The History of Money and Banking

1178 Words3 Pages

The invention of money was a major improvement in peoples’ lives. In the past, people usually had to travel all day to find the person who is willing to exchange their goods. In addition, the goods people want to exchange did not have the standard value of measurement. This led to unequal exchanges. Furthermore, it is not convenient to carry heavy goods from one place to another for an exchange. To solve these issues, money will be the only solution. Later, people tend to develop money from cowry shells to credit cards for the convenience and to improve their society. In the beginning of the human kind, there was no money. The only way to get what you want is to trade what you have for it. This system is called bartering. Sometimes, you will find a person who is willing to exchange your goods. However, most of the time, it is really difficult to find the person who is willing to trade with you. Since, you desperately need to exchange, you will need to travel the whole day until you meet the right person. In this type of situation, it will take a lot of time to find the person who wants to trade with your goods. Economists defined this kind of issue as transaction costs. It is the time and effort people spend before they can exchange their goods. In barter economy, the transaction costs are incredibly high. Another major drawback of barter system is that people cannot measure the value of goods. This usually leads to conflicts since people have to make unequal exchanges. In order to reduce transaction costs and conflicts, people developed commodity money. Commodity is a fundamental item used by almost everyone. In the past, tea, tobacco, salt, sugar are considered as commodities. People use these commodities to exchange goods. T... ... middle of paper ... ... "Host Merchant Services." Host Merchant Services. 4 Dec. 2013. . "Museum of the National Bank of Belgium." Cowry Shells, a Trade Currency —.4 Dec. 2013. . "Wikia." Social evolution of money. 05 Dec. 2013. . "Famiglia De Medici: The Extraordinary Story Of The Family That Financed The Renaissance." Business Insider. 6 Dec. 2013. . "Origin and Evolution of Money." Origin and Evolution of Money. 4 Dec. 2013. . Shirur, Anand. "Evolution of Money by Anand Shirur." Evolution of Money. 07 Dec. 2013. .

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