Desirable featuresTo be a medium of exchange: -- It should have liquidity, and be easily tradable, with a low spread between the prices to buy and sell, in other words, a low transaction cost. -- It should be easily transportable; precious metals have a high value to weight ratio. This is why oil, coal, vermiculite, or water are not suitable as money even though they are valuable. Paper notes have proved highly convenient in this regard. -- It should be durable. Money is often left in pockets through the wash. Some countries (such as Australia, Mexico and Singapore) are making their bank notes out of plastic for increased durability. Gold coins are often mixed with copper to improve durability. -- It should minimize contamination and contagion. Since money is frequently handled it becomes a pathway for infectious disease transmission. Recent studies have shown that the area in business offices that show the highest contamination by disease causing organisms is the accounting office where money must be counted and handled. Unlike paper, silver is used as a anti-bacterial and anti-viral agent, as are platinum and titanium. This property of silver has been recognised for millennia, which is why silver is often used in eating utensils. To be a unit of account: -- It should be divisible into small units without destroying its value; precious metals can be coined from bars, or melted down into bars again. This is why leather and live animals are not suitable as money. -- It should be fungible: that is, one unit or piece must be exactly equivalent to another, which is why diamonds, works of art or real estate are not suitable as money. -- It must be a specific weight, or measure, or size to be verifiably countable. For instance, coins are often made with ridges around the edges, so that any removal of material from the coin (lowering its commodity value) will be easy to detect. To be a store of value: -- It should be long lasting, durable, it must not be perishable or subject to decay. This is why food items, expensive spices, or even fine silks or oriental rugs, are not generally suitable as money. -- It should have a stable value. -- It should be difficult to counterfeit, and the genuine must be easily recognizable. To be anonymous: -- In the opinion of all libertarians and most laissez-faire economists, money should not be subject to government tracking. -- In the opinion of all libertarians and most laissez-faire economists, it should be usable for purchases in a black market. -- It should not require equipment, tools or electricity to use. Money also is typically that which has the least declining marginal utility, meaning that as you accumulate more units of it, each unit is worth about the same as the prior units, and not substantially less. For these reasons, gold and silver have been chosen again and again throughout history as money in more societies and in more cultures and over longer time periods than any other items. One key benefit of these features of money is that it facilitates and encourages trade, as barter is far less efficient. source: wikipedia.org GNU Free Documentation License |
History of money Characteristics of money Desirable features Modern forms Credit Money Creation Problems with precious metals as money Problems with paper as money Basis for value of money Economics Private currencies The Future of Money Supply The World's Richest People
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