Definition Of Money.

The term ‘Money’ has a broad definition. But, for this content, Money simply means a generally circulating mode of exchange or a means of payment.

In Nigeria, The Central Bank creates and issues money. While in some countries the Government, treasury or central bank creates and legalises the use of money.

Characteristics Of Money.

There are qualities that something must possess to be described and accepted as money. These
qualities make for the easy identification of money.

Generally Acceptable – Money must be identified and accepted by a large group of people or society as a medium of exchange for goods, services and values.
Durable – Whatever is considered as money will have durability, this means that money must not be weak or perishable, Money should be useful even after its first usage. It should last over a year
Divisible – Money must be able to be divided into lesser units, to help in purchasing low or high products
Mobility – For something to be regarded as money, it should be able to be moved around from one place to another. It shouldn’t be immovable. This allows transactions to be made at any point in time.
Value – Anything considered money has value. And this value determines its worth.

History Of Paper Money(notes).

Paper money or Paper bills are a country’s valid paper currency that is used in transactions to purchase goods and services. Cheques and Bill of exchange are also deemed as paper money.

The Chinese were the first to use paper money during the 7th A.D as a way to eliminate carrying heavy metallic coins to complete transactions. Merchants who used trading receipts from deposit shops where goods or money were stored. The merchants would deposit copper currency into the stores of wealthy families and trustworthy wholesalers, and in turn receive notes denoting how much they deposited, this note aided them in cashing numbers in surrounding towns by accredited persons. The merchants did this to prevent carrying around the heavy and bulk copper coinage in huge transactions.

Although, the early Song government restricted their receipts to their monopolized salt industry and trade. It is recorded that they began issuing deposit receipts in the 10th century.

China being the first to issue paper money, their first official regional paper-printed money can be traced back to the year 1024, in Sichuan province.

China used paper money for over 500 years before Europe got a hint of it.
By then China’s finance was suffering immensely, and the value of paper money fell causing inflation to rise. This made China discontinue the usage of paper money for hundreds of years.

Europe first learnt about paper money in the late 13th century through the journal of a traveller by the name of Marco Polo.

In Europe, the first real successful banknotes were issued by Stockholms Banco, on 1661. This bank was founded by Johann Palmstruch who was later sentenced to death for mismanagement of the bank in 1668 by the Svea Court Of Appeal and later had his sentence reprieved, but continued to stay in prison till 1670 and died the next year.

It took a century or more for paper money to spread across other countries.

Forms Of Paper Money.

Paper Money exists in different forms, Such as;

Representative Paper Money – This is a type of paper money that is solely insured by gold and silver reserves. The monetary authority keeps in reserves the amount of gold and silver equal to the value of paper currency issued under the representative money monetary system.

Convertible Paper Money – Convertible paper money is paper money that can be easily transformed into standard coins or metals. These are held as substitutes by the monetary authority.

Inconvertible Paper Money – In this type of Paper money, paper money cannot be changed to standard count or valuable metals. The monetary authority does not keep metallic reserves against the paper currency in the system of inconvertible paper money, as it does in the systems of representative and convertible paper money.

Fiat Paper Money – Fiat money is money that is issued by the government by order or authority. It includes all notes and coins that a country’s citizens are legally required to accept as a medium of exchange.

Advantages Of Paper Money.

Its portability makes it less cumbersome in moving around than metallic money. A large amount of paper money can be carried around to make large transactions without having to worry about its heavy weight.

The fiscal benefits of paper currency to the government are undeniably significant, particularly in times of national emergency such as war. Taxes and loans alone cannot fund modern warfare. Every government must use the printing press.

The banks benefit greatly from paper money. They can keep their cash reserves in this form against liabilities because currency notes are full-length tender.

Paper money is completely malleable. The currency authority has the authority to increase or decrease its quantity.

Disadvantages Of Paper Money.

There is a chance that the paper will be damaged. If the area is flooded and it can also be burnt.

When domestic and foreign prices do not move in lockstep, paper currency can cause foreign exchange rate volatility.

While paper money has no value outside of the country of issue, gold and silver coins are accepted by foreigners because they have intrinsic value.

Many countries are still in use of paper money notwithstanding its disadvantages. This has proved the usefulness of paper money.

What do you think led to the mismanagement of the first bank to issue a real bank note?

Like Our Story ? Donate to Support Us, Click Here

You want to share a story with us? Do you want to advertise with us? Do you need publicity/live coverage for product, service, or event? Contact us on WhatsApp +16477721660 or email Adebaconnector@gmail.com