Money, generally accepted means of payment. Money also serves as a goal and a means of storing values. A monetary or coin currency is the system of money that applies within a state or monetary area.
The monetary concept may be delimited to include legal tender, in English legal tender. This money is a compulsory or redeeming method of payment because you can settle the debt by paying with them.
In Norway, banknotes issued by central bank Norges Bank are releasing funds for any amount. Divorce is a detrimental method of payment for a smaller amount.
Special money and universal money
If money is only used for fully defined purposes or transactions, they are called special money, in English special purpose money. Money may have one or more of the following features:
- Exchanging agents, such as when a service is paid with money which in turn can buy another service or item.
- Standard value goal, that is, a common value that other goods or benefits can be measured in relation to. In different societies, different objects have had such a function. In Northwest Coast, Indians of North America were the carpets of ullgeithår, in some groups of New Guinea was a salt barrier.
- Payment, like when paying for something without receiving anything, for example, when you pay a replacement for the loss of life or objects or when you make up for a fine.
- It has also been common for money to earn as a value deposit.
If money has all the three first mentioned features at the same time, like paper money with us, talk about universal money, in English general purpose money.
In many societies, one can find that one type of object is a measure of value, for example, a special type of brass rods, while something else acts as a switch, such as cattle.
Origin of the division of labor
The historical origin of the money is somewhat unclear. The need for money arose when we switched from producing to our own households, what we call natural housekeeping, to specialize, the division of labor, and thus the exchange of goods was necessary.
This exchange can take place directly as a barter, but it will be greatly facilitated by the use of a common exchange. If such a replacement is generally accepted, it will immediately get the grade of money. Then we say we have a cash .
The components of the money
Metal has been used as money for at least 4000 years, coins in maybe 2700 years. The first deployment probably took place in the temples, later the princes took over this feature, and in modern times it is the governments’ task to provide the money supply.
Historically, the purchasing power of coins has tended to weaken in the direction of real metal value when the so-called coin declines have caused a difference between a denomination and internal metal value. The decline in coins is to compare with inflation since you get fewer items for each coin unit.
- Read more in the article about coins.
The banknote denotes further rationalization. It originated in Europe in the 17th century but can be traced back to China a thousand years earlier.
On the paper money, the money tag is linked to a little valuable material, which saves a lot of resources. In order for people to trust the value of the paper money, which was not worth anything, one had the right to redeem the money attached to the gold standard. If desired, the banknotes could be exchanged with the corresponding coins, such as gold coins, or you could buy gold bars in the banknote bank (now the central bank ). That way, the banknotes could have a certain real value.
Thus, redeemable banknotes worked economically as full-time coins. During the so-called Great Depression in the 1930s, triggered by the Wall Street crack in 1929, the redemption obligation was suspended in most countries, and the promise of redemption in gold disappeared from the banknotes, in Norway in 1931. Thus, it departed from the gold standard.
Paper banknotes you can not redeem in, for example, gold has no net worth or value. Their value is just a reflection of the values that can be achieved for them through purchases.
The size of the value of the money depends on the amount of money in relation to the need. Excessive issuance of unsecured banknotes will result in a steady decline in monetary value and inflation. In other words, the more money that is issued by the central bank, the less your money will go hand in hand. You get fewer items for 100 kroner when money is increasing.
The trust in money is thus no longer dependent on its relation to gold, but that the central bank makes reasonable choices.
- Read more in the articles about the gold standard and monetary policy.
Account money is the most abstract form of money. Payments can be triggered by purely numbered transfers from one account to another, such as by check, debit card, giro or transfer between accounts over online banking.
Account budgets are of major importance in modern society. In a monetary system based on coins or redeemable banknotes, the access of coin metals will determine the amount of money in society. However, the amount of account money is unlimited in theory.
For systems with insoluble banknotes, there will be no objective limitation on the amount of money that can be issued. It is, therefore, a task for the authorities through monetary policy to regulate the supply of funds in society so that there is an appropriate relationship between the amount of money in circulation and the number of goods and services that will be sold at all times. See the electronic payment system.
Money in other communities
In economic anthropology, one has studied the phenomenon of money in pre-capitalist economic systems, both historically and in different societies today.
In such economies, money can be absent, as in barter trading. In the case of more complex transactions, the need for an aid arises as money.