What is Currency? The History of Money Invention

What is currency?

Currency is the means that people use to purchase and sell items. It is how you get paid and how you pay your bills. There have been many different types of currency over history and even now countries change their means of currency. The value of currency can be based on many things. It used to be backed behind gold but times have changed and the United States no longer uses this backing in most cases.

How does currency work?

Currency works by being something of value. Take for example some older coins that were made of gold. As gold climbed in value the coins would climb as well and so could be used to purchase more items. When the value of the coin declined it would take more of the coins to be able to purchase the same items. Today’s currency is no longer made of valuable materials or semi-precious metals but the enforcement and standing of the government behind the value of their monetary system.

How did early civilizations work if they did not have a set currency or coin?

Early civilizations worked on a type of currency of sorts. They would barter for goods that they needed or had in abundance. A farmer with a bumper crop would exchange his goods with the local butcher for meat. It is a similar concept with the use of currency except that the bartering aspect and the self-production aspect are not as prevalent.

When was money introduced?

A form of money was introduced during the period of time when people would trade precious jewels or metals such as gold and silver. As a way to try to make things more uniform for all parties around, the sovereign nation began making up coinage in that precious metal. The coin would be worth what that metal was currently selling for. Thanks to different treaties between trading countries and areas, the currency could be agreed on and accepted even if it were from a different land.

When was paper money invented?

There was an obvious downside to having to pay for all products with coinage. It could become a very hefty endeavor to keep that much coin on hand for large purchases. The banknote took care of this. The paper product was backed by the bank and was thus called a banknote. These new banknotes first made an appearance in China and were called jiaozi from Sachuan in the 10th century. It was a popular idea and helped lead to banking systems. The Netherlands were the next area of Europe to adopt the paper money idea and from there it began to sweep through the rest of the continent.

Who controls the currency of a country?

The Federal government of that country usually has a branch that devotes itself to monitoring the banking system and the use of currency. They are the ones that print new bills, circulate money and destroy old currency. There are also international organizations that put out a standard of currency that agreeing companies will abide by.

What is private currency?

There are two different types of currency. Private currency issued by a private organization and fiat currency issued by a government. Private currencies may be special money paid to the employees or credits. The best example is a casino. You trade in your fiat currency for their private currency. When you have won or lost the private currency you can then trade it, should there still be any left, for the fiat currency.

What are the different types of private currency you can find?

You can still find private currency used in casinos, in some online games and in areas where you trade your “real” money in for that establishment’s tokens. In the past there were lots of places that issued their own currency, such as banks. This lead to big problems since not every place took that form of currency. It seemed to only work in the area where the bank was located. Eventually that was taken over by the Treasury Department and they created a unified system of money that would be accepted anywhere the US dollar was accepted.

What is local currency?

Local currency is the money used in that area of the world. Not every country, of course, has a dollar system in place. Different countries have their own money that they use and have worked out deals with other countries and International Banking Institutions for their money to be used and to be able to be exchanged.