'Money makes the world go round' - functions of money in the modern world

Service Business

Oh, how sweet and pleasing to the ears is the clink of coins and the rustle of banknotes. These inconspicuous pieces of metal and paper, ruling our minds and souls, rule the entire world.The functions of money are extremely important in our social and economic life - let's take a closer look at them.

Functions of money - money as a medium of exchange

When money had not yet been invented, barter reigned, that is, the exchange of goods for goods or service for goods. Imagine a situation in which you go to the store, choose the goods and negotiate the price: you offer the seller five handsome pigs for your new laptop. However, this one turns his nose at such an exchange, because he hates pork, he prefers mutton. Unfortunately, you do not have rams, so you will have to look for someone who will exchange your flock for some nice specimens of bleating animals. As you can see, barter exchange is very troublesome.

Commodity money is something similar to barter - here, too, the function of settlement is performed by a specific good. However, this is a more structured form of transaction, because we are dealing with one selected product that has a payment function. So the seller from the example cited would have to accept the pigs offered to him, even against his culinary preferences. The only question is - how to change such a currency?

Curiosity

By the end of the 18th century, as the United States of America was forming, whiskey became the commodity currency in many regions. The better quality it was, the more you could buy with it. When the federal government imposed excise duties on alcohol, residents of several states raised the so-called The Whiskey Rebellion, quickly and bloodlessly suppressed by troops led by President Washington himself.

The above problems were overcome when money was created - a universal medium of exchange, accepted by all market participants in a given area.

Money as a unit of account

Another function of money is to play the role of the unit of account necessary to determine the value of some goods in relation to another. If money did not exist, we would be dealing with chaos - imagine converting the price of, for example, a laptop to all goods available on the market. In such a computer store, price tags would have to be the size of an average book. This is the only way you can check how many rams, pigs, coconuts, movie tickets or hairdresser vouchers the laptop you are interested in costs.

However, the advent of the concept of money did not automatically solve all billing problems. In medieval Poland, there were many different coins in circulation, minted by states, cities and powerful lords. The people of that time had a lot of trouble with the constant conversion of Prague groszy into denarii, denarii into half groszy, half groszy on hellers ... Only the introduction of one official state currency and a central bank brought order.

Money as a means of storing value

And the last function of money, thanks to which the modern economic system may even exist. A stable currency has a certain fixed value, guaranteed by the issuer. We can be sure that the zloty earned one day will not become worthless the next day. There is, of course, the phenomenon of inflation, ie the loss of value of the currency, but in a mature economy it is a slow process. There are, of course, exceptions - such as hyperinflation during the war or the collapse of the economic system (the declining period of the Polish People's Republic).