Money
Money is something that is very difficult to explain. People in various cultures think of money in different ways. A London banker and an African tribesman have different ideas of what money is.
Many people think of money as a currency – metal coins and paper bills. We need it to buy the things in life that we need. We also get money for the work that we do. So, money is a way of exchanging goods and services.
The History of Money
In early civilizations people did not have money. They traded objects. Maybe a hunter had more animal furs than he could use and his neighbour might have caught more fish than he could eat himself. They soon saw that they needed each other. The fisherman needed furs to protect himself from the cold and the hunter needed something to eat, so they exchanged their goods. This is called barter.
Barter also had disadvantages. If there weren’t any more people who needed the hunter’s furs he couldn’t trade them for the things he needed.
Early Forms of Money
As time went on, people used things that were valuable as a kind of money. Cattle was one of the earliest forms of money. People who had many cows were thought to be very rich. Later on, grain and salt were common forms of money. They had advantages because you could weigh them.
The Aztecs used cacao beans as money. They were valuable and easy to carry. The early American colonists used gunpowder, tobacco and nails as money. These things were very rare.
Coins
In the course of time people searched for better ways of trading goods. They found out that metal , especially gold and silver, was very valuable.
Some historians believe that the first coins were made at around 700 B.C. by the Lydians. The Greeks and Romans also had silver and gold coins. Their value was guaranteed by the government.
But it was not until the late Middle Ages that coins became common throughout Europe. Metals were stamped and coins had to have a certain weight. People knew how many coins they needed to buy something because they had a fixed value.
Paper money
Paper money came into use about 300 years ago. The idea came from goldsmiths who gave people pieces of paper in exchange for their gold. These bills could be exchanged for their gold later on. They told you that real gold and silver existed somewhere.
Until the middle of the 20th century governments all over the world had deposits of gold that was worth as much as the money they gave to their people. Paper money had many advantages. It was cheaper to make and easier to carry around.
But there were also dangers. Governments could produce as much paper money as they wanted. If they produced too many banknotes and gave them to the people, they would have too much money to spend. If there were not enough goods to buy, prices would go up. The money then would lose its value. We call this inflation.
Today, the amount of money in circulation is controlled by central banks. They make sure that paper money has constant value.
In the second half of the 20th century people realized that they didn’t have to carry money around to buy the things they needed. Information about money was sent from bank to bank, so you could have your money transferred from one place to another without touching it.
Credit Cards
Today, more and more people use credit cards to buy things. You don’t have to take real money with you. With a credit card the bank lends its customer money to buy something. The customer signs a small slip of paper and the shop assistant sends it to the bank and gets his money at once. A few weeks later the customer pays the money back to the bank.
The Euro
In 1991 the leaders of the European Union got together in Maastricht, the Netherlands and agreed on creating a single currency for all of Europe.
On January 1, 2002, the Euro became the official money in twelve of the fifteen EU nations. Only Great Britain, Sweden and Denmark wanted to stay with their old currency.
In 2004, ten central and eastern European nations joined the EU. They will decide later on if they want to join the Euro zone.
When banks and stock exchanges began using the Euro in 1999 it was worth 1.17 US dollars. Shortly afterwards it became weaker and fell to 0.80 US dollars, but since 2002 its value has risen constantly , almost up to 1.30 US dollars.
The colourful euro banknotes were designed by the Austrian Robert Kalina. They range from € 5 to € 500 and have a map, the EU flag, as well as arches, bridges and windows on them.
There are eight coins — ranging from 1 cent to 2 Euros. One side of the coins all look the same but on the other side each country has its own national design.
People in favour of introducing the Euro argue that the European currency will increase trade among European countries. It could also unify the union and make it stronger. Many economic experts also predict that the Euro can compete with the US dollar as an important international currency.
Money. Retrieved from English Online