with other goods through trade agreements between the buyers and sellers. Moreover, there was no unit of determining how much the goods were worth. This method was tiring, inefficient, and incomparable to the effectiveness of the current currency system. It was also difficult to find individuals who were willing to trade an item of interest, and most of the items traded lack equality in terms of their worth.
As a result of the challenges experienced through barter trade, the currency was introduced. Such currency was able to determine the underlying value of merchandises. Since the currencies were extensively desired during the colonial time, they became valuable. Some of the currencies used during this time included beaver skins and dried corn. The evolution from barter trade to currency units means that ‘money’ promoted the desire to attach values on goods and services. Although such currency units became popular at the time, they lacked uniformity and standardization. Additionally, there were possibilities of losing their worth over time. In this regard, the introduction of money in form of notes and coins afforded the availability of mediums that were standardized and consistent.
The introduction of metallic money in the form of gold and silver transformed the society to be commercially oriented. However, these metals were scarce and prompted the need to develop the coinage system. Although the metallic money overcame the shortcomings of the previous systems, it was heavy and could not be used in quick transactions. Furthermore, there were portability problems associated with the system and the quantity and quality of the gold and silver had to be tested regularly. During this time, ‘money’ had immense value as it was equated to expensive and precious metals. However, its role as a medium of exchange had not changed.
The introduction of the coin and paper money system played a significant role in promoting global economic progress. It became to be used as a unit in all forms of exchange and overcame all the challenges experienced by the previous systems. Moreover, it simplified the concepts of buying and selling in the free market as individuals only had to exchange their goods and services with coins or notes worth the same value.
The use of coin and paper money eased the depositing and withdrawing activities in banks. This is because money was now easy to carry around and could be transported to the banks. Additionally, there was an enhancement of international trading activities as currencies were easier to buy. It is clear that the different forms of money used through history served one major purpose; to promote the exchange of goods and services. The concept of money as a medium of exchange has evolved significantly, as the initial systems failed to recognize the value of money. Furthermore, the modern society has developed more efficient ways to attach ‘price’ on commodities, eliminating the ‘double coincidence of wants’ challenges in previous systems. Lastly, money has played a significant role in predicting the supply and demands of commodities in the society.
Evolution of personal ideas on money
My original opinion of money was in term of the dollars of the United States, the Euros of Europe, and the Sterling Pound of the United Kingdom among other currencies. I understood that having money meant that one could be able to purchase goods and services. After this course, my personal ideas of money have transformed significantly. Understanding how money evolved through centuries has enabled me to recognize the challenges that were associated with the previous currency systems. An example is the inability of barter trade to place value on commodities. As a result, people did not get the true value of their goods.
Such perspectives have enabled me to appreciate the role of money in transforming economies. Without money, it would be difficult for countries to buy commodities such as oil from other nations. The global buying and selling of goods and services forms a chain through which money circulates throughout the world. I have also understood that the value of money is dependent on the economies of different countries. The challenges in the global financial history have made me appreciate the value and the durable nature of money. Furthermore, money has played a significant role in maintaining the country’s GDP’s and safeguarding healthy economic competition.
We live in a materialistic world in which money has become a crucial commodity in promoting survival. In this regard, I now understand the need to plan and save to ensure survival in the materialistic world. Although having money is a resource in itself, it also enables individual to acquire other resources. Accumulation of investments also guarantees that people have resources to fall back on if they ran out of money. Everything in the world has monetary value and the ability to acquire these things determines the quality of life that one lives. I understand that money is powerful and tends to rule the world today. Moreover, the value attached to money has increased its demand.
This is because the society claims that life would be impossible without money. Money is a humble agent that has the ability to promote supremacy and authority. In summary, the course has enabled me to appreciate the history of money and understand that the current currencies would be absent without it. The course has afforded me the knowledge to make wise decisions with regard to spending the little money I have. This is due to the comprehension that money is a critical aspect in the daily lives of all human beings.