Origin of Money

Origin of MoneySeptember 21, 2006 - republished herehttp://homefina.wordpress.com/2006/09/21/origin-of-money/

It was Money that brought the curtain down on the primitive barter systems of commodity exchange. In ancient times, each empire of repute began releasing metal coins stamped with the emplem of emperor. Was there any control on how many coins should be minted and be issued to the people of the state? As it seems, in early days, the coins were like a token - a permit to buy any goods of choice and were issued by the ruler when goods were bought from the people. And men had to accept the token because the ruler was powerful and despite the habit of bartering, the usage of coin remained as a tradition and it indicated a binding on the part of the ruler’s family to recognise certain debt to the person who owns that coin. Now who decided the value of coin? A diamond to a monkey is of no value. These coins' metals ranged from Silver, Bronze to Gold. It is the rule of economy that the scarcity and utility of the metal determines the value of the metal and of the coin. There was a time, when metal had no immediate relevance than using it for preparing weapons – so metal stood for safety. Those who had the metals, they felt more secured by making a weapon out of it – or perhaps sharpening the tip of the weapon with a metal plate. But with passage of time, people also began to enjoy creativity and began to wear these metals as a sysmbol of pride on their body and thus ornaments were born. That gave fillip to the demand for the hard metals – possessing metals became a sysmbol of pride and began to be counted as a part of wealth along with the catlestock and other perishable and non-perishable items of human use. That is the background story of how coins minted by the ruler began to be accepted as a item of undisputed wealth.In the beginning, the people continue to barter with other people and coin traded only with the ruler who used to buy his vaste empire’s needs by issuing coins. Later, with the popularity of the coins, people began to transact partly barter and partly with coins. The diffeences were settled with coins when there were hardly any commune or family that do not possess any coin.Later, all the purchasable items began to be rated in terms of number of coins of gold or silver or of bronze. That set the pace for the system of pricing and money based economy as it was easier to carry coins than to carry other heavy items. The same logic that pushes the plastic money became the guiding factor influencing the money economy.But, was it known, how many coins needed to be minted by the ruler? The ruler’s wealth decided the volume of coins. Suppose, had the ruler issued less coins, that would not be embarassing, but issuing more would put the ruler in debt – as against each coin he had to offer some goods or service of equal value! When he issues more and cannot honour the coin presented by any man, implies disrespect for the king. That is what we call bankrupsy today. So, some wisdom of coin issuance dawned upon the rulers, that coins cannot be issued more than the wealth that ruler owns. Now, who will control these complicated matters of wealth valuation of a ruler spread over a vast land. So, Ruler put an intelligent man in his chamber who would keep records of his wealth and the records of coin minting and issuance to the people.So the duty of Accountant was born. Ruler now became free from the nitty-gritty of Coin management. In the meantime, a change also took place in the ruler’s estate. Many products of common usage began to be produced or mined in large scale by the people and often Ruler’s requirement of those items surpassed what had been directed as Tax Collection. Necessity is the mother of invention. The ruler’s intelligent Accountant sugested that the ruler can keep a completely separate account of coins procured from the market through ruler’s selling of any goods or services and a separate record of collection of taxes in the form of coins.That was a defining moment in the monetary history of mankind – when the minted money management and ruler’s wealth management were consciously disintegrated to ensure better control over the money and the emergence of governing state and its financing yardsticks.