Lesson 50 Assignment – What is the origin of money? (In other words, how does money first arise?

Before the establishment of a centralized production of fiat currency by the government, people used to barter. Bartering is the act of exchanging one good or service for the other, but as society developed this turned into an inconvenient way of getting what we wanted. This is because you’d have to find the exact person that offered what you wanted and was willing to exchange it for the service or product you offered. Individuals then turned to gold, as they put value in it for being a beautiful, moldable material that was rare to find and was sought after by people. People then resorted to gold as a means of exchange, but banknotes were created, (IOUs) which were paper notes that allowed individuals to give it to any bank and exchange it for gold. In the US, we used to be able to exchange dollars for gold or silver at the bank, this was known as the gold standard but was removed in 1971. Governments can’t create money out of thin air, in the sense that they cannot establish a value that everyone will abide by. If individuals have no use for the piece of paper, then it simply becomes useless regardless of the official value set by the government. The government simply intervenes, this has been the case throughout history. First, they centralized the production of gold and silver, and made it illegal for anyone outside of it to mint or mold it into coins. The government then hoards all the gold & silver, cancels the gold standard, and eventually leaves everyone with useless paper money. The reason the dollar or any other paper currency has value nowadays is that of the global circulation and its use in trade, transactions, assets of the country, etc.