Evolution of cash is maybe one in every of the largest invention in human history. the money was not unreal however it evolved with passage of your time consistent.
Some of the major stages through which money has evolved are
as follows: (1)barter system (2) Commodity Money (3) Metallic Money (4) Paper
Money (5) Credit Money (6) Plastic Money.
Money has evolved through different stages according to the
time, place and circumstances.
(1)
Barter system
A barter system is an old method of exchange. Th is system
has been used for centuries and long before money was invented. People
exchanged services and goods for other services and goods in return. The value
of bartering items can be negotiated with the other party. Bartering doesn't
involve money which is one of the advantages. You can buy items by exchanging
an item you have but no longer want or need. Generally, trading in this manner
is done through Online auctions and swap markets.
Advantages
- Flexibility
- No money Involved
- Networking
- Utilizing the idle
Disadvantage
- Impossibility of subdivision of goods
- Lack of information
- Double coincidence
- Lack of a standard unit of account
(2) Commodity Money
Money is a type of asset in an economy that is used to buy
goods and services from other people. A commodity is a physical item that is
readily interchangeable with another item of the same type. Commodity money is
a commodity that has intrinsic value. Intrinsic value means that the commodity
has value even if it is not used as money. In times of economic turmoil, such
as severe economic depressions or hyperinflation, people sometimes turn to
commodity money instead of the money authorized by their governments.
(3)
Metallic Money
Metallic money- is “money made of some metal”. With the
drawbacks of commodity money and with economic advancement of the people,
metals came to be used as money.
This existed during the town economy stage or during the
pre-machine age. In the beginning iron, copper, tin, bronze, nickel, lead,
gold, silver etc were used. The final choice however was in favour of gold and
silver due to their scarcity. Initially pieces of gold and silver of different
sizes and shapes were used.
Therefore metals which served as money were Gold, Silver,
and Copper etc. In recent times baser metals like aluminum etc are used.
Advantages of metallic money
- It had all the qualities of good money
- Durable.
- It had ornamental and decorative value.
- It could be stored.
- Steady demand and supply
- Subdivision was possible.
- It had a high and stable value.
- It was readily acceptable.
Disadvantages of metallic money
- Necessary to carry in bulk in case of large transactions.
- Had to be split up at every stage of exchange.
- Difficult to assess the value of metals.
- Not easily potable.
- The pieces of metal were not uniform in weight, size, shape, value etc and therefore had to be weighed at every stage of exchange.
(4) Paper Money
Paper money is a country's official, paper currency that is
circulated for transaction-related purposes of goods and services. The printing
of paper money is typically regulated by a country's central bank or treasury
in order to keep the flow of funds in line with monetary policy.
4 Types of Paper Money
Representative Paper Money
Convertible Paper Money
Inconvertible Paper Money
Fiat Money
Advantages of Paper Money
- Economical
- Elastic
- Stable Price
- Non Cyclical
- Quickly Usable
- Easily Countable
- Easily Movable
- Storable
- Acknowledged
Disadvantages of Paper Money
- Inflationary
- Unstable Price
- Shorter Life
- Uncertain
- No Automation
- Unstable
(5) Credit Money
Emergence of credit money took place almost side by side
with that of paper money. People keep a part of their cash as deposits with
banks, which they can withdraw at their convenience through cheques. The cheque
(known as credit money or bank money), itself, is not money, but it performs
the same functions as money.
(6) Electronic Money
Electronic money refers to money that exists in banking
computer systems that may be used to facilitate electronic transactions.
Although its value is backed by fiat currency and may, therefore, be exchanged
into a physical, tangible form, electronic money is primarily used to transact
electronically, due to the sheer convenience of this methodology.
Advantage
- More Practical
- More Practical
- Global Transaction
Disadvantage
- Consumptive
- Low Security
- The Left Balance Can’t be Cashed
