Money. Types of money and their purpose

2024 Author: Howard Calhoun | [email protected]. Last modified: 2023-12-17 10:16

People have been using money for thousands of years. During this long time, the monetary system has undergone many changes. If in the 19th century means of payment always had a material embodiment, then in the 20th century money (we will consider the types of money below) began to exist not only as material objects.

In the beginning, money appeared in the form of coins, and it was in ancient times. This type of means of payment has not yet gone out of circulation. Later, paper money was invented to replace metallic money. But it was not completely possible to displace coins with the help of banknotes. For a long time, these were the main types of money that existed in parallel.

Today, new types of means of payment have appeared, but nevertheless, bills and coins have not gone out of use. They still continue to fill the wallets and pockets of the townsfolk.

In our time, metal coins, paper banknotes, electronic and credit money are in use. The choice of means of payment is very diverse, but their main essence remains unchanged.

What kind of money is used today? Types of money financial market specialists divide into 4 categories:

• commodity;
• credit;
• secured;
• fiat.

Commodity money

In the beginning, money appeared in society as material and natural. That is, their function was performed by some kind of commodity that could serve as a measure in exchange for other items. Commodity money could be animal skins, shells, pearls, and many other things that have a certain value in human society. Such a means of payment had one significant drawback - a very large variety in nature.

Followed by coins, devoid of such a drawback, but also related to commodity money. Initially they were made of gold, silver and other metals. They were easy to melt down and made from them, for example, jewelry.

Commodity types of money still exist today. For example, cigarettes that act as a means of payment can be considered such money in places of deprivation of liberty.

Secure money

The next class is secured money. Types of money from this category are goods (certificates, signs) that can be exchanged for a certain amount of precious metal. They are also called exchange or representative. In fact, they are representatives of commodity means of payment.

There is a version that the place of their initial appearance was Ancient Sumer. They came up with clay burnt figurines of sheep and goats to exchange for real animals on demand.

Initially, banknotes were also considered secured money, as long as they assumed the presence of a certain amount of metal coins. Today, the gold standard has been abolished. Paper money is symbolic money, although its name has been retained.

The traveler Marco Polo in the 13th century brought the news from China to Europe that paper money had been used by the Chinese for centuries. Europeans in those days used only coins. Only 3 centuries later in Europe they understood the practicality and convenience of banknotes, the security of which was gold.

Fiat money

In another way fiant money is called symbolic money, fake, decreed, paper. This means of payment is not secured by anything material, but is accepted as payment for goods and services. Fiat is all non-cash and electronic money, as well as funds lying on bank accounts, and paper banknotes in our pockets and wallets. Some researchers are of the opinion that soon people will stop using paper money.

Many today prefer a non-cash payment method. In this case, not only plastic cards are used, but also types of electronic money that are accumulated in virtual wallets.

Credit money

There is a certain category of people who prefer to live in debt. Perhaps, another means of payment was created specifically for them - credit money. The types of money of this class actually represent a debt formalized in a certain way. They may look different. This is a credit card, check or promissory note. Money in the form of formalized debt is common today and serves to pay for goods and services.almost everywhere, crowding out cash. This type of means is fraught with danger and a psychological trap. This is due to the fact that it is possible to take funds from the account in any amount, but not everyone can return them.

The evolution of money is a very interesting topic. What will happen in the future, time will tell. And although the disappearance of material means of payment and their replacement with fiat and credit money have been predicted for a long time, paper bills and coins are still in use and do not give up their positions.