Gold & Money
without "money" the difficulty of bringing together persons with reciprocal wants would have been an insurmountable obstacleto that development of exchange, which alone made division of labour possible, which is the prerequisite to civilised existence.The second important function of money is to provide a ready means for estimating the
comparative values of differentcommodities
. For, common sense tells us that without some common object as a standard of comparison this would bepractically impossible. For example, if a clockmaker had only clocks and wanted to buy bread, meat or a horse, it wouldproblematical to determine how much bread he ought to obtain for a clock or how many clocks he should give for a horse.Moreover, the problems of equivalence increased as the number of commodities concerned increased, for each commoditywould have to be quoted in terms of every other commodity. Thus, the societal imperative through the ages and withincultures to establish a common currency of exchange or"common object"that could be used as a medium of exchange and todetermine comparative values of different commodities. By the selection of some particular article, the"common object,"asthe criterion the comparison of values is made much easier. Thus, the chosen commodity becomes a common denominator,common measure or"common object"of value in terms of which the value of all other goods are estimated. By such anarrangement, the"common object"–money- not only renders exchange possible by acting as an intermediate term in eachtransfer but also makes exchanges easier by making them definite.Throughout history there has been a great variety of "common objects"or"money"which have been used to supply the need
of a circulating medium ranging from seashells, feathers, animal skins, cattle, sheep, goats, oxen, pig, amber, ivory, jade,glass beads, silver and gold coin, paper currency and, today, electronic debit cards. Consequently, money in its various formshas been the great agency for transmitting values from place to place. Furthermore, the Form of Money or is not importantsince these are so diverse and are merely
that represent economic value to a particular people at a specific in aconvenient and
commercially acceptable forms. Furthermore,"value"is a subjective and therefore a psychological concept,which is independent of the purely mechanical aspects of economics.Another important function of money arose at a later stage in Western culture when the economic infrastructure and itsparticipants became more sophisticated and trusting of each other and entered into relations arising from"contracts."That is,an agreement that something is to be done in the future for which payment will be given and received. Naturally, for anestimation of the value of that future act a standard is thus required and so money which has already acted as a medium of exchange and as a measure of value at a given time, performs a third function, by affording an approximate means of estimating the present value of the future act. Here, money may be regarded as a standard of value or of deferred payments.Thus, there are
important functions of Money:
That it supplies the common medium by which exchanges are made possible, that is, it facilitates exchange vis-à-vis wealth or value. Money is thus acommodity universally accepted in exchange for goods, services and for the discharge of debts or contracts.
That it supplies the common measure by which the comparative values of those exchanges are estimated. That is, to provide a ready means for estimating thecomparative values of different commodities. Money thus acts as a measure of value and a unit of account, a common standard that makes the operation ofthe price system possible and provides the basis for keeping accounts and calculating cost, profit, and loss.
That it supplies the standard by which future obligations are determined. That is, money affords an approximate means of estimating the present value of futureacts conveniently called"contracts"whereby it functions as"deferred payments."Money thus serves as a standard of deferred payments; the unit in which loans
are made and future transactions are fixed providing the commonly accepted basis for borrowing and lending. Importantly, it facilitates credit the primaryfeature in the contemporary economy.
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