The history of money
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History of money
The Stone Age is the age of barter, that means, the exchange of products. A measure of cucumbers was traded for four measures of barley. Regarding this last one, it was sufficient
sow it and reap it, while the cucumbers were seeded one at a time, then watered plus picked up, each separately, reason why their value was four times higher, because
their production was very long and not so easy to do. To get a good lance of stone, first of all there was a need to find a stone that was adequate and hard, then there was the
phase of the modeling and finding the right wooden rod and at the end there was necessary assemble it all. For a good lance could be obtained until six chickens. More or less this
was the ratio between the work spend for the production. In other words the price was based on the time necessary for arrive to the final product. For sure we must also include other
parameters, the supply and demand, the necessary knowledge and qualifications of those who are working on such goods. However, the basis of all this is the time invested.
The age of metals. The human race has discovered metals and with this discovery men's jobs were widely expanded as well as the goods available for trading, that is, the goods for trading. People have started moving away from their homes and this has complicated the use of barter. Moving from Europe to China a herd of cows for exchange them for the berries of silk, was unthinkable and impractical. At that point someone invented the first form of money, the coins. They were made of gold, silver and bronze and logically they had an intrinsic value because it was precious and expensive metals. For a sheep you had to pay a gold coin, a ducat, because the time lost for finding the gold, for its mining, smelting and casting in the coins, required more or less the same time that it tooks to grow a sheep. The value was still exchanged directly with another value.
BanknotesHuman civilization continued to develop, the tools for the work became more advanced, the quantity and quality of goods more diversified. The volume of commerce was every day higher. Bringing a treasure chest containing gold or silver to make exchange with other goodies, became physically problematic, for the weight but also for the safety. In this way the first banknotes were created. In Sweden, at the beginning of the seventeenth century, the payments were based on the copper coins, because they had no gold and silver. The big coins were made from the plates of fifty centimeters square on which their value was pressed. Due to their size and weight, their use was inconvenient. So, in 1661, Sweden was the first European country that has started issuing banknotes. Later they were joined by other states. These banknotes in practice had no value, but for the same, in the bank you could obtain the corresponding amount of valuable metals, in the majority of cases it was gold. In this way the banknotes were a cover for their value and often the collateral exchange with gold coins was explicitly expressed on the same notes.
The gold standardIt's summer of 1944. The world is still dealing with the Second World War. Fortunately his end is near. The Europe is torn, its economy is on its knees, the gold reserves of many countries have been robbed and some of these countries don't possess even their own currency, like Italy for example. In an American city, unknown until then, Bretton Woods, the world has set the foundation of his new monetary system. All currencies could be converted into U.S. dollars, the only one with a gold cover. So the dollar has become the most important currency in the world, a guarantee for all the others. Who possessed for example, 1000 German marks could change them in dollars and then turn them into gold. At that time, gold ounce (28 grams) was worth 35 dollars. At least in theory, the money has still the true value.
The money without valueAt the beginning of the seventies of the last century, OPEC, organization of the Petroleum Exporting Countries, composed mostly by the Arabian countries of the Middle East, has tripled the oil price and this has caused a huge global economic crisis. In response to these events, Americans have begun to print money without coverage, called, petrodollars. OPEC has requested that this money was turned into gold, as was established by the Bretton Woods act, but the problem lay in the fact that the United States didn't have it. The American president, Richard Nixon, had no choice and he proclaimed abandonment of Bretton Woods, the gold standard. In August 1971, the decree of abandonment had become official and it was practically proclaimed the bankruptcy of the nation. The dollar has had a strong devaluation, but the world continued to function as before. The banknotes no longer had their equivalent, real value; they had only virtual value, based on an agreement, recognized by all subjects of financial market.
For reasons described above, the Forex market was suspended several times during 1972 and 1973. The modern Forex, as it is known today, was created in 1973, the year in which it was almost completely liberalized.