How did money originate?

Answer 1

AnswerUg gave his friend Org a pretty rock in exchange for a bite of Org's apple. Org later exchanged the rock for a bite of Iggy's rabbit. The following day, Iggy's wife found the rock and used it to buy a purse. Iggy would spend the rest of his days making sure the purse has new pretty rocks in it. Answer:Originally, man survived by barter trading. yes, exchange of good for good. There were evident problems with that and that started a search for a trade mechanism. There was evidence man once used cowrie shells, gold bars and coins. Given the weight and bulk of coins, use of paper notes was more favoured given traders usually travelled long distances in the past.

(About barter trading: this continued even after money was in wide use. We've all heard of the country Doctor Who takes produce and chickens as payment. One group who used gold not in bar or coin form as a medium of exchange was sailors. They would receive a moderate amount of gold at the start of a voyage. As the ship visited various ports, the sailors would need to buy things, and they would exchange part of their gold for the things they bought. The gold could get lost or stolen. One creative sailor had a jeweler make his gold into a big ring then put a hole in one of his ears to keep it in. As other sailors realized this was a safe way to keep their gold, they started doing the same thing--and now you know why sailors of old wore earrings.)

Answer:

Gold lost it's value to money because it has bad portability functions. Money is more easily portable. When people were in prisoner of war camp they traded cigarettes as there only currency. Cool eh? One problem people smoked their "cash" away.

Another thing about goldThe biggest problem with gold is the fact there's a finite amount of it. It's possible to manufacture money out of thin air. If the Federal Reserve decides it wants to create a billion dollars, it goes to The First National Bank of Freedonia and buys ten billion dollars worth of First National's government bearer bonds. The bank then turns around and loans the ten billion out on overnight loans at one percent interest. They do this ten times, and all of a sudden First National has eleven billion dollars in its reserve.

You cannot do this with gold. If there are only a million tons of gold in the world and one person was sitting on all of it, he could loan it out a thousand times and...surprise! there won't be any more gold than he started with.

The other problem gold has that fiat currency does not is it's also an industrial metal. Parts of your computer are made from gold; none of it is made from money. As with the comment about prisoners using cigarettes as currency (which happens in prisons even today), people buy gold and use it up.

Additionally...Money as we know it, paper money (which will henceforth be called by its technical term, fiat - French for "fake" - money), originated, as was kind of touched on above, due to the need for liquidity of value. Consider a hypothetical: you are a corn farmer and want Joe's Plumbing service. In barter trading, you ONLY have corn to trade. But what if Joe wants potatoes instead of corn? In that case, both you and Joe lose, because you don't get your plumbing fixed and Joe doesn't get his potatoes. With money, you can sell your corn to someone who wants it in exchange for money, which you can then pay Joe for his plumbing service, who can then buy potatoes.

Fiat money has another characteristic that needs to be examined: it is easily manipulated (and by that I mean changed in value, not manipulated in a bad connotation). Governments that print fiat money have a much greater amount of control over their economies than they would in a barter system or a commodity-currency system (ex: the gold standard). For instance, if the economy has slowed down, the government might wish to make it better, so they can print more money to give to people so they can spend, which helps the economy. But with that we might experience inflation, which the government is able to combat by printing less money (practically this is done by raising interest rates, but that's not the scope of this question).
Physically, in the US, coins are minted in Philadelphia, Denver, San Francisco, and West Point. Paper money is printed at the Bureau of Engraving and Printing in Washington, DC, or at their franchise substation in Fort Worth, Texas. Economically, "money" is generated by the commerce of generating product, rendering of services, or by the increase in value of investments.