Money: A Fair Medium of Exchange

25 Money: A Fair Medium of Exchange From the earliest days when a cow could be traded for a horse, to the 21st century when that same horse might easily be purchased with one swipe of a bank card, humans have always needed a way to buy and sell things at an agreed price. Long ago, a farmer who had too much grain might trade the surplus for cloth made by someone down the road. A system like this is called a barter system. It worked well for a long time. However, things grew more complicated as population numbers rose. Everyday life in such a world demanded a standard unit to measurethe value of one thing against another. The era of money soon followed. And it has been with us ever since, in various forms.

The Chinese were the first to move from the bartering era to the money era, beginning with the use of cowrie shells as early as 3, 000 years ago. People traded these shells for the products they wanted. A few hundred years later, the Chinese began to manufacture synthetic cowrie shells from metals such as copper and bronze. By 100 BC, they introduced the first banknotes. Small squares of hand-decorated pieces of leather became common forms of money. In Europe, money coins soon came into existence. Unlike the Chinese, Europeans used precious metals such as gold and silver. Soon, paper money became the preferred currency because it was much easier to carry around and to store. This system worked until the early 19th century when life grew even more complicated. The Bank of England introduced “ gold-backed" paper money, and tied it to an agreed price in gold. Now, anyone could simply redeem their paper banknotes for a commodity with value-in this case gold or silver.