Finance Wanted.

By Luke Hawthorne

Once Upon A Time...men (and women) exchanged goods and services with each other and they called it "bartering". In effect, they were exchanging something that they owned for something that they wanted or needed. What they owned may simply have been their time and strength, so they would labor for somebody else in exchange for things, perhaps food and shelter.

While communities were small, this worked reasonably well, and it still would, IF communities were small. Nowadays communities are rarely small, ranging from the thousands to the multiple millions. There are only a very few groups of people around the world who could pay for goods in this way anymore.

Then somebody (most likely several all around the globe) thought that it would be a good idea to barter with something that most people in their vicinity considered valuable. Thus, things like pebbles, crystals, ornaments, beads, etc. became the 'money' of that day (even TULIPS at one point!). Thousands of things have been used as money throughout history...we're currently using zeros and ones in computer memory as money! (More on that later!).

Up until quite recently, precious metals like gold and silver were used as the prime 'currency' (meaning nothing more than "what's used NOW") in most of the world.

Gold and silver used to be exchanged by weight, NOT as coins. Because these metals were considered valuable by most people and were relatively easy to transport and hide, they became the DeFacto materials for trade.

And THERE is the most important aspect of money. MOST PEOPLE accepted it as a form of currency!

In and of itself, the metal had little value; they were nicely colored and could be used to make cups and bowls and trinkets, but other than that, at that time, they had no other applications.

For these metals to have any other kind of value, MOST PEOPLE had to have the CONFIDENCE that if they took the metal in return for something of theirs (wheat, a cow or a service of some kind), THEY could then go and do the same WITH that metal. If the confidence was not there, why would they accept it in the first place?

So what is money then? Well, there are several kinds: There is the commodity kind like the gold or silver; then there is the IOU note kind (you do/give something for you if you PROMISE to do/give something of agreed-upon value back to me) or PROMISSORY money.

Finally there is 'fiat currency', which is the currency that a ruling organization (king, emperor, dictator, government etc.) rules is the medium of exchange. THEY say it's legal tender...so it's legal tender!

Continued in Part Two

Luke Hawthorne has been writing for over 12 years. His interests include flying airplanes, scuba-diving, skiing, paragliding and making money. http://www.lukehawthorne.com