A monetary system has been utilized ever since humans existed on earth, because right from the beginning goods owned by one person have been needed by another person, just for survival. At first however, there was no universal kind of currency that could be used to procure goods – all exchanges came about as a result of bartering, or trading one object for another. There were probably such crude exchanges as far back as the earliest human existence, likely involving food, animal skins, salt, simple tools, and weapons. Coinciding with the development of towns and cities in human history, bartering evolved into a somewhat more consistent system wherein cattle, sheep, and other livestock with universal value could be exchanged for all other goods needed.
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This kind of money exchange developed in the same places that civilization itself arose, in Mesopotamia, Egypt, and the Indus Valley. Around 1100 B.C. China began using small bronze representations of the objects to be traded in lieu of the objects themselves for the sake of convenience. Then in 600 B.C. the first true coins were minted from electrum by Lydia’s King Alyattes, and his kingdom prospered using the new medium of exchange. From these humble origins, money has largely evolved to a system of electronic exchanges, in which no physical money is actually used, but is simply debited or credited from the accounts of individuals and businesses.
Investopedia – The History of Money: From Barter to Banknotes
NOVA – The History of Money
Timelines of History – Timeline of Money
History Lists – 8 Things You may not Know About Money
History Infographics – The Story of Money
The Role Money Has In The Economy
Everyone is aware of at least one or two roles that money plays in the economy, even if they don’t consciously think about it. As a medium of exchange, money facilitates the transactions between parties for the exchange of goods – producers of goods offer them to consumers for money, and in turn use that money to procure goods that they themselves need. As a unit of value, money measures the value of services or goods and provides a standard so that the amount of goods given to procure any object can be determined. Money also serves to store value in a way that is very difficult in a strictly bartering system – money can be saved easily to store up value. Besides serving as the basis of modern transactions, money also acts as the basis of deferred payments, which is our modern credit system. This is the only system of deferred payments in which neither party loses value, and economic equilibrium is maintained for all.
Panel featuring Paul Samuelson – The Role of Money in National Economic Policy
Preserve Articles – 4 Essential Functions of Money
Wesley Mitchell – The Role of Money in Economic Theory
Center for Economics – The Role of Money in a New Economy
Role Of The Stock Market In Depressions & Recessions
The stock market can play a huge role in triggering recessions and if severe enough, those recessions can lead to depressions, which are more severe and more prolonged manifestations of economic hard times. The reason this is true relates to the nature of stocks, since they represent shares of ownership in a given company, and the health of the stock market is a reflection of investors’ confidence in the viability of those companies. Business success depends completely on the health of the U.S. economy, which by extension makes the stock market a reflection of the economy. Thus, when the stock market experiences a significant downturn, it actually represents a loss of confidence in the domestic economy, and if that confidence is not restored in a reasonable period of time, an economic recession is triggered. If that recession deepens and persists for a long period of time, it is considered to be a depression.
PBS – The 1929 Stock Market Crash
National Bureau of Economic Research – Stock Market Crashes and Recessions
Investopedia – Recession: What Does it Mean to Investors?
About News – Could a Stock Market Crash a Recession?
Financial Post – Predictors of ’29 Crash see a 65% Chance of 2015 Recession
The Future Of Money
The world economy today is a form of fiat money – behind every currency in existence is nothing more than a government’s promise to accept it as payment for existing debt – meaning there is no gold, silver, or other precious metal that backs it. While this can easily lead to problems if too much currency is distributed, it will still likely remain in effect for some time to come, because governments will always have the power to tax populations and demand payment in a standard medium. However, systems using digital currency such as bitcoin may gain steam as a medium of exchange, even if they are not particularly useful as stores of value. Bitcoin and other digital currencies have appeal in that they are immune from government intervention, can only be created in limited supplies, are extremely secure, and when exchanged digitally, take effect instantaneously because of the underlying worldwide distributed digital ledger.
Government Office for Science – The Future of Computer Trading in Financial Markets
Forbes – The Future of Money
CNBC – The US Dollar to Reign Supreme for Decades
Wired – The Future of Money: Flexible, Frictionless, and Free
Bernard Litaer – The Future of Money: Creating New Wealth, Work, and a Wiser World