28 August 2013

Money Defined

Money - World Book Encyclopedia
Money is anything that is generally accepted by people in exchange for the things they sell or the work they do. Any object or substance that serves as a medium of exchange, a unit of account, and a store of wealth is money. To be convenient, however, money should have several qualities. It should come in pieces of standard value so that it does not have to be weighed or measured every time it is used. It should be easy to carry so that people can carry enough money to buy what they need. Finally, it should divide into units so that people can make small purchases and receive change.

A unit of money is the lowest common denominator for comparative valuation among many persons. Money allows the exchange of goods and services to be conducted in interregnum transactions. Something of value is exchanged for an amount of money, and that money is later exchanged for something else of equivalent value with someone else completely unrelated to the first exchange. That is the simplicity and beauty of money.

A History of Interest Rates by Sidney Homer, Rutgers, 1963
A study of primitive money catalogues some 173 objects and materials which in ancient and modern times have had monetary attributes in one or more places and at one or more times. Those most frequently mentioned include beads, cattle, cloth, copper, gold, grain, iron, rice, salt, shells, silver, skins, slaves and tobacco.

Commodities, some more than others, have an intrinsic value that is uniform, storable, divisible, and transportable. Cattle sufficed as money for large transactions, but obviously not smaller transactions since cattle are not divisible. However, cattle sufficed so well for larger transactions that the term pecuniary, which means 'related to money,' is derived from the Latin pecuniarius, meaning 'wealth in cattle.' What does and does not qualify to be called ‘money’ is not cut and dry.

For discussion purposes, all persons who use the same form(s) of money comprise a ‘society’. The valuation process increases in complexity as the number of different forms of money in coexistence increases, to such a degree that no more than a handful would most likely coexist at the same time within the same society. Which commodity transforms into or out of the category of ‘money’ is a Darwinian selection process determined by the Market.

The mere logistics of gathering, manufacturing and handling each form of money significantly shapes the culture of a society, impacting the way and manner a society interacts. All those who use the same form, or forms, of money have something in common with each other. Any change in the form of money will impact societal interaction as a whole and individually. When a society changes or alters its form of money, societal changes occur in proportion to the magnitude of the change or alteration.

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