With the advent of the first production, an exchange began to take place between people. But it was not always possible to find the right amount of product for this operation. Money is the equivalent that was used when making the exchange.
They can rightfully be considered an achievement of mankind, because modern life cannot be imagined without them.
Money and history
Historically, the exact time of the appearance of money is not determined. However, for the first time, silver payments are mentioned in cuneiform records around 2500 BC. After that, metals began to serve as a means of payment. Later, this was reflected in the appearance of coins.
The first money was very diverse:
- Stone, which were disks with a hole in the center. They varied in diameter and were used in the exchange of goods, payment for services.
- Metal - made of soft metals, such as copper, which were not used in the manufacture of weapons.
- Salt - it was a bar of salt and was used in some countries until the 20th century.
- Cattle at certain times served as a monetary measure. Even whole herds could be considered equivalent in economic transactions.
Money in the form of coins first began to be used in the seventh century BC. They were plates of metal of irregular shape, on which a picture was depicted. He determined the value of coins depending on weight.
Paper money was first recorded in China in 910. Their production was possible thanks to advanced technologies in the production of paper.
Banknotes became more widespread after the invention of the printing press by Guttenberg in 1440. Since that time, paper money is the means that are used in any transaction.
Theories of the emergence of money
Many economists were attracted to the question of the origin of money. Economic theory distinguishes two directions in the origin of money:
- rational theory;
- evolutionary theory.
According to the first, money is a product participating in agreements between people. They are created as a tool for the exchange and circulation of goods. For the first time such a concept was stated in the work "Nikomakhov ethics" written by Aristotle. The philosopher wrote about the comparability of the goods involved in the exchange, and suggested using a specific unit of measurement - a coin.
American economist Samuelson regarded money as a social economic conditionality created artificially. According to this theory, money can be any product endowed with certain functions and accepted in society.
Evolutionary theory considers the emergence of money as an inevitable process during which some objects were isolated. In the future, in the life of society, they occupied a special place.
The classics of economic theory Riccardo and Smith, and then Marx, developed the idea that money is a commodity and they appeared in the process of exchange.
Essence of money
In modern society, money has a special status. They are an integral part of economic relations. For people, money is a blessing, that is, an opportunity to satisfy their needs.
The essence of money is reflected in their participation:
- In reproduction, distribution, consumption and exchange. Money is the basis for the development of trade relations, they change along with the development of exchange processes.
- In the distribution of GNP, as well as the sale of land and real estate. Money is a means of distributing wealth in society.
- In setting the price. Money reflects the value of goods produced by man.
In addition to the features of the participation of funds in society, these signs have two features:
- Serve as an equivalent in the general exchange of goods. This feature is reflected in the direct exchange for any product. In contrast, under conditions of barter, other goods may be equivalent, but within the framework of mutual needs.
- Save the cost of goods. The best way to save it is precisely money, because at the same time storage costs are reduced, and damage to the goods is also prevented.
Functions of Money
In the modern economy, money does not have its own value, but retains exchange value. This indicates that money is a paper that has the properties of a product.
Functions of money reflect opportunities, features and role in economic life. Money acts like:
- The measure of value. The function is implemented by setting the price of goods.
- Medium of circulation. Banknotes are involved in the process of buying and selling goods. In this case, the calculation and transfer of goods are carried out simultaneously.
- Instrument of payment. This function is implemented during the payment of goods or services, payment of taxes, the provision and repayment of loans, etc.
- Means of accumulation. Money that is not involved in circulation creates savings.
- International medium of payment (or world money). This function is reflected in the use of money for settlements between countries. What kind of money is this? The function of a global medium of payment is performed by currencies backed by gold. For example, the dollar, euro, Japanese yen, pound sterling, Canadian dollar, Swiss franc and Australian dollar.
Types of money
Money is a financial and economic category that can be classified. They are divided into such types:
- Natural or material money. Often they are called valid. This category includes any goods that may serve as an equivalent in exchange and money from precious metals. For example, such money is silver and gold coins, cattle or grain. The face value of such money is equal to real.
- Symbolic money. These are cost signs that replace real money. This category includes credit and paper banknotes, as well as electronic money - digital analogues of coins and banknotes. Their nominal value is higher than real.
In modern developed countries, cashless payments and electronic money take precedence. They have several advantages, among which one can note the absence of costs for storage and transportation, as well as the impossibility of falsification or loss.
Forecasts by leading economists suggest that in the future, electronic money will completely replace cash.
There are two forms of such money: smart cards and network. The first are electronic wallets, an analogue of a credit card, but without mediation through a bank. Network money is a software that provides the ability to transfer funds in accordance with human needs.
Distinctive features of money
In the process of evolution, money acquired not only certain properties, but also its own characteristics. These include:
- compactness or portability is the convenience of money in moving and using;
- value - money must have value; cheap or easily accessible goods cannot be money;
- quantity - money should have a quantitative value and the possibility of calculation;
- divisibility - signs must be easily divisible to make payments of any kind;
- scarcity - the amount of money involved in circulation should be less than the demand for them, in another situation there will be a lot of money and inflation will come;
- acceptability - money - form of payment, which must be introduced by law.
Number of characters reversed
Money has a direct impact on the pricing of goods, work and services. Since money is the sum of cash held by the population and reserves of commercial banks, regulation of the amount of money supply is the main method of influencing the market economy.
Since each country must have a certain amount of money that will correspond to the volume of production, trade and income, the amount of money circulated can be determined by the equality:
m * V = P * T, where:
- m - the amount of money involved in the circulation;
- V - the speed of turnover of one currency;
- P - the general price level;
- T - the volume of commodity transactions.
When such equality is present in the country, price stability is ensured.
If mV <PT, then prices for goods, work and services are reduced. If mV> PT, then prices rise and inflationary processes arise.
On this basis, the establishment of price stability by the state becomes the main condition for the optimal amount of money in circulation.
Monetary aggregates
The money supply is divided according to liquidity into monetary aggregates M0, M1, M2, M3:
- All types of money that have a high degree of liquidity are included in the M0 aggregate and include checks and cash: M0 = H + N.
- An addition to the previous unit is M1, which adds funds to bank accounts: M1 = M0 + B.
- The next step, supplementing the previous ones, is funds that do not have absolute liquidity - deposits. These are certificates of deposit, bonds, bills: M2 = M1 + B.
- The last aggregate contains government securities: M3 = M2 + CB.
This division into aggregates allows the state to regulate the money supply and control inflation.
Monetization rate
The most important indicator by which we can judge the state of the money supply is the monetization coefficient, calculated by the formula:
Km = M2 / GDP, where:
- M2 - the corresponding monetary unit,
- GDP - an indicator of gross domestic product.
The monetization coefficient makes it possible to get an answer to the question of whether there is enough money in circulation. It can be judged by how much GDP is provided with real money, in other words, how much money is spent per ruble of GDP.
In economically developed countries, this coefficient can reach 0.6, and in some it is close to 1. In Russia, this indicator slightly approaches 0.1.