ORIGIN AND ESSENCE OF MONEY

As early as 1100 B.C., miniature bronze knives were circulating in China.

axes and other tools used to replace tools
true ones that served as a means of exchange. The functions of money as a medium
of change and measure of value facilitated the exchange of goods and services and the
specialization of production, but without the use of money, trade becomes
it would reduce to barter or direct exchange of one good for another. In an economy of
barter, a person who has something to trade must find another.
a person who wants the same thing and has something acceptable to offer in return.

Coins made from an alloy of gold and silver first appeared

in the 6th century BC in the district of Lydia, in Asia Minor, which was at that time
an important industrial and commercial country. This money was genuinely money
material, whose value was determined by its content in precious metals. The
coins proliferated rapidly in all developed countries of the world.
Both the monarchs and the aristocrats, the cities and the institutions
they began to mint money with their identifying seal to certify authenticity
of the metallic value of the coin. However, coins were always filed or
they were cut to extract the precious metal they contained, which is why the authorities
those that emitted them were tempted to lower the minting, ensuring profits to
short term by reducing the content of precious metals. The low coins
bronze or copper quality were, in fact, fiat money, whose value depended
mainly from the number of gold or copper coins for which one could
exchange. 7The gold and silver coins used to circulate outside the country that issued them.
emit it given its intrinsic value; thus, the weight of Spanish silver, whose material
it came from the mines of Peru and Mexico, it became a currency in use
current in China starting from the 16th century.

Once created, coins originated a monetary system whose

characteristics have remained, in essence, constant for millennia; one of
the changes that have endured was the introduction, in the European currencies of
17th century, of the grooves on the edges in order to prevent them from being filed down. The paper
currency was first introduced in China around the 9th century as money
in cash exchangeable for certificates issued for the government of the dynasty
Soak by private banks. Backed by the powerful authority of the State.
Chinese, this money retained its value throughout the empire, thus avoiding the need
to transport the heavy silver. Turned into a state monopoly under the dynasty
The paper currency has survived throughout Chinese history despite the
disruptions caused by political changes and the issuance of paper
the currency was not backed by silver or other reserves. The problem of the
depreciation caused that, from then on, silver was maintained as a standard of
Chinese currency for important transactions. Paper money appeared for
first time in the West in the 16th century, when promissory notes began to be issued for
part of the banks to back the monetary deposits of their clients. These
means of exchange proliferated and the French colonial authorities of Canada
they used playing cards signed by the governor as a promise of payment since
1685, since the money transfer from France was very slow. The banknotes were
it became popular throughout the 18th century, but it was still credit money
that was issued to back the deposits of gold or silver. Fiat money,
when it emerged, it was typically an emergency measure for wartime,
like the American (greenback) papyrus. Private banks were replaced
gradually by central banks as issuing authorities of currency.
At the end of the 19th century, the fall in the value of gold led to the creation of a gold standard.
international in which all currencies could be exchanged for gold, and the value
of money (more than prices) was set by the currency's parity with the
gold. Almost all governments suspended the convertibility of their currencies
during World War I, losing all interest in reintroducing the
international gold standard after the Great Depression. Great Britain abandoned the standard
gold in 1931, and the transformation of world currencies to fiat money with
values set entirely by market demand ended with the abandonment of
the linkage of the US dollar in 1971.

What is money?

Money is any generally accepted medium of exchange for payment.

goods and services and the amortization of debts. It also serves as a measure of
value to assess the relative economic price of different goods and services;
the number of monetary units required to purchase a good is called
price of the good. The most important classes of money are material money, the
credit and fiduciary. The value of an asset considered as physical money is the
value of the material it contains, the main materials used in this type of
money has been gold, silver, and copper, in ancient times various articles were made
with these metals, as well as with iron and bronze, they were used as money,
while among primitive peoples they were used as a means of exchange
goods such as shells, pearls, elephant tusks, skins,
the slaves and the cattle. Credit money consists of a paper backed by the
issuer, whether it is a government or a bank, to pay the equivalent value in metal.
The banknotes that are not convertible into any other type of money and whose value is fixed.
merely by government decree is what is known as fiduciary money.
Most of the coins in circulation are also a form of fiat money.
because the value of the material they are made of is usually lower than their value
like money. Both credit and fiduciary are forms of money that
they have generally been accepted after a government decree according to which all
lenders must accept money as payment for what is owed to them;
money is then called legal tender. If the supply of paper currency does not
it is excessive in relation to the needs of commerce and both the industry and
people trust in the stability of the situation, it is likely that the currency will
generally accepted and relatively stable in value. Without
embargo, if that currency is issued excessively to finance the needs of
government, trust in the currency will be destroyed and it will quickly lose its
value. This depreciation of the currency is usually followed by a devaluation
formal or reduction of the official value of the currency through a decree
governmental

The basic money of a country is referred to as the monetary standard, which refers to
the type of money used in the monetary system. Modern patterns have
a commodity or a good, mainly gold or silver, or fiduciary standards, consisting of
non-convertible banknotes. The main types of gold standards have been the
gold coin, gold bars with a certain amount of gold and the standard
gold exchange rate under which one currency can be converted into the currency of another country
based on the gold standard. The silver standard has been used in our time
mainly in the East. There is also the bimetallic pattern; the system of
bimetal has been used in several countries where the coins could be both of
gold like silver. These systems rarely worked, fundamentally
due to Gresham's law, which shows that cheap money tends to
displace and expel the expensive currency from circulation. Currently, the majority
part of the monetary systems in the world are fiduciary, in which there is no
it allows the free convertibility of currency into metals and money has value
thanks to a government decree and not because of its content in gold or silver. The
modern systems are also described as management money systems,
because the value of monetary units depends, to a large extent, on management
governmental and economic policies.

Credit, or the use of a promise of future payment, is a complement

very valuable of money today. Most of the transactions
economic transactions are made through credit instruments more than with currencies.
bank deposits are generally introduced into the monetary structure of a
country; the term 'money supply' reflects the money in circulation plus the deposits
banking. The real value of money is determined by its purchasing power, which
It, in turn, depends on the general price level. According to the quantitative theory of
money, prices are determined, largely or entirely, by the volume of
money in circulation. However, empirical evidence shows that at the time
Determining the general price level is also important for the speed of
circulation of money and the volume of production of goods and services. The volume
and the circulation speed of bank deposits is also relevant.

When do interests arise?

During the medieval period, and before, the payment and collection of interest was analyzed following
moral criteria, since usury was considered a sin. The position of the
The Catholic Church, defined by Saint Thomas Aquinas, did not consider it a sin
payment of interest on loans that will be used in businesses, since the money
it was used to create new wealth, but payment was considered sinful
the charging of interest on loans used to purchase consumer goods.
Under modern capitalism, the payment of interest on any loan is
it is considered correct and even advisable, since the burden that the payment implies
of interests allows for the proper allocation of the limited available funds to
those projects in which they are more profitable and productive. Economists
they consider interest as the reward for saving, that is, the payment that is
offers to encourage people to save, allowing others to access
to this savings.

The interest generated by land is called rent, which is characterized by not coming from
directly from a specific action that has attributed that additional value to it
which represents; merging in this aspect with the added value that is the
increase in income that a property owner achieves from a circumstance that does not
it depends on their will; in other times it was thought that this surplus value came from,
almost exclusively, of agriculture.

The Interest:

Interest is the payment made for the use of someone else's money; in
Economics is considered, more specifically, a payment made for obtaining
of capital. It is determined by following the rules of price formation, that is,
it depends on supply and demand.

Normally, only interest is paid on the principal, meaning on the total amount.
from the borrowed money, the interest is added to the capital at the end of the period (one year),
As a consequence, the interests produced by a certain capital are
the same every year, this is called simple interest. In some cases, the
interest is not only paid on the principal, but also on the total accumulated
principal and the outstanding interest, the interest generated by a
certain capital is greater each year, this procedure is known under the
compound interest name.

The interest rate is expressed as the percentage of the principal that is paid for the
use of this over a certain period of time, usually a year. The type
of current interest, or market interest, is fundamentally calculated based on the
relationship between the money supply and the demand from borrowers. When the supply
available money for investment is increasing faster than the needs of
Borrowers, interest rates tend to fall. Similarly, the rates of
interest tends to increase when the demand for funds to invest grows more
quickly, as the available funding offer that those demands face