Categories : Commerce/Financial Uncategorized

 

In the history of humanity individuals banded together to form micro societies in which the members worked collectively for the common good.  Everything was pooled primarily for survival.  Then micro societies interacted using barter to exchange essentials (satisfy needs).  As humanity evolved, however, certain things became collectively recognized as having inherent value, permitting different micro societies to essentially export their “stuff” in exchange for inherent value.  Then, as the micro societies merged to become organizations with governance, money evolved – issued by the organization and agreed by its members as a valid medium for the exchange of value.  Barter did not go away.  Rather a medium of potential was created that permitted the evolution of commerce.

 

Initially, the medium was represented by tangible substances such as gold and silver.  Coins we eventually minted by the organizations exercising governance.  A key aspect of this arrangement was that the coins were made of materials recognized by individuals as having value.  A silver coin might not have value in what it could do for the individual, but it could be traded to satisfy real needs.

 

But coins had their limitations.  First, they had mass.  Second, as they were used, entropy[1] took hold and the material recognized as valuable disappeared through the erosion of the coin.  A new medium of exchange was needed to maintain the materials perceived as having potential value.   Governments responded with paper money[2] – an abstract medium perhaps backed by a store of the physical material having the perceived value – or maybe not.

 

Eventually, all governments abandoned the backing of paper money with tangible materials. Money became a tangible but necessary medium for commerce based solely on trust in the issuing government.

 

Today we have paper money (and coins made from non-”precious” metals), but we also use electronic money.  Credit cards, debit cards, wireless bank transfers (wired too), and electronic-based exchange.  For the most part, the numeric values representing units of currency remain backed by governments[3], but the emergence of other mediums such as bitcoins is seen.  Note, however, that these mediums are based on the use of technology for implementation

 

What is the future of the exchange medium as a form of potential value that continues to enable commerce?  And what are the needs of this medium to continue the value perception of humanity?

[1] Entropy: lack of order or predictability; gradual decline into disorder – from Google

[2] First used during the Tang Dynasty in China (A.D. 618-907).  China eliminated paper money in 1455, when its perceived value plummeted.

[3] As an aside, this electronic currency has even lost the intrinsic value of the small piece of paper.

Print Friendly, PDF & Email
 Posted on : June 19, 2017
Tags :

Leave a Comment

Your email address will not be published. Required fields are marked by *.

You must beLogged in to post a comment.