PowerPoint: My Money and Its Development
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Transcript of PowerPoint: My Money and Its Development
My Moneyand its development
What is Money? What is Currency?Both ‘Money’ and ‘Currency’ involve the exchange of goods and services.
Money is the most liquid asset because it is universally recognized and accepted as the common Currency.
MoneyThe economic definition emphasizes that money is the medium of exchange, or what we use to buy things with i.e., what you earn by working and what you spend in order to buy things.
CurrencyCurrency is the means of purchasing through trade and generally refers to printed or minted money. Currency is the system or type of money that a particular country uses.Local currency: The local currency is Australian dollars.
Money is a ‘Unit of Account’
‘Unit of Account’ means:That money can be used to set the value of items.
Money is a ‘Store of Value’
‘Store of Value’ means:That ‘money’ is able to be saved, put away and retrieved. But with one stipulation, that after it has been retrieved it must still be able to be used.
Money is a ‘Medium of Exchange’
‘Medium of Exchange’ means:Money must be able to be swapped and retain its value. So that there is no need for any actual goods to be exchanged.
One Man Economy
One Man Economy• No need for money.• No need for exchange.
Barter: The Bartering System
What is Bartering?Trading goods and services without the use of money is called bartering. Early civilizations relied on this kind of exchange. If you were a successful hunter you would have a lot (a surplus) of animal meat and animal products. If you meet someone who has a lot of vegetables because they are a good farmer then you have the makings of a delicious meal. So you swap/trade/exchange some of your goods for theirs.
Even cultures in modern society rely on it. You might swap ‘football cards’; a play-station game for another.
It is a system of trading items that are ‘needed’ or ‘wanted’.
Barter: What problems could arise?
What problems could arise?Analysis of this Economic System reveals three aspects that are considered as problems?
Can you guess what they are?
Barter: Problem 1: Standard of Value
‘Standard of Value’?Who decides what something is worth?
What happens when you want something small, like some tomatoes and the tomato vendor asks you for a table in return?
You'd probably argue that a table is worth a lot more than a few tomatoes.
Is a cow a fair exchange for a lamb?
Is a 14ct gold necklace a fair exchange for a dozen home-baked pies?
Under a barter system there was no measure of value. Because of this, you might be pressured into taking unfair deals and therefore suffering in the process.
Barter: Problem 2:Double Coincidence of Wants
Double Coincidence of Wants?Exchange can take place between two persons only if each possesses the goods which the other wants.
Double Coincidence of Wants is the requirements of a barter exchange that each trader has what the other wants and wants what the other has. Because everyone doesn't necessarily want everything, the lack of Double Coincidence of Wants is a major obstacle in barter exchanges, especially for complex, modern economies. While Double Coincidence of Wants is also essential for exchanges involving money, it's such an inherent trait of money we don't think twice about it. By its very nature as a generally accepted medium of exchange, everyone WANTS money.
Barter: Problem 3:Indivisibility of Commodities
Indivisibility of Commodities?It was difficult to divide a commodity without loss in its value.
e.g., a man who wants to purchase 10 metres of cloth equal to the value of half his calf would find it difficult to ‘divide’ his calf unless he was able to find other commodities for the other half of his calf and therefore be stuck with half a calf. (“,)
The likelihood would be that he would not be able to purchase the 10 metres
Commodity Money & Fiat MoneyCommodity Money is:Commodity Money is a form of money which has an intrinsic value, meaning it is worth something in its own right rather than simply being a token of financial value such as a banknote.
The best known form of commodity money is gold or silver coins, though any commodity can fulfill this role.
Fiat Money is:Most types of cash used today do not have any real intrinsic value. For example, a banknote is virtually worthless in itself and only has value because society accepts it as a measure of currency and a unit of exchange.
This type of currency is known as Fiat Money.
Coinage
Archaic Age800-500 BC
610 BC Lydians of Asia Minor invent coinage; shortly afterward it spreads to Greek cities in Asia Minor, then Greek islands, then Greek mainland, then rest of world
600 BC China issues its first coins, cast bronze pieces in shape of farm tools
560 BCLydians invent bimetallic coinage, issuing coins of pure gold and pure silver
550 BCFirst coinage minted in mainland Greece, in Athens and Corinth
Lydian electrum trite (4.71g, 13x10x4 mm). This coin type, made of a gold and silver alloy, was in all likelihood the world's first, minted by King Alyattes in Sardis, Lydia, Asia Minor (present-day Turkey), c. 610-600 BC.
Obsidian, a type of volcanic glass or hardened lava, is one of many materials that were used as money before coins and afterward.
Lion paw electrum 48th stater (0.27g). This coin features on the obverse a lion's paw. There's disagreement over whether these fractions are Lydian.
Paper Currency
First Paper MoneyThe first paper money was issued in China during the Song dynasty in the 10th century.
The name of the note was jiaozi. For the first time it was issued liberally among the people of China. Thus it was able to take the place of coins that till then were widely used in circulation.
Paper money appeared in China due to several reasons. Firstly, after a great development of the economy and a boom in trade registered in the Northern Song Dynasty, the iron coin sometimes showed its disadvantages, mainly due to the fact that it was small in value and heavy. In addition, during this period, printing showed great results, it was able to produce paper money, which was quite convenient for traders.
Fort KnoxThe US Bullion Depository, KentuckyFort KnoxAmount of present gold holdings: 147.3 million ounces at a book value of $42.22 per ounce.
Opening:The Depository opened in 1937; the first gold was moved to the depository in January that year.
Highest gold holdings this century: 649.6 million ounces (December 31, 1941).
Construction of the depository:Building materials used included 16,000 cubic feet of granite, 4,200 cubic yards of concrete, 750 tons of reinforcing steel, and 670 tons of structural steel. The cost of construction was $560,000 and the building was completed in December 1936.
Other items:In the past, the Depository has stored the Declaration of Independence, the U.S. Constitution, the Articles of Confederation, Lincoln's Gettysburg address, three volumes of the Gutenberg Bible, and Lincoln's second inaugural address.
In addition to gold bullion, the Mint has stored valuable items for other government agencies.
The Magna Carta was once stored there. The crown, sword, scepter, orb, and cape of St. Stephen, King of Hungary also were stored at the Depository, before being returned to the government of Hungary in 1978.
The Depository is a classified facility. No visitors are permitted, and no exceptions are made.
Credit Money
Credit MoneyCredit money refers to money that constitutes future claims of a valuable item against an entity.
The holder of credit money can use it to purchase goods and services; when the holder wants to, he or she can redeem it to get the item by which it is backed.
Credit money is made of a material that has low intrinsic value compared to the value it represents when exchanged.
Some types of credit money include IOUs, bonds and money market accounts. Some people also consider paper money and coins to be credit money because they have no intrinsic value and can be exchanged for valuable commodity.
Money is a means of keeping score
Money ScorecardThis all means that today, money is just a number; just a score at the end of a sports game.
The Forbe’s World’s Richest List is just similar to The Best Sportman’s Award given out by other magazines.
Assembled by: S. KolberLayout: A. Ballas