Forms of Business Organization

EVOLUTION OF MONEY

EVOLUTION OF MONEY.

• In the earlier stages of human civilization, to satisfy man needs, barter system took place.
• After that with the passage of time man used so many other ways of satisfying its needs and wants which led to various stages of use of money as a medium of exchange.
• Like Commodity money, Metallic money, Paper money, Credit money, Electronic money etc.
• All such stages of money are used as a medium of exchange to solve the difficulties of barter economic system.

STAGES IN THE EVOLUTION OF MONEY

• The money came into being from different stages in different time periods. Following are the different kinds or stages of money…
• Commodity money
• Metallic money
• Paper money
• Credit money
• Electronic money

COMMODITY MONEY

• A large number of commodities or items has served as commodity money at different time and places.
• Such as, cattle like goats, horses, cows, sheep, etc and other precious items were used as money.
• There were some problems in storing, transportability, durability and divisibility of such items as money, which led to an other stage of money in terms of some precious metals like gold, silver and copper which is known as metallic money.

CONTINUE…

• For Example:
• Romans used cattle and salt as money at different times.
• The Mongolians used skins as money.

METALLIC MONEY

• Metallic money stage has been divided in three stages;
• Cheap Metal
• Precious Metal
• Coins
• Cheap Metal
• Cheap metals like copper and tin were used as standard of value. But there was need of standard weight and purity of those metal, so a stamp was used to provide guarantee about the weight and purity.
• Precious Metal
• The next form of money was the use of some precious metals such as gold, silver as a medium of exchange. The ratio of one metal to other was declared by the state. The age of precious metals has been ended after two world wars.

• Coins
• Accordingly metal was made into coins of pre-determined (pre-decided) weight.
• This innovation is attributed to King Midas of Lydia in the 8th Century B.C.
• But some economics says that gold coins were in use in India many centuries earlier than Lydia.
• Some economists says that coins were minted in temples more than 2500 years B.C. The standard of weight and fineness was necessary.
• As a metal there was no guarantee of purity and weight of metal as this defect was removed by coins.

• Some coins had an intrinsic value ( value in themselves ), which was reflected in their face value these coins were also known as full bodied coins.
• As the price of gold began to rise , then Government mix copper and silver in gold coins because the gold was becoming scarce and expansive with the passage of time.
• But again there were some problems in such kind of money which led to establishment of paper money.
• Types of Coins;
• Full bodied coins (face value is equal to the intrinsic value of coin).
• Token coins (face value is greater than intrinsic value).