Free Essay: How Did Money Evolve Over Time, and Why?

Published: 2023-04-11
Free Essay: How Did Money Evolve Over Time, and Why?
Type of paper:  Essay
Categories:  History Banking Money
Pages: 4
Wordcount: 893 words
8 min read

Evolution is the gradual change of something over a long period of time. According to history, money has been in existence in approximately 5-6000years. Before the discovery of money, barter trade was being practiced. Due to its nature, it had many disadvantages, i.e., the process was time-consuming, and the prices were not transparent as there were no measures of value. This led to the development of battering with a medium of exchange, the first form of money developed alongside specialization. Rare objects started being used that people would control their availability, for example, shells and animal skin. Live animals like cows were also being used in 9000-6000 BCE. The Mesopotamia shekel was the first form of currency. These mediums of exchange had intrinsic value. After this, the people of China took another step and discovered the use of coins. The coins replaced the axes and animal belts that they were in use. China and India used coins with a hole in the middle to show value. These were easier since many coins could be tied together for easy transportation.

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Next, these coins evolved to be more special by being stamped with precious metals at the center; these metals included animal pictures. the lidyians were the first western culture to make coins the coins had many advantages. They were durable compared to the previous mediums, portable, and their production could be easily controlled. At around 600BCE, paper money was invented in China. The Chinese people disliked the coins' currency since the metals were expensive to produce and heavy to transport, especially in large quantities. Banks, therefore, started to provide their clients with IOUs that could be exchanged for coins. In 1685 Canadian soldiers were being paid with player cards bearing the governor's signature. As people became wealthier, paper [notes] currency became more popular since it was easy to transport.

As the notes dominated as the main form of money, coins that were made of expensive metals were discontinued. Despite this, the notes were still exchanged with silver and gold. The USA wanted to value us dollar to gold. After the second world war, us dollar became the international standard currency and was evaluated to gold in most parts of the world. In 1971, the notes were more than the gold, and this led to the dropping of the gold standard. After the end of the gold standard, modern money took the lead. Money value is being determined by the purchasing power and the inflation of a particular country. In Canada, Australia, and other developed countries, paper notes are being replaced with durable polymer notes, and this might mark another stage of evolution. Physical money is being knocked out slowly and being replaced with electronic currency in the form of debit and credit cards as well as cash transferred through banks.

Are Banks good for growth? Justify your answer

Banks are significant in growth. They contribute in many ways towards the development of individuals, organizations, and the country at large. The first way through which banks contribute to growth is by lending money to businesses. Banks provide an earning outlet to those with surplus and provide funds in the form of loans to those with a deficit. Hence companies can expand through these loans, and this can lead to growth. Banks, on the other hand, helps in the creation of new capital, the money saved in the banks can earn interest. Banks lend the extra money to manufactures to facilitate their purchase of raw materials, which acts as the principal capital for their businesses. Banks facilitate the exchange of goods and services; banks with low transaction costs encourage technological innovation as well as promote specialization. These are closely linked to growth. According to Adam Smith, the division of labor and specialization are the main determinants of growth therefore bank

According to Vincent carosso [1970], at an individual level, it becomes difficult and expensive to evaluate managers, firms, and market conditions. The banks act as an intermediary of providing information and advice on banking, interest, loans, and different investing plans, therefore, reducing the cost banks help in acquiring information about investments and help in the allocation of resources by enhancing risk diversification, size of feasible firms, and liquidity. This contributes to growth by making the economy more efficient. Banks can create money to the economy , due to business expansion, money is needed as the primary medium for exchange of transactions, the laws and rules many countries have given the banks the main role of monitoring the supply of money thus when there is a deficit banks quickly increases its money, therefore, acting as the main supplier of funds. For example, the bank of India is the leading supplier of money in India.

Lastly, banking leads to an increase in trading activities. It contributes to both internal and international trade. They do this by providing financial security to the customers in the form of guarantors and referees. Financial security is fundamental in trade since most of the transactions involving big businesses are conducted on credit. This enables sellers to get items on credit from the manufacturers, trade is then expanded, and this leads to economic growth. In business, banks also act as a reference point since it can be conducted in different between people in different geographical locations. Banks should be expanded since they are the backbone of growth.

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