Money Matters – Article 2
This is article 2, part of a series of monthly articles with the intention of discussing matters related to Money and Finance.
We look forward to your active readership, participation, critique, feedback, comments and suggestions. Come, join with us, and let us explore this most important of subjects in detail.
We will be covering a wide range of issues; Income, Savings, Cash-flow, Debt, Finance, Property, Assets, Managed funds, Shares, Super, investments, and many more.
We plan to interact actively with you and will promptly respond to your queries and suggestions.
In our previous article we started a conversation on a fundamental question; What is Money?
Love it or Hate it, we know that Money is the other half of our lives, part of almost all transactions we conduct, big and small.
We discussed the origin of money; The Barter system
We discussed evolution of the concept of Money; From exchange of simple goods, to nomination of certain ‘commodities’ as preferred means of exchange, to the narrowing down of this ‘preferred means of exchange’ to certain metals, and finally, widespread acceptance of Gold and Silver as the preferred means of exchange.
The concept of producing excess goods and services (more than what is needed for minimum sustenance of a Family, Group, Village, Community, Town, City, Region, etc.) was a revolution.
People could now have a wider variety of goods and services by more trading and exchange.
They could ‘store’ some of it for longer periods of time, ‘specialise’ and become more ‘efficient’ in producing particular goods and services
They could now save time and effort, lead more healthy and fulfilling lives.
Looking at it another way – They could ‘save’ and ‘liberate’ their ‘Time’, ‘store’ it, and use it for things they ‘wanted’ to do.
In short – Gold became a Storage of Value. Gold became “Money”
Let us now move forward ……… Why was Gold and Silver the natural choice?
Many commodities were tried and experimented, no doubt, including Grains, Livestock, Salt, Hides, Beads, Feathers, etc. in ancient times.
Gold is rare, divisible, non-perishable, cannot be replicated (counterfeited), and most importantly has high aesthetic value. It was logical and natural choice to select gold as a means of exchange and storage of value.
Gold as Currency:
The next logical evolution was to use Gold as a ‘Currency’.
You could now produce anything, anywhere, trade it anywhere for a common store of value – a ‘Currency’ – Gold.
You could then transport Gold easily to anywhere, store it for any period of time, trade it for any other goods or service, anywhere and anytime of your choice.
There were wider effects; one of them political. Exchange and trade increased citizen’s wealth, and wealth increased their influence, leading to more knowledge and power.
The ruling establishment were not very happy with this.
They tried to regulate, control and manipulate the source of growing independence and power of their citizens by trying to manipulate the ‘Currency’.
There were various experiments, mostly by force & diktat, by various leaders, rulers, invaders, etc. to use other forms of ‘Currency’.
Peppercorns, Leather Coins, Tea leaves ……….. And Paper (ring a bell ????) were used at various times, by force, but Gold remained the most popular free-market choice of Currency.
There were a few problems as well, one of them being ‘Safety’ and ‘Security’.
Storing, handling, carrying gold all the time was not ideal.
There was a need to ‘own’ the currency but not having to have it physically all the time ………….. What was the solution?
We shall explore that in our next article.
Once again, we hope this article was of some value to you. We will continue with the story about the History of Money next month. We look forward to your active feedback, comments and suggestions.
Talk to you next month.
About the Author: Harish Narayana is a Sydney based Finance Professional and Adviser.