Financial Markets Management class 9 chapter 1 notes

                

                MONEY - WHAT IT IS?

Expert says “money is what money does”.

A man on the street would probably cite coins and notes as a definition of money.

But is money just coins & notes?

What about balance in the bank? Haven’t we heard people saying I have money in the bank?

Definition of Money

Money is invention of human mind.

It is a symbol that represents the value of goods & services.

Money is a medium of exchange. It allows us to satisfy our needs & wants.

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Evolution of money

Initially, money was not a physical entity. There was no monetary system existed.

To get a particular commodity, people had to exchange it with another commodity. 

Which was called as Barter System.

Due to many limitations, Barter system could not serve the purpose.

Discovery of precious metals gave a solution to the problems in Barter system.

The metals were exchanged instead of commodities.

Later, difficulty to carry heavy metal coins paved way for paper money.

Due to increase in volume of business, paper money became too heavy to carry.

Thus paper money gave way to Intangible money.

Before money there was Barter system.

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Later commodities were as money.

For example:

Aztecs used beans.

Norwegians used butter

Early US colonists used tobacco leaves & animal hides

People of Paraguay used snails.

Roman soldiers paid ‘salarium of salt’. Modern term ‘Salary’ is originated from salarium as per language experts.

On the island of Nauru, islanders used rats.

Symbolic Money 💰

Early in pre history, people began exchanging items that had no real value. But had agreed upon & symbolic value.

E.g. Cowrie shell 🐚

 It was used as currency in China, India, Thailand & West Africa till 1930s.

Symbolic Currency

Wampum 

It was used as money in several American states.

It is oblong shells sawed into beads, polished, and then strung together.

A wampum factory remained in business until 1859 in New Jersey.

From its widespread use we get the current phrase ‘shelling out’ money.

Egyptian currency

Ancient Egyptians developed a system for making payments with weighed amounts of precious metal.

Metals were weighed on a balance with stone weights.

600 B.C. (the first coins)

Coins are pieces of metal marked with designs that indicates they are money

Earlier coins were made in the kingdom of Lydia now in Turkey in the 7th century B.C.

They used weighed lumps of metal, shape was unimportant, stamped with pictures to confirm their weight.

The stamp on the coin was a seal. 

The process of stamping is called minting.

Use of coins spread from Lydia across Africa and Europe.

500 B.C.

The earliest chinese coins were made from bronze in the shape of tools & shells.

Shells had been used as money earlier in China.

Chinese Paper Money

The earliest paper money was invented in China during the 10th century.

Chinese used one foot square pieces of deer skin as money initially and later started using paper money.

But in 1945 A.D. china discontinued paper money, due to increase in paper prices.

Paper Money in Europe 

Paper money was adopted in Europe much later than in Asia and the Arab world primarily because Europe didn’t have paper.

The first paper mill in Europe was established in 1151 A.D in what is now Spain.

11th century Europe government began printing paper money. Which served as official money.

The Swedish Stockholm Bank in 1661, the first bank in Europe to issue printed money.

India is one of the earliest issuers of coins in the world.

Moguls introduced paper money in india in 1236 A.D.

The origin of the word “rupee” is found in the word rup or rupa, which means silver. The original rupaya was a silver coin.

The Sanskrit word rupyakam means coins of silver.

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