What is money?
Money of itself has no actual value. It can be in any mode, such as a metal coin, shell, or paper piece. Its value is defined by people on the piece of paper. In today’s time, money has become a commodity accepted by everyone for exchanging goods and services. But, almost every country has its specific system and paper money.
Before the invention of money, there was a barter system used. In this system, people used to exchange commodities from one another. For example, farmers would give grains in exchange for wheat, etc. in such cases, and these commodities become money. This is the system that was invented in the earliest days of human beings on earth.
Why did the barter system stop?
With time, people realized that it was not much successful as people started disagreeing on exchanging the commodities because they thought the other product did not have that much worth.
Also, the other problem that occurred was some people would not need the product another person is offering. Because of these kinds of problems, commodity money was introduced.
An issue with commodities
In ancient times, the term commodity was mainly used for tea, salt, cattle and seeds. Using these commodities eliminated some of the difficulties of the barter system. Still, it fostered other concerns as these things were not easy to move because some were perishable and challenging to store.
The idea of money
All these issues led to the creation of money in the form of coins. Precious metals were used at that time to create these coins. The fact of who invented money is still unknown, but it is being said that its usage began back in 5000 B.C. (See How much money is in the world?)
Around 770 B.C., it is considered that Lydians were the initial western culture to make coins. Later, all the different countries began to make their own coins with specific values. This system made it really simple for people to calculate the objects’ worth and pay accordingly.
After some time, people stopped making coins from precious metals and started making money on paper and coins from non-precious metals. The new system began in which the government or bank would give the money in exchange for people offering gold or silver.
What is used today?
In today’s time, fiat money is used as the primary source of exchanging commodities. Money has so much worth today because the government decree provided it such value. As per law, it is unlawful to say no to the legal currency in the inclination of some other payment method. (See How Much Would A Shilling Or A Pound Cost In Today’s Us Money?)
When was the first paper money issued?
The first paper money was created in the U.S on March 10, 1862. The notes were printed of value $5, $10 and $20. Congress approved them on March 17, 1862.