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Introduction

 

 

The world is full of money. It’s what we spend most of our lives earning and trying to accumulate in order for us to live in modern society. But have you ever thought about what money actually is?

 

Money is one of the mankind’s greatest inventions. Without money acting as a medium of exchange, we would be stuck with the old bartering system, trading this for that. The main problem with barter is what is phrased as the  ‘Double Coincidence of Wants’. Simply stated, the Double Coincidence of Wants  occurs when what I have for trade isn’t wanted by my trading partners, which in turn means that I can’t get what I want or need. I would have to travel far and wide to find enough people who want what I have, and my travels would leave me unable to produce more of what I have to trade. This is where the barter system eventually breaks down.

 

Once we developed a means of currency, mankind was able to use it as a medium of exchange that was always widely accepted for all goods and services. This meant that we could then put an end to our ventures outside our community to exchange our goods, and we could hire others to ferry them to the customer as we make more of our goods. Services became more available because you always had what the service provider wanted: Money!

 

There have been several types of money, from livestock and food, shells and beads, precious metals and coins to banknotes. The three main types of money used throughout history were Commodity Money, Fiat Money and Credit Money. Let’s explore them:

 

Commodity Money is the medium of exchange that had intrinsic value, such as precious metals, tobacco, foodstuff, tools, etc. Even paper money, when backed by precious metals could be considered a form of Commodity Money. Silver certificates were commonly issued in the USA in the past, and a customer was promised by the government that they could exchange their paper money for that same denomination in silver.

 

Fiat Money is not backed by any such precious metal or other goods. It is decreed by the government that it will be accepted as ‘legal tender’, a medium of payment and exchange for goods, services and debts. All banknotes in the USA are now Fiat Money, including older gold and silver certificates which, although they are no longer redeemable in precious metal, they are still legal tender and may still be used at face value (though their collector value is probably much higher).

 

Credit Money is generally a form of currency that is issued by a bank that is a claim against it for payment. This is typically found when banks like the Bank of Scotland and the Shanghai Banking Corporation issue banknotes. These are commonly accepted by their communities as legal tender and may be exchanged for other monies (generally more fiat money issued by a government) if desired. Checks are also a form of Credit Money as they are a promise made by both the check issuer and their bank that it may be exchanged for other types of legal tender. The risks of using Credit Money are that the bank may default on their banknote payments, and the issuer of the checks may not have the money in their accounts to cover the payment when due.

 

- But what about Credit Cards – aren’t they also Money?

 

Strictly speaking, no. That is because when you buy something and use a credit card, the credit card company is actually paying the cost up front. You become a third party who then owes payment to the credit card company; you’re actually borrowing the money from the credit card company. Your debt to them is not money, only an obligation to pay.

 

Debit or check cards are different. These are used the same as checks and the money is withdrawn from your account upon use (or very shortly thereafter). This is the same as Credit Money.

 

There has long been a migration of unifying currencies. This was recently seen during the turn of the last century when several European nations joined the European Union (EU) and formed an independent central bank which makes the monetary policy for the member countries. This was also the case of the old USSR, where member countries all used a unified currency. Today, along with the European Union, several other countries are bound together financially in geographical markets, including the Central African States, West African States, and The Eastern Caribbean States. There are other countries that have been trying to join these unions and still others who have looked into the possibility of creating new currency boards for a region. This makes monetary sense. The issuance of a unified currency across borders creates financial stability for all the member nations. Even when there is no option for such a nation, there’s still hope. A country can start accepting another countries currency, officially adopt another country’s currency for use, or peg their currency’s value to another country. There are now several countries that use United States currency instead of their own including Panama, Ecuador Palau, El Salvador, Bermuda and East Timor to name a few. Nations that have pegged their currency value to the US include Aruba, Belize, China, Djibouti, Jordan, the United Arab Emirates, and many others.

 

But what is lost when countries adopt a new unified currency or when a country starts to use another countries currency? Countries may gain financial stability, but they lose a strong cultural aspect. Countries can place national symbolisms on their own currencies which can help a nation to feel patriotic, grow culturally and achieve its own independence from other nations. A country with its own currency can show what is important to them, show their history, and commemorate their own achievements, and show their unique culture. Unified currencies like the Euro, though not unattractive or without it’s design merits, lacks this sense of individuality. The money in Spain is now virtually no different than the money in Greece, which is the same in Germany, etc. Though the coins might be able to have one side devoted to a countries design, they are distributed throughout the union, and turning a 1 Euro coin over, you are as likely to get a French or German design as you are a Spanish or Italian one. But the obverse coin image is always the same.

 

There is , however, considerable vulnerability when maintaining your own currency. Take Zimbabwe for instance. This country has gone from being called the “Breadbasket of Africa” to being financially the worst country on the continent, if not the current world. Their inflation has skyrocketed massively and the country has had to issue banknotes (and credit money called “Bearer Checks”) in the amounts of Billions of dollars per banknote. Coins were too expensive to make, so they printed their coins on paper instead. Yet the cost of making paper money individually was too much as the inflation kept soaring, so they printed them on paper watermarked for 500 dollar bills! This was fruitless because small change banknotes were absolutely worthless, as were 500 dollar notes. Revaluing their money has had no effect on the rate of inflation. Mismanagement of the government has ruined the country and even with large denominations, suitcases of banknotes are needed for transactions. Could a country like Zimbabwe have benefited from membership in a monetary union? While short term crises in a country may be alleviated by such a union, complete mismanagement, ravages of war, or governmental overthrow may lead to that countries expulsion from the union, causing trouble for all the remaining member countries as well as itself.

  

Credit and bank cards are now becoming more mainstream in modern countries. Their use eases the burden of carrying cash, or running out of it during an evening out. An account of each transaction is maintained by the card company which can help you in seeing where and when your money is spent. Loss of the card, unlike cash, is usually guaranteed and its use can be stopped electronically. Cross border use guarantees that the proper exchange rate between the user’s currency and the visited country’s currency is maintained. This is a great benefit to the modern consumer, and its popularity is expanding, leading some to speculate that there is a looming decline for actual money of massive proportions on the horizon. There will always be a need for money, though. From private transactions where no electronic surveillance is desired, to the rural areas without means of electronic payment, to the need for payment when there is a loss of power to run the electronic payment machines; money will ever be present in our world.

 

And barring a unified world currency, perhaps something called the Mundo or Earth-o, there will always be the exotic foreign design that captures some aspect of a culture that is not our own. These banknotes will show strange places, unfamiliar faces and objects, just as they do today. If you happen to see them, you will surely wonder where the money is from, whose portrait is depicted and what that strange design is supposed to be.

 

Here in this book, you will find a sampling of the world’s banknotes and their designs. You will find out where that exotic banknote comes from, who that person is and why they were revered enough to be placed on such an important item, and what that strange, odd looking design is. You will also learn more about the world and how connected we actually are. There is more than meets the eye when you look into the many faces of money.

 

 

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