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At first almost anything was used in trade, as long as the buyer and seller could agree on the value of the item being traded. A pig might be traded for a few sacks of grain, or a cow for a wagon, etc. However this barter system often failed if the two could not agree on the realtive value of the items being traded.

In time metal coins were produced with a standard value which people could use in trade. All tradeable items then were given a value acording to a certain number of coins, with some variations. Copper or bronze coins were most often used in day to day purchases, with silver coins used for more expensive trades. Gold coins were also made but rarely used as they were quite valueable. In addition since gold is a very soft metal they were easily damaged if handled too much, which reduced their value.

In time to avoid the trouble of carrying around heavy coinage, merchants began giving each other vouchers which promised the holder a specific quantity of coins. this worked well as long as the merchant actually had the cash to back up the vouchers he issued, however unscrupulous merchants often issued vouchers in value far exceeding what they were capable of honouring in payment. There was also the risk of people making counterfeit vouchers which looked like a valid payment, but had no redeemable value.

In time governemnts began issuing offical paper money, which were backed by reserves of gold and/or silver which gave more stablity to the paper money system, as governments were much less likely to go bankrupt. In addition governments more able to take measures against counterfeiting with a standard money system.

With the advent of computers, it has become possible to do commercial transactions electronicly. In such cases no actual money changes hands, but the values of the bank accounts of buyer and seller can be instantly modified according to the agreed value of the transaction. This allows people to avoid the hassle and risk of carrying cash. :)))

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13y ago

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