Many centuries ago, to obtain the necessary goods and sell those that are in excess, people used the simplest method - barter, or an elementary exchange of goods. With the development of crafts, the improvement of agricultural and animal husbandry processes, as well as with the expansion of areas of movement, this method of calculation became more and more inconvenient.
It was then that the first money appeared. They took root quickly enough, and soon the whole world used a different system of mutual exchange of goods: sale and purchase. Time passed, countries and currencies changed, payment systems evolved , full-value and inferior money, electronic payments and wallets appeared.
Definition of a concept
Full-value money are banknotes in which the purchasing power directly depends on the material from which they are made. Most often it is gold, silver, copper. For such banknotes, the nominal value indicated on the front side necessarily coincides with the market value.
For example, a coin that weighs one gram of gold has a face value equal to the price of the same weight of this precious metal on the market. Otherwise, these means of payment cannot be considered as full money. Circulation and issuing has a number of its features, advantages and disadvantages, discussed below.
Specific traits
As already indicated above, a prerequisite for such banknotes is full compliance with the nominal value of the real. For example, on a silver coin weighing one gram, you can buy exactly as many products as the weight of this metal is worth. In addition, full-fledged money is an ingot of precious material that can be used not for settlements, but for other purposes. For example, for the smelting and further production of jewelry, household items or art, weapons, etc. History knows many cases of smelting money for various needs, both individually and in bulk.
Special nature
In fact, full-fledged money is a product that can be bought, sold or exchanged. But a feature of this property of these calculation tools is that they only accompany circulation, but are not intended for direct consumption.
Of course, the precious metal itself can be used for other purposes, but then it is no longer considered as full-fledged money. This phenomenon determines a special commodity form that is not inherent in any other payment instruments.
Everything can depreciate
By its definition, this payment instrument has a cost that is quite resistant to external factors. Despite the fact that gold mining has been going on for many centuries in a row, this metal not only does not become cheaper, but, on the contrary, its price is constantly growing all over the world. Silver, unfortunately, has lost its former value, but nevertheless remains among the precious metals. With the development of industry, copper has become cheap at all. In history, there have also been facts of the depreciation of full money.
One example was back in the 16th century, after the discovery of America. Ships loaded with gold and silver, selected by force from the local population, sailed to Europe. Precious metals began to sharply and greatly cheaper, and coins, accordingly, lose their value. But this process did not last long: the market rate was determined, and the situation stabilized. Money made of silver or copper has also significantly lost value several times in its history.
Important features
Full-fledged money is not only a payment instrument, but also the most important lever of government administration and regulation. With their appearance, a new function of the state arises - not only the introduction of certain coins or bars into circulation, but also the adoption of the necessary regulatory legal acts to regulate the activities of all people who use such means of payment.
Thus, full-fledged money displays legal and informational features or, as they say, have a “fiat nature” (from the word “decree”, “decree” - fiat). Thanks to this phenomenon, the principles of monetary policy are being born, as well as the development of the law and legislative activity of the state.
Appearance and Forms
Forms of full-fledged money are not particularly diverse. Initially, gold and silver bullion appeared in circulation. To indicate their weight and metal sample, the issuer minted this information on them. In the presence of such inscriptions, the ingot did not need to be outweighed, which greatly facilitated and accelerated the trading process. But the ingots had a significant drawback - they were bulky and inconvenient to use, had a high cost and made it impossible to pay for a small product or a minor service. Only selected members of society could possess such money, while the rest continued to conduct the usual barter.
These problems were solved with the advent of coins, which, according to scientists, were first minted in a state called Lydia in Asia. A small piece of precious metal minted in the form of a coin served as a unit for measuring the value of everyday products, services and works. Coins began to appear not only among the nobility, but also among the common people (peasants, artisans, ordinary soldiers, etc.).
Over the next centuries, these types of high-grade money began to appear in all corners of the world. They were minted in the shape of a circle, square, with embossed edges and even. In some Asian countries, for example, holes were made in them so that they could be strung on a rope and not lost in transit. On the front side, as a rule, the nominal value and the name of the currency or the place where it was struck were applied. But the variety of images on the back is simply huge: mythical deities and plots, portraits of prominent figures of politics and art, representatives of flora and fauna, weapons, buildings, cities and much more.
However, this trend has continued today. And to issue such banknotes could both states and individual cities, regions, kings and feudal lords. Paying was easy enough anywhere in the world - gold is appreciated everywhere! And today, most people will definitely find a couple of coins in their wallet. True, they will be made of steel, brass, nickel and various inexpensive alloys.
Another interesting form is the classic banknotes exchanged for gold. That is, these are paper bills that have the properties of high-grade money, and the value of which is expressed in the equivalent of a precious metal. Such money was used at the beginning of the last century. Although they looked like simple papers, in reality their nominal value was confirmed by the country's gold reserves.
Interesting fact
Of course, the entry into circulation of a new type of gold product - banknotes in the form of ingots and coins, entailed the appearance of a mass of people who wanted to illegally enrich themselves with this phenomenon. Fraudsters simply sawed coins, and new ones were made from gold mined in this way. Accordingly, the mass decreased and was no longer equal to the face value. Ordinary people could not distinguish fake, and weighing coins every time in the calculations was completely inconvenient.
To solve this problem, they came up with making ribbed edges. The sawdust coin now stood out significantly and immediately aroused suspicion, and it was not so easy to repeat the carving in artisanal conditions. Later, technologies appeared that allowed applying various drawings and inscriptions, which further protected against fakes. Today, the value of coins is small, and there are not so many who want to counterfeit them, but the tradition of carving has been preserved.
Main advantage
Valuable money had a very important property, from the point of view of their owners: with an excess in circulation, they could simply be deposited as a reserve of precious metal (treasure). And then, if necessary, bullions or coins could be removed by the owner and put back into circulation without losing their value (of course, except when they depreciated due to unforeseen circumstances or events). This eliminated the need for complex regulation of savings funds and those that are needed for current needs.
disadvantages
Along with all the advantages that allowed a long period of time to perform its basic functions, a full (real) money has a number of negative aspects:
- The manufacture of coins from precious metals (gold, silver) requires a sufficiently large amount of expensive material, the extraction of which is itself a laborious and expensive process. In addition, not all states have reserves of these metals in their bowels and are forced to acquire them from other countries.
- As a result of use, full-fledged money wears out, wears out, loses its original weight, and, therefore, the nominal value.
- The need for money can change over time depending on many factors. Sometimes a sharp increase occurs, and then the shortage of money in circulation can be felt sharply. The reason for this is that the mining of precious metals simply does not keep pace with the needs of the market.
Transition Background
Functions of full-fledged money made it possible to ensure convenient commodity circulation throughout the world for a rather long time, but with the development of banking, credit relations and the processes accompanying them, the entire payment system required changes.
Scientific and technological progress and population growth have led to a significant increase in the range of goods and services, as well as the need for them. Silver and gold were no longer enough to provide the market with the necessary amount of means of payment, and the real money was replaced by defective money. Another prerequisite was that banknotes ceased to be value in themselves, but were needed only as “intermediaries” in sales transactions and did not stay for long with one owner, changing for various available benefits.
Defective money
At the beginning of the last century, real banknotes began to be supplanted by banknotes that are made of paper, have virtually no face value, confirmed by the "gold" equivalent, are subject to strong depreciation and cannot be used as goods. Such money is called inferior. At the same time, they have a number of advantages: simplicity in issuing, which is not limited in any physical sense, as well as ease of use. Such means of payment were able to solve the problem of lack of money in the market, but they also caused a number of other problems and consequences. Such as, for example, the need for exchange rate determination of the value of currencies of different states on the basis of many variable factors.
Just pieces of paper?
In the last century, the concept of "paper money". Full-value money has a guaranteed nominal value, defective money does not, and paper money is issued by the state to cover the budget deficit or for other similar needs. That is, these means of payment are not only not backed up by anything, but also not aligned with the needs of the market.
At the time of their issuance, they perform the functions assigned to them, and then depreciate, moreover, along with the rest of the money of the same currency in the market. Thus, the fiat property of money is distorted and leads to negative consequences. It is thanks to this phenomenon that the definition of “paper” appeared, that is, meaningless, and not at all because they are made of such material.
Modern technologies
Progress has stepped far forward, and today, full and inferior money is becoming increasingly less popular. They were replaced by electronic currencies. Making purchases with a credit card or making payments without leaving your chair is much more convenient and practical. Electronic money, of course, has its drawbacks, but the information-digital age makes its own adjustments and requires changes in the good old system of settlements using coins and banknotes. True, even today, many people prefer to keep their savings in the form of bank gold bars in order to protect them from depreciation, believing that the precious metal is still the most reliable means of payment and accumulation.