The History of Money

The best things in life are free
But you can keep them for the birds and bees
Now give me money

Note: the following is another guest post was written by James Lander, a writer for the couponing site, Couponing.com; they provide a variety of coupons and offer couponing tips and techniques.

Money has been around for a very long time. In the beginning of recorded time, people used to barter for their needs. If you were a fisherman and needed bread to go with your supper, you would trade your catch with the bakery. The obvious problem is, and was, when the baker didn’t like fish.

Those who lived long ago came up with a solution to this problem…money! They determined that they needed to have something that would be accepted in trade for the items they needed. In the earliest cultures they often used seashells or beads. There were times when tea or furs or meat were used.

According to the Federal Reserve Bank of Minneapolis, in around 700 BC there was a group of seafaring people known as Lydians. They developed the first coins to increase their ability to trade. This tradition was handed down from one civilization to another. People liked coins because they were easy to transport, they lasted a long time and they had some precious metal in them. Paper money was introduced as a means of exchange by the Chinese beginning in the T’ang Dynasty in the 7th century. According to the Oracle Think Quest, paper money caused uncontrolled inflation and in 1455 the Chinese stopped using it. It was a long time before European countries started using paper money.

The Gold Standard was introduced in the mid-1700s in England. This meant that a certain amount of gold was tied to the value of each paper currency. The United States officially adopted the gold standard in 1900 with the Gold Standard Act, although a de facto gold standard had existed since the early 1800s. One of the best things about the Gold Standard was that it was an effective way to control inflation because it prevented the federal government from printing money without having the necessary gold reserves to guarantee the dollar’s value. It also increased confidence in the value of a country’s money since that money was tied to a tangible commodity.

The Gold Standard’s greatest strength, however, is also its greatest drawback. By restricting the government’s ability to print money, the Gold Standard makes temporary large expenditures (such as wars) nearly impossible. After breaking down during both World Wars, the Gold Standard was abandoned following WWII in favor of the “Bretton Woods System,” or a system in which the United States adopted the Gold Standard and other countries tied the values of their currencies to the US Dollar. President Nixon ended this system in 1971, and today most countries allow the value of their currencies to “float,” or be determined on the global currency exchange market. While this system also has its drawbacks – most notably in allowing nations to accumulate crippling debt – it allows nations a great deal of monetary flexibility.

Money has undergone significant changes since its origins in ancient times, but none is more striking than the rise of electronic money transfers. Today, nearly all government transactions and a significant portion of consumer transactions are carried out via electronic transfers. Consumers now rarely need to use paper money and can instead use credit or debit cards for the majority of their purchases. The Internet has allowed shoppers to buy anything – from computers to groceries – from the comfort of their own homes.

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