Different denominations of the euro currency.
Index of Encyclopædia Britannica, Inc.
moneygoods accepted by general consent as a form of economic exchange. It is the means by which prices and values are determined; as money, it circulates anonymously from one person to another and from one country to another, thus facilitating trade, and it is the main measure of wealth.
(Read Britannica’s biography of this author, Nobelist Milton Friedman.)
The subject of money has fascinated people since the time of Aristotle until today. A piece of paper written on one dollar, 10 euros, 100 yuan, or 1,000 yen is not so different, since the paper, from the same size as torn from a newspaper or magazine, will nevertheless enable its bearer to manage a certain amount of food, drinks, clothes and the rest of life while the other is only suitable for lighting a fire. Where does the difference come from? The simple, and correct, answer is that modern money is a social project. People accept money like that because they know others will accept it. This common knowledge makes pieces of paper valuable because everyone thinks they exist, and everyone thinks it is because in their experience money has been accepted in exchange for valuable goods, goods, or services. Now, at bottom money is a social convention, but it is an unusually strong convention that people will obey even under extreme provocation. In fact, collective power is what makes governments benefit by increasing income (increasing the quantity of) money. But it will not be destroyed. When there is a large increase in the number of these papers—as there is during and after wars—money may appear to be nothing more than scraps of paper. If the social security arrangement is a After that, people will look for other things—such as cigarettes and cognac that were once used in Germany after World War II. A new currency can replace an old one under very limited circumstances. In many countries with a history of high inflation, such as Argentina, Israel, or Russia, prices may be quoted in a different currency, such as the US dollar, because the dollar has a more stable value than the local currency. In addition, citizens of the country accept the dollar as a medium of exchange because it is popular and provides more stable purchasing power than the local currency.
Money works
The main function of money is to separate buying and selling, thus allowing trading to take place without so-called double coincidence. barter. In fact, credit could do this job, but, before extending the credit, the seller would want to know about the possibilities of payment. That requires a lot of information about the customer and sets the cost of information and ensures that the use of money is avoided.
If a person has something to sell and wants something else, the use of money avoids the need to find someone who is able and willing to make the desired exchange. A person can sell the surplus for total purchasing power—that is, “money”—to anyone who wants to buy it and use that money to buy the thing he wants from anyone who wants to sell it.
The importance of this work of money is shown in a remarkable way by the experience of In Germany after World War II, when paper money was rendered useless due to price controls that were successfully used by the occupying forces of America, France and Britain. Money quickly lost its value. People were unwilling to exchange real assets for the depreciating German currency. They turned to exchanging money or other non-cash items (such as cigarettes). Price controls reduced production incentives. The country’s economic output dropped by half. The later German “economic miracle” that occurred immediately after 1948 reflected, in part, the monetary revolution established by the authorities in place of a depreciating currency with a currency of fixed value. At the same time, the revolution abolished all price controls, thus allowing a money economy to replace a barter economy.
These examples showed the “medium of exchange” function of money. The separation of an act of sale from an act of purchase requires that there be something generally accepted in payment. But there must also be something that can serve as a temporary store of purchasing power, in which the seller holds the income in the period between the sale and the next price or that the buyer can take out purchasing power in total with which he can pay for what he bought. This is called “treasure” the work of money.
Different types of money
Anything can serve as currency that custom or social association and successful experience gives it the value of general acceptance, and a variety of things have done so—from wampum (beads made of shells) of the American Indians, to cowries (colored shells) in India, whale teeth among the Fijians, tobacco smoking among the early colonists of North America, to cigarettes. of Pacific island II, to Pacific cigarettes. Germany and prisons around the world. In fact, the widespread use of cattle as money in ancient times it is in the word pecuniaryfrom Latin cattlewhich means cattle. The development of money is characterized by repeated innovations in the use of money.
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