Historical development of money

Answer 1

Over the centuries many different objects e.g. feathers, shells and precious metals have been used as currency in exchange for goods and services.

There was a time when goods were exchanged for other desirable goods and this was called barter trade. Problems were encountered with this form of trade, as a farmer could not find one supplier of all goods and services he desired in exchange for his cow.

When the barter trade collapsed it gave way to the use of precious metals as a form of exchange.Then this form of payment also experienced problems because the value of the gold compared to the goods and services had to be established.

During this period only goldsmiths had safes.So the people in town would deposit their precious metals and valuables with them for safekeeping.For every deposit, a receipt would be issued. The receipts were promissory notes payable on demand and became a convenient means of payment. This was the origin of bank notes. The bank notes obtained their value for the gold they presented in the deposits.The Promissory notes were used as a form of payment.