Question

The history of money. What is it? What forms has it taken over the history of mankind? What is fiat and commodity-based money? What is the origin of the expression, “Bad money drives out good?” What is a “touchstone?” Where does the word “dollar” come from? Why are dollars sometimes called “bucks?” These and other aspects of money should be explored.

thank you

Answer 1

Answer :- Money is used to be a commodity established for medium of exchange while doing transaction. It store some amount of value. Money is accepted for payment for goods and services as well as repayment of debt in different countries.

On first it was barter system before the invention of money in which goods are exchange between both the parties. For that to be happen there must be double coincidence of wants for trade to be done between both the parties. For example :- a cow could be traded for a few sacks of rice. But due to lack of double coincidence barter system failed. Then transaction were carried in coins (silver,bronze,copper, gold) as a medium of exchange. All items were given value according to specific number of coins. Most commonly coins used for daily purpose were copper and bronze. Silver and gold coins were used for expensive goods. After that for avoiding carrying coins traders began to use vouchers that represent given number of coins. Some people issued vouchers which were beyond their paying capacity. Fake vouchers were another risk in this type of transaction. Now government started issuing paper money as a medium of exchange that were backed up with gold and silver reserve giving it more stability. This helped government to avoid bankrupt. Now government is able to control money circulation. Computers were used for transaction and avoided risk for carrying money.

* Fiat money is a worthless and has no guarantee that it is provided by government authority . Fiat money has no use value and it has value as government maintains its value. Where as commodity money drives it's value from its commodity from which it is made up of. Such as gold , silver, copper coin. Commodity money was more convenient than barter system. Commodity money was faced fluctuation in its price.

* Origin of expression"bad money drives out good"

This law of Gresham applies in a situation where two kinds of commodity money exist in circulation. Legal tender facilitate that it is accepted as it's face value. Money which has been overvalued attempts to throughout undervalue money out of circulation through price circulation.  

Bad money was used instead of good money in the 5 th century. Good money are those money which shows small disparity amid nominal worth as well as value of commodity. Without law governing legal tender will result in free exchange of metal coin in economy worth billions. Coins are preferable than metals hunks. Coins store more value because of its commodity from that it's made up of.

* TOUCHSTONE

These are hardstone that is dark , slate, Jasper. Touchstone is used in testing process of metal purity. Earlier it was used more commonly but now it's uses has been reduced. It is kept in assaying offices, some people preserve them because of curosity , some are in museums which are old. During testing , a metal is rubbed on touchstone to check it's purity. Most commonly used metal used for testing are silver, gold.

*Where the word dollar came from

During 1516 , Joachimsthal lauch silver mine . it was followed by mint known as joachimsthal. Mint began churning coins known as joachimsthalers. They were called thalers and now as Dutch. It was corrupted by English and foreign silver coin was given name of dollar . English men settled in America they called Spanish piece of eight as Spanish dollar. It was used widely that time. The Congress announced the dollar as US currency in 1785 to 1794.washington already reffered almighty dollar during 1837 and it was continued till now.

*Dollar known as bucks

European discovered dollar from Indians in eighteenth century. It meant deerskin. Deerskin was used as a medium of exchange for commodities. When Indian visited Ohio. Conrad weiser told that he had been robbed of 300 bucks and every whisky cask would be traded for 5 bucks. Value of deerskin declined in that century and dollar was serve as exchange medium replacing buck.