Introduction
Humanity has gradually advanced from a time when survival depended on the availability of food and shelter. From a simple existence of sustenance, man developed the need to have more hence the barter system. The barter trade eventually led to the invention of currency which has improved to paper money coins.
History
The history of cash can be associated to man's advancement socially, economically and culturally. After the barter system developed, the need to invent a standard exchange rate led to the invention of metal currency. China was the first nation to develop metal cash. In fact, this Asian nation also began leather and cloth currency which ushered in the use of paper money coins. However, with the development of this currency, China experienced an inflation that led to the disappearance of cash. This form of cash reappeared in Europe and finally spread worldwide.
Paper money coins should satisfy certain qualities to be good currency. It should be divisible, portable, durable, stable, cognizable and homogenous. Cash should be available in various denominations. It should be easy to carry around currency. Moreover, cash has to be made of high quality elements and easily distinguished from fake currency.
Features
There are certain functions that are satisfied by currency. Paper money coins act as a medium of exchange and as a standard for measure. As a medium of exchange, it is the means of purchasing goods and paying for services. As a standard of measure, prices for goods and services are set in terms of cash. Cash is a unit of account and should be stable. The unit of measurement should not be ever changing nor should prices for goods and services keep shifting. In any case, prices should remain the same over a period of time before they increase or decrease.
Cash can be either convertible or inconvertible. It is convertible if the government of a particular state allows the exchange of cash for commodities such as gold. However, if there is no such guarantee, it is inconvertible. Paper money coins when in constant circulation within any economy can lead to inflation. During such scenarios, the value of money decreases as the cost of living increases. The value of cash relies heavily on the forces of demand and supply within any given economy.
Tips and Comments
It is possible to have paper money coins in various forms. Banks issues cheque books to its clients. One can carry out transactions by issuing cheques to their respective debtors. The amount owed is deducted from the amount deposited in the bank account. The same formula exists with electronic transactions. There are credit cards and debit cards which allow us to engage in online transactions. The introduction of electronic cash threatens the existence of hard cash transactions.
Man's invention of a medium of exchange for goods and services has necessitated the constant improvements of this innovation. No wonder currency has shifted from gold to paper money coins and presently electronic cash is gaining worldwide recognition. However, there are merits and demerits associated with having cash. One is able to satisfy their needs and engage in luxuries. On the other hand, one is vulnerable to harm from criminals and the have-nots in society.
