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What is Currency?

General Knowledge | 8-14 yrs | Animation, Video

Money, at its most basic level, is an object that simplifies an exchange of goods.

In ancient civilizations, it was a receipt that denoted the amount of grain that you had saved up at the granary.

Since everyone was using the same granary, people were able to exchange these receipts between each other- as if they were actually exchanging barrels of grain.

From the Pharaohs of the fertile crescent to the planners of Mohenjo Daro, people have used some form of currency to value the objects around them.

Since different cultures valued objects differently, the Harappan money may not be worth anything in Mohenjo Daro.

As trade developed between civilizations, there was a need to organize all these receipts that were being exchanged.

A system of banks were created that kept an account of all the grain in storage and the receipts in circulation. Banks would also mark a value of goods in two different currencies to help trade relations.

Before chequebooks and credit cards, kings regulated the money within their domains. They ensured that the banking system was fair to the people using it and that no one was making fake money.

THE BANKNOTE

  • Coins made from precious metals like alloys of gold, silver and copper came before paper money.
  • They were easily countable units of measurement that made it very easy to trade. The coins themselves had a value equal to their weight and size in precious metals.
  • Gold coins were usually used for large transactions like government affairs like wars, silver coins for taxes and trade, and copper coins were usually thrown around at the local market.
  • Paper currency actually grew out of a practice of 7th century Chinese merchants. The royal-issue copper coins were circular and had rectangular holes right in the middle that made them easy to put on a string.
  • The richer merchants who found it hard to carry around their strings of money would give their coins to one person for safe keeping.
  • In return, this trust-worthy person issued the merchant a receipt indicating just how much money he was banking for the merchant.

THE GOLD STANDARD

  • Coins were expensive to produce as it is, so when the king realized that he didn’t have to actually make coins, he issued little paper promises in the form of bank notes that represented the amount of gold in his treasury.
  • By doing this, the king was guaranteeing anybody who presented one of these notes at the treasury, that they would be given its worth in gold.
  • Making the value of your currency equal to its worth in gold, is known as the Gold Standard.
  • But unlike the Rupees of today, the notes of the Tang dynasty were only valid in specific regions of the kingdom and expired after 3 years.

For more such interesting General Knowledge articles and videos, visit: GK for Kids.

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