Money, history and controversy

Kategorie: Ekonómia (celkem: 556 referátů a seminárek)

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  • Přidal/a: anonymous
  • Datum přidání: 23. února 2007
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Money, history and controversy

The history of economy is as old as humans them selves. As soon as people started to interact with each other they started to make goods first for them selves then later in need for other goods they could not make them selves but other people could make them. In the first markets people were meeting each other and change all the goods they made or purchased for another goods with their neighbors. This type of trade is called barter. Even after invention of money barter has steel some place in our society today.
What is Barter?
Barter is often regarded as an old-fashioned means of exchange that was superseded because money is far more efficient. After all, in a monetary system an apple grower who needs shoes simply has to find a cobbler. In a pure barter system the apple grower would have to find not just any cobbler but one who happened to want apples at that time. However the inconvenience of barter was just one factor, and in most places was probably not the most significant one. Barter has, undeservedly, been given a bad name in conventional economic writing, and its alleged crudities have been much exaggerated (Rev. ed. Cardiff, p.10). Barter and money are not necessarily completely incompatible. One of the most important improvements over the simplest forms of early barter was first the tendency to select one or two particular items in preference to others, so that the preferred barter items became partly accepted. Because of their qualities in acting as media of exchange although, of course, they still could be used for their primary purpose of directly satisfying the wants of the traders concerned. Barter still often plays an important role in trade with countries whose currencies are not readily convertible, e.g. the communist countries during the cold war. At the retail level barter has become the main means of exchange on occasions when currencies have collapsed completely as a result of hyperinflation, e.g. in Germany after the two world wars. In normal circumstances retail barter is much less important but its persistence has puzzled some economists (A History of money from ancient times to the present day. Rev. ed. Cardiff: University of Wales Press, 1996). After people were used to barter they realized they needed some other monetary system to trade goods, because it was impossible to make any trade with shoemaker if one wanted a new shoes and had for example apples if shoo maker did not want apples.

People started to use different kinds of goods to exchange for the goods they desired. There were some differences in different parts of world. Some where used precious stones, gems, jewels, gold, silver and other metals. In some part of world people used some other thing to purchase goods. American Indians used Wampum as money we can say.
Wampum-money used by American Indians
Wampum was usually made from the Northern Quahog, a hard-shell clam known to biologists as Mercenaria mercenaria. The name "quahog" is a variation of the Native American name for the clam. The quahog got its Latin name in 1758, when Linneaus himself picked the word mercenaria, because he knew that beads of quahog shell were used for currency in 17th century New England, and "mercenaria", the Latin word for money, seemed to be appropriate. Three hundred years ago, wampum could buy enough land to start your own plantation. In fact, you could even use wampum to pay your taxes to the Commonwealth of Massachusetts and pay your tuition at Harvard College. Wampum is typically a cylindrical bead, not a disk bead, and much of its value comes from the work that goes into drilling pieces of shell lengthwise.
Money used in history
In other parts of the world people usually started to make and use coins made from pieces of gold or silver. However the first coin was not a practical means of symbolizing exchange (as the economists believe). The earliest coins were temple tokens, pilgrimage souvenirs, detachable bits of holy power, made of substances at once chthonic (underground) and celestial (sun/moon, gold/ silver)--an exchange not between humans but between humans and spirits. As coinage is "secularized" it already appears as debased, polluted with lesser metals, subject to "inflation." But inflation is breath, i.e., and spirit. Money begins as half spirit half material, a doorway between worlds. But money becomes ever more spiritualized as it circulates through "History." Money is a Gnostic System, or an imaginable machine. Money has been used for something like 3000 years. City-states in the ancient Near East had extensive trade from city to city, and they used precious metals as a medium of exchange. When trades were settled a certain amount of metal could be used to settle the difference. There was a problem of quality control, however. There were problems of determining that the quantity and purity of the metal was as agreed. The answer was quality control and certification.

The early kings of Lydia standardized the hunks of metal and guaranteed their quality by stamping the king's picture on them. These were the first coins. This guarantee of quality by the Lydian kingdom -- already a rich and powerful one -- was very successful, and made the Kingdom of Lydia even richer, indeed proverbially rich. Croesus and Midas -- of all kings the most proverbially wealthy ones -- were among the kings of Lydia. But what Lydia could do, other kingdoms could also do. By 1000 AD, metallic coin monetary systems had spread through much of the Old World. Paper money were first used in China
As in so many other things, the Chinese were the innovators for the next step. The Chinese invented printing, and not too much later, they also invented paper money. It was widespread in China by around 1000 AD, but the Chinese abandoned it after about 1500, in the general decline of Chinese society after the Mongol conquest. Paper money was to evolve much more indirectly in Europe, though. A bimetallic standard is a monetary standard where the monetary unit is defined as consisting of either a certain amount of a metal or a certain amount of another, with the monetary authority being ready at all times to coin either metal at the legal price. For example, in the United States for the greater part of the 19th century the dollar was defined as consisting either of 22.5 grains of gold or 371 grains of silver (a grain is 0.065 grams). People could bring gold or silver bars at the Mint (the agency responsible for coining money) and they would get gold or silver dollar coins in exchange (www.micheloud.com).
Story of early Canadian money
Metallic coins were hard to find in Canada. People hoarded the coins and paid in hides. Part of what we call today "Canada" was French until 1763. The king of France used to send a Governor that administered the colony with some civil servants and soldiers. Trade within the community was limited because of the scarcity of means of exchange, namely, coins. Earlier trappers used hides as money, but the people that came from France regretted the so practical metallic money used in their country. The problem was that, as in other colonies, metallic coins had a tendency to leave the colony very soon or disappear. People, in accordance with Gresham's Law, hoarded these rare coins, not willing to give them away to pay for goods unless forced to do so ; furthermore, if they wanted to buy manufactured products from France, they had to pay in coins. Thus often coins sent at great expenses left Canada by the same boat on which they came.

All kinds of things were tried to retain the coins on the colony's territory, but none succeeded. The Governor found solution. The boat that brings the troop's pay is late. The Governor decides to issue fiat money, using playing cards. A break occurred in 1685. The annual boat that brought goods (including a load of metallic coins) from France usually came in the summer, but this year he only reached Canada in January. The coins were meant to pay the troops, and thus the soldiers had waited for 8 months! The Governor, having tried everything possible, like feeding the soldiers on credit, letting them work for peasants...) decided to requisition all decks of playing cards in the colony. He then had each card cut in quarters, wrote a monetary value on each, signed and stamped them. Then he let it be known that these cards had to be accepted in payment for anything that was for sale in the colony, without any raise in prices. The soldiers were paid with these cards, and the merchants accepted. When the boat arrived each and every card was exchanged at par against metallic coins in a week. This was an emergency solution, and had worked fine. All the cards were destroyed after the conversion, and life returned to normal. The Governor used this trick every year, issuing more and more cards each time. But the problem was recurrent, and soon the story began all over again, and repeated itself year after year, notwithstanding the "strong disapproval" of the King. Sometimes paper was used instead of playing cards (which had become hard to find), and this system could have given Canada an efficient monetary system, were it not for the excessive emissions. After 1690, the card emission had become annual. Around 1706 the exchange of cards against coins was already random, the King being less generous with this colony that brought him so little. Several years of arrears grew, and cards exchanged at a third of their nominal value, when merchants accepted them altogether! Emissions multiplied, leading to 400% inflation in 1713. After several unsuccessful attempts to convert the outstanding cards in real values, the governor almost stopped the emissions of new cards. French Canada began to suffocate by lack of money (as a mean of exchange, not as standing for resources). People tried to cope with credit, bills of exchange and other IOU's. In fact money was so badly needed that in 1729 merchants sent a petition to the king to reintroduce the playing card money.

He accepted and the cycle began again, leading to strong inflation and ultimately loss of trust in paper money, especially in 1755 during the 7 years war against the English. Inflation and fear of repudiation of any form of paper money became chronic. Peasants refused to sell their goods for anything other than metallic coins, shopkeepers raised their prices every week. Metallic coins still disappeared, as people hoarded them to protect them from requisition from the government who needed them to buy grain. The playing card money was over (william-king.www.drexel.edu)
Problems with money
Banking appears as a kind of alchemy, making wealth out of credit, something out of nothing. And the US dollar bill, a virtual crypt-text on the ethereal nature of money, can sum up the whole process. Sheer representation, money could become paper (text) backed by metal, then by imaginary metal, then by sheer imagination. By the eighteenth century all nation-states were in debt, to their own self-created banks. By 1973 the long alchemical process ended with Nixon's "toppling the gold standard," a feat of pure heraldic magic. The "Global Market" manifested as a gnostic sphere in which thought, transmitted at digital speed, coagulates as symbolic wealth. By now trillion dollars clay whirls around the globe in a noosphere (or "numisphere") have its own, devouring all such lesser ideologies as communism or democracy. "Money's gone to Heaven," become absolutely pure, and all-powerful. Money, though always based on trust, demands some material presence. Even electronic means of payments, though speediest for exchange, remain secured by paper records and ledgers, held in safe deposit, to reliably store their value. Humans go back and forth on money's proper ingredients. As times worsen, as in prison camps or during disasters bartering flourishes, trading with cigarettes or jewelry, even children. Today, only eight percent of the planet's money is in paper or coin. The rest is in ledgers.
Trust in barter is face to face. Contemporary trust in money is religious in the sense that its value relies only on rules made by banks and the customs of governance--far removed from most citizens' spheres of influence. And remember money differs from wealth, a matter of richer substance. Wealth is well being, an affluence, a contentment money may nurture but can never buy.

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