Hello everyone.
Welcome back to another blog post on your favorite blog "ICCBizNews".
So for today, we shall explore the concept of "The role of money in modern economic life."
Alright, let's tuck in and enjoy.
Money tends to hold a pillaring role in any market economy across the world.
Why is it this way??
Is it because it serves to act as a medium of exchange between 2 or more people for XYZ amount of transactions in monetary terms be it cash or credit or is it something else??
Let's dive deep into this concept with this example.
What would happen in the world if trade of goods & services took place without employing this tool called "Money"??
Would a hairdresser have to accept some other good or service as a direct exchange price for her/his services instead of money??
What would this means for her bottom line & budget??
Would she/he have to be forced to receive payment for her/his work in let's assume "Potatoes"??
If this scenario actually happened would it mean that she/he must pay herself/himself, her/his team, and her/his suppliers in potatoes.
Furthermore, if another client pays in rice and yet another one in wheat for her/his services, the question to be pondered upon stands to be "What is the worth of these haircutting/hairdressing services in monetary terms of rice or wheat??".
Interesting, right??
Hence, direct exchange and transaction of goods & services became very complex in a barter-system-based economy in human history.
This also stands to be the reason why this "WAY" of conducting economics remained highly unsuccessful and undeveloped for us human beings because as stated earlier direct trade became extremely difficult in terms of quantifiable networth & value regarding the exchange of goods and services amongst creators & consumers of those goods & services in any given marketplace.
Awesome, now that we know the problem related to "Trust & Transparency" of trade & transactions between 2 or more individuals in their respective marketplaces for a variety of goods & services, let's now delve into the solution for this problem with birth of "Money" that allows for complex trade & exchange.
The Birth Of Money:
Money is any asset that can act as a storage of value, a unit of account, and a medium of exchange in an economy that is acceptable in the settlement of "Debt" incurred in an exchange of value for its respective price be it any good or service.
Now, for an asset to be made in bulk, widely distributed, and considered of immense value, I.E. "Money", it must consist of certain components to itself including portability, divisibility, durability and stability in value.
It's now a well known fact that certain assets like "Gold & Silver" tended to fulfill the role of money much better than other items like "Potatoes, Tomatoes, Rice, Wheat, etc," because of their durability, portability & divisibility into bars and coins.
The advent of paper money by the chinese people in the 9th Century AD commenced a vital shift in the evolutionary journey of money, especially given the simplicity with which various denominations could be made, and the ease of portability they tended to provide in comparison to gold or coinage.
It is said that the reason that the Chinese gave for the purpose of inventing paper money was that "they were facing an acute shortage of metal to make coins."
This incident and chain of events clearly states that the evolution of money as a medium of exchange, unit of account & storage of wealth, has undergone a very long and ardious to create a considerable impact on the development of modern commerce, international trade, and global prosperity.
Alright, that's for this post on "The role of money in modern economic life."
Thanks for reading it all the way through the end.
Now, I invite you to discuss your perspective on this topic in the comments section below.
Bye.
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