In earlier times, anything ranging from rice to cotton to food products like honey could serve as a medium of exchange
Over time, the economies, that survived on the barter system or in-kind transactions-systems became lesser and lesser in number, and slowly and steadily the medium of exchange kept evolving, from day to day goods like rice and crops, to cattle, to precious metals
Precious metals such as gold and silver hen became the commonly used medium of exchange and they continue to inspire confidence even now, in some form or the other.
Today, we use only paper currencies as money and therefore it’s interesting to see how this evolution happened continuously over time.
What should an Acceptable ‘Medium of Exchange’ Be Like?
It should be durable
Should be easily divisible into larger or smaller amounts
Should be comparatively scarce; procuring it should require some effort
Should be “homogeneous”: every item of the commodity should be exactly like every other item.
Should be convenient: it should be easy to carry enough around to make trades for other commodities
Should ‘store’ value: should have some perceived intrinsic value of its own
Over time, the economies, that survived on the barter system or in-kind transactions-systems became lesser and lesser in number, and slowly and steadily the medium of exchange kept evolving, from day to day goods like rice and crops, to cattle, to precious metals
Precious metals such as gold and silver hen became the commonly used medium of exchange and they continue to inspire confidence even now, in some form or the other.
Today, we use only paper currencies as money and therefore it’s interesting to see how this evolution happened continuously over time.
What should an Acceptable ‘Medium of Exchange’ Be Like?
It should be durable
Should be easily divisible into larger or smaller amounts
Should be comparatively scarce; procuring it should require some effort
Should be “homogeneous”: every item of the commodity should be exactly like every other item.
Should be convenient: it should be easy to carry enough around to make trades for other commodities
Should ‘store’ value: should have some perceived intrinsic value of its own
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