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The performance of monetary functions has historically been carried out by various types and forms of money. Money went through a complex process of its development, changes in forms and types. Various things played the role of a money commodity.

Let s trace the evolution of the forms of money, and find out the reasons for the transition from simple to more complex forms of money.

The development of money has passed a certain way, in which two main stages are distinguished – the stage of full and defective money.

Good money – this is real money, in the role of which the monetary product itself acts (in particular, it is gold and silver money, because they have an intrinsic real value).

In this regard, they distinguish: the intrinsic value of money, which is determined by the costs of their production and the nominal value, that is, the value of money, which is indicated on them.

High-grade money had an important advantage: its value was relatively constant, it changed slowly, which provided the economy with a reliable standard for measuring all economic processes and phenomena.

However, high-grade money also had a number of significant drawbacks. This is primarily:

  • high costs for their manufacture;
  • low compliance to the regulatory influence of the state;
  • inconvenience in use;
  • arbitrary change in the value of money contrary to the needs of the market, the intentions of the state, and the like.

Gradually, full-fledged money was replaced by inferior ones – made of paper and common metals, issued in accordance with the needs of turnover in money.

Defective money – these are “substitutes” of full-fledged, banknotes, the intrinsic value of which is insignificant. Defective money is also called credit money.

Defective money retained some of the disadvantages of high-grade money, namely: high production costs and poor controllability of their circulation.

A type of credit money is paper money, which is issued in accordance with the needs of the state budget, and not commodity circulation. Interestingly, at first, credit money appeared as paper tokens of real (gold) money and was exchanged for the latter. Since the 30s of the twentieth century, credit money has become independent, since it has ceased to be exchanged for gold and silver money.

Deficiencies of inferior money led to the emergence of deposit money in the form of entries in the books of banks (in customer accounts) and in the memory of computers (electronic money). Electronic money is a conventional name for funds that are used by their owners on the basis of an electronic system of banking services. Electronic money is used thanks to the introduction of computer technology and modern communication systems in payments. Today it is the most progressive, economical and convenient carrier of monetary functions.

That is, you need to realize that modern credit money has several forms of manifestation – cash, deposit, electronic, form of “trade” money, each of which has its own advantages and disadvantages.

Thus, the development of forms of money is a long way from simple goods (livestock, salt, furs, etc.) to electronic signals in computer systems.

Post Author: Rachel Reinbauer

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