Money

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Various denominations of currency, one form of money

Money is any good or token that functions as a medium of exchange that is socially and legally accepted in payment for goods and services and in settlement of debts. Money also serves as a standard of value for measuring the relative worth of different goods and services and as a store of value. Some authors explicitly require money to be a standard of deferred payment.

Money includes both currency, particularly the many circulating currencies with legal tender status, and various forms of financial deposit accounts, such as demand deposits, savings accounts, and certificates of deposit. In modern economies, currency is the smallest component of the money supply.

Money is not the same as real value, the latter being the basic element in economics. Money is central to the study of economics and forms its most cogent link to finance. The absence of money causes an economy to be inefficient because it requires a coincidence of wants between traders, and an agreement that these needs are of equal value, before a barter exchange can occur. The efficiency gains through the use of money are thought to encourage trade and the division of labour, in turn increasing productivity and wealth.

Economic characteristics

Money is generally considered to have the following characteristics, which are summed up in a rhyme found in older economics textbooks and a primer: "Money is a matter of functions four, a medium, a measure, a standard, a store."

There have been many historical arguments regarding the combination of money's functions, some arguing that they need more separation and that a single unit is insufficient to deal with them all. 'Financial capital' is a more general and inclusive term for all liquid instruments, whether or not they are a uniformly recognized tender.

Unit of account

A unit of account is a standard numerical unit of measurement of the market value of goods, services, and other transactions. Also known as a "measure" or "standard" of relative worth and deferred payment, a unit of account is a necessary pre-requisite for the formulation of commercial agreements that involve debt.

• Divisible into small units without destroying its value; precious metals can be coined from bars, or melted down into bars again.
• Fungible: that is, one unit or piece must be exactly equivalent to another, which is why diamonds, works of art or real estate are not suitable as money.
• A specific weight, or measure, or size to be verifiably countable. For instance, coins are often made with ridges around the edges, so that any removal of material from the coin (lowering its commodity value) will be easy to detect.

Store of value

To act as a store of value, a commodity, a form of money, or financial capital must be able to be reliably saved, stored, and retrieved - and be predictably useful when it is so retrieved. Fiat currency like paper or electronic currency no longer backed by gold in most countries is not considered by some economists to be a store of value.

Market liquidity

It is important for any economy to move beyond a simple system of bartering. Liquidity describes how easily an item can be traded for another item, or into the common currency within an economy. Money is the most liquid asset because it is universally recognised and accepted as the common currency. In this way, money gives consumers the freedom to trade goods and services easily without having to barter.

Liquid financial instruments are easily tradable and have low transaction costs. There should be no—or minimal—spread between the prices to buy and sell the instrument being used as money.

Types of money

In economics, money is a broad term that refers to any instrument that can be used in the resolution of debt. However, different types of money have different economic strengths and liabilities. Theoretician Ludwig von Mises made that point in his book The Theory of Money and Credit, and he argued for the importance of distinguishing among three types of money: commodity money, fiat money, and credit money. Modern monetary theory also distinguishes among different types of money, using a categorization system that focuses on the liquidity of money.

Commodity money

Commodity money is any money that is both used as a general purpose medium of exchange and as a tradable commodity in its own right.

Commodity based currencies are often viewed as more stable, but this is not always the case. The value of a commodity based currency as a medium of exchange depends on its supply relative to other goods and services available in the economy. Historically, gold, silver and other metals commonly used in commodity based monetary systems have been subject to regular and sometimes extraordinary fluctuations in purchasing power. This not only damages its stability as a medium of exchange; it also reduces its effectiveness as a store of value. In the 1500s and 1600s huge quantities of gold and even larger amounts of silver were discovered in the New World and brought back to Europe for conversion into coin. As a result, the purchasing power of those coins fell by 60% to 80%, i.e. the prices of goods rose, because the supply of goods did not keep pace with the increased supply of money. In addition, the relative value of silver to gold shifted dramatically downward. Such discoveries of huge sources of gold or silver are a thing of the past, and lend to their supply stability. More recently, from 1980 to 2001, gold was a particularly poor store of value, as gold prices dropped from a high of $850/oz. ($27.30 /g) to a low of $255/oz. ($8.20 /g).^{[citation needed]} It should be noted that gold was not a currency at this time, and was fluctuating due to its status as a final store of value - that is, the price never goes to zero as fiat currencies inevitably do. The advantage of gold and silver, however, lies in the fact that, unlike fiat paper currency, the supply cannot be increased arbitrarily by a central bank.

It is also possible for the trading value of a commodity money to be greater than its value as a medium of exchange when governments attempt to fix exchange rates between different commodity monies. When this happens people will often start melting down coins and reselling the metal used to make them. This has happened periodically in the United States, eventually causing it to move away from pure silver nickels and pure copper pennies.^{[citation needed]} Shipping coins from one jurisdiction to another so that they could be reminted was sometimes a lucrative trade before the advent of trusted paper money. ^{[citation needed]}

Commodity money's ability to function as a store of value is also limited by its very nature. Copper and tin risk rust and corrosion. Gold and silver are soft metals that can lose weight through scratches and abrasions, but this is nothing by comparison to fiat currencies, where billions of dollars can be injected ("printed") into the market within moments.

Stability aside, commodity-based currencies may have a tendency to restrain growth in a very active economy. For example, in order to maintain the price level, the supply of money in an any economy must be equal or greater than the volume of goods and services produced. If commodities are used as money, then the total production can easily outstrip the supply of those commodities, which leads to price deflation. The lower prices of goods would signal to their producers to reduce the supply of goods, hence restoring the price level. As such, production within commodity-based economies tends to be limited by the supply of the commodity currency.[citation needed]

This problem is compounded by the fact that money also serves as a store of value. This encourages hoarding (in other circumstances known as "saving")and takes the commodity money out circulation, reducing the supply. The supply of circulating commodity currency is further reduced by the fact that commodity moneys also have competing non-monetary uses. For example, gold and silver are used in jewelry, and nickel and copper have important industrial uses.

Commodity based currencies also limit the geographic extent of the trading market. To make large purchases either a large volume or a high weight or both of the commodity must be transported to the seller. The cost of transportation of the currency raises the transaction cost and makes long distance sales less attractive.

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Banknotes from all around the world donated by visitors to the British Museum, London

Fiat money

Fiat money is any money whose value is determined by legal means rather than the relative availability of goods and services. Fiat money may be symbolic of a commodity or government promises.

Fiat money provides solutions to several limitations of commodity money. Depending on the laws, there may be little or no need to physically transport the money - an electronic exchange may be sufficient. Its sole use is as a medium of exchange so its supply is not limited by competing alternate uses. It can be printed without limit, so there is no limit on trade volumes.

Fiat money, especially in the form of paper or coins, can be easily damaged or destroyed. However, it has an advantage over commodity money in that the same laws that created the money can also define rules for its replacement in case of damage or destruction. For example, the US government will replace mutilated paper money if at least half of the bill can be reconstructed.. By contrast commodity money is gone for good.

Paper money is especially vulnerable to everyday hazards: from fire, water, termites, and simple wear and tear. Money in the form of minted coins is sometimes destroyed by children placing it on railroad tracks or in amusement park machines that restamp it. In order to reduce replacement costs, many countries are converting to plastic bills. For example, Mexico has changed its twenty and fifty pesos notes, Singapore its $2, $5, $10 and $50 bills, Malaysia with RM5 bill, and Australia and New Zealand their $5, $10, $20, $50 and $100 to plastic for the increased durability.

Some of the benefits of fiat money can be a double-edged sword. For example, if the amount of money in active circulation outstrips the available goods and services for sale, the effect can be inflationary. This can easily happen if governments print money without attention to the level of economic activity or counterfeiters are allowed to flourish.

Perhaps the biggest criticism of paper money relates to the fact that its stability is highly dependent on the stability of the legal system backing the currency. Should the legal system fail, so would the currency that depends on it.

Credit money

Credit money is any claim against a physical or legal person that can be used for the purchase of goods and services. Credit money differs from commodity and fiat money in two important ways: It is not payable on demand and there is some element of risk that the real value upon fulfillment of the claim will not be equal to real value expected at the time of purchase.

This risk comes about in two ways and affects both buyer and seller.

First it is a claim and the claimant may default (not pay). High levels of default have destructive supply side effects. If manufacturers and service providers do not receive payment for the goods they produce, they will not have the resources to buy the labor and materials needed to produce new goods and services. This reduces supply, increases prices and raises unemployment, possibly triggering a period of stagflation. In extreme cases, widespread defaults can cause a lack of confidence in lending institutions and lead to economic depression. For example, abuse of credit arrangements is considered one of the significant causes of the Great Depression of the 1930s.

The second source of risk is time. Credit money is a promise of future payment. If the interest rate on the claim fails to compensate for the combined impact of the inflation (or deflation) rate and the time value of money, the seller will receive less real value than anticipated. If the interest rate on the claim overcompensates, the buyer will pay more than expected.

Over the last two centuries, credit money has steadily risen as the main source of money creation, progressively replacing first commodity then fiat money.

The main problem with credit money is that its supply moves in line with credit booms and bust. When lenders are optimistic (notably when the debt level is low), they increase their lendings activity, thus creating new money and triggering inflation, when they are pessimistic (for instance because the debt level is perceived as so high that defaults can only follow), they reduce their lending activities, bankruptcies and deflation follows.

Money supply

The money supply is the amount of money within a specific economy available for purchasing goods or services. The supply in the US is usually considered as four escalating categories M0, M1, M2 and M3. The categories grow in size with M3 representing all forms of money (including credit) and M0 being just base money (coins, bills, and central bank deposits). M0 is also money that can satisfy private banks' reserve requirements. In the US, the Federal Reserve is responsible for controlling the money supply, while in the Euro area the respective institution is the European Central Bank. Other central banks with significant impact on global finances are the Bank of Japan, People's Bank of China and the Bank of England.

When gold is used as money, the money supply can grow in either of two ways. First, the money supply can increase as the amount of gold increases by new gold mining at about 2% per year, but it can also increase more during periods of gold rushes and discoveries, such as when Columbus discovered the new world and brought gold back to Spain, or when gold was discovered in California in 1848. This kind of increase helps debtors, and causes inflation, as the value of gold goes down. Second, the money supply can increase when the value of gold goes up. This kind of increase in the value of gold helps savers and creditors and is called deflation, where items for sale are less expensive in terms of gold. Deflation was the more typical situation for over a century when gold and credit money backed by gold were used as money in the US from 1792 to 1913.

Monetary policy

Monetary policy is the process by which a government, central bank, or monetary authority manages the money supply to achieve specific goals. Usually the goal of monetary policy is to accommodate economic growth in an environment of stable prices. For example, it is clearly stated in the Federal Reserve Act that the Board of Governors and the Federal Open Market Committee should seek “to promote effectively the goals of maximum employment, stable prices, and moderate long-term interest rates.”

A failed monetary policy can have significant detrimental effects on an economy and the society that depends on it. These include hyperinflation, stagflation, recession, high unemployment, shortages of imported goods, inability to export goods, and even total monetary collapse and the adoption of a much less efficient barter economy. This happened in Russia, for instance, after the fall of the Soviet Union.

Governments and central banks have taken both regulatory and free market approaches to monetary policy. Some of the tools used to control the money supply include:

• currency purchases or sales
• increasing or lowering government spending
• increasing or lowering government borrowing
• changing the rate at which the government loans or borrows money
• manipulation of exchange rates
• taxation or tax breaks on imports or exports of capital into a country
• raising or lowering bank reserve requirements
• regulation or prohibition of private currencies

For many years much of monetary policy was influenced by an economic theory known as monetarism. Monetarism is an economic theory which argues that management of the money supply should be the primary means of regulating economic activity. The stability of the demand for money prior to the 1980s was a key finding of Milton Friedman and Anna Schwartz supported by the work of David Laidler, and many others.

The nature of the demand for money changed during the 1980s owing to technical, institutional, and legal factors and the influence of monetarism has since decreased.

History of money

The first golden coins in history were coined by Lydian king Croesus, around 560 B.C.E. The first Greek coins were made initially of copper, then of iron because copper and iron were powerful materials used to make weapons. Pheidon king of Argos, around 700 B.C.E., changed the coins from iron to a rather useless and ornamental metal, silver, and, according to Aristotle, dedicated some of the remaining iron coins (which were actually iron sticks) to the temple of Hera[1]. King Pheidon coined the silver coins at Aegina, at the temple of the goddess of wisdom and war Athena the Aphaia (the vanisher), and engraved the coins with a Chelone, which is to this day as a symbol of capitalism. Chelone coins[2] were the first medium of exchange that was not backed by a real value good. They were widely accepted and used as the international medium of exchange until the days of Peloponnesian War, when the Athenian Drachma replace them. According other fables, inventors of money were Demodike(or Hermodike) of Kymi (the wife of Midas), Lykos (son of Pandion II and ancestor of the Lycians) and Erichthonius, the Lydians or the Naxians.

The history of money is a story spanning thousands of years. Related to this, Numismatics is the scientific study of money and its history in all its varied forms.

Money itself must be a scarce good. Many items have been used as money, from naturally scarce precious metals and conch shells through cigarettes to entirely artificial money such as banknotes. Modern money (and most ancient money too) is essentially a token—in other words, an abstraction. Paper currency is perhaps the most common type of physical money today. However, goods such as gold or silver retain many of money's essential properties.

The emergence of money

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Shells of the pea-sized snail Nassarius kraussianus. Blombos Cave, South Africa, 75,000 B.C.E. Wear marks indicate the shells were strung on a necklace or bracelet.

The use of proto-money may date back to at least 100,000 B.C.E.[3]. Trading in red ochre is attested in Swaziland, from about that date, and ochre seems to have functioned as a proto-money in Aboriginal Australia. Shell jewellery in the form of strung beads would have served as good with the basic attributes needed of early money. In cultures where metal working was unknown, shell or ivory jewellery were the most divisible, easily storable and transportable, scarce, and hard to counterfeit objects that could be made. It is highly unlikely that there were formal markets in 100,000 B.P (any more than there are in recently observed hunter-gatherer cultures). Nevertheless, proto-money would have been useful in reducing the costs of less frequent transactions that were crucial to hunter-gatherer cultures, especially bride purchase, splitting property upon death, tribute, and intertribal trade in hunting ground rights (“starvation insurance”) and implements. In the absence of a medium of exchange, all of these transactions suffer from the basic problem of barter—they require an improbable coincidence of wants or events. Jewellery has often been used for currency and wealth storage in some historical and contemporary societies, especially those in which modern forms of money are scarce, in addition to being used for decoration and display of status and wealth.

In cultures, of any era, that lack money, bartering and some system of in-kind "credit" or "gift exchange" would be the only ways to exchange goods. Bartering has several problems, most notably the coincidence of wants problem. If one wishes to trade fruit for wheat, it can only be done when the fruit and wheat are both available at the same time and place, which may be for a very brief time, or may be never. With an intermediate commodity (whether it be shells, rum, gold, etc.) fruit can be sold when it is ripe in exchange for the intermediate commodity. This intermediate commodity can then be used to buy wheat when the wheat harvest comes in. Thus the use of money makes all commodities become more liquid.

Where trade is common, barter systems usually lead quite rapidly to several key goods being imbued with monetary properties. In the early British colony of New South Wales in Australia, rum emerged quite soon after settlement as the most monetary of goods. When a nation is without a fiat currency system it is quite common for the fiat currency of a neighbouring nation to emerge as the dominant monetary good. In some prisons where conventional money is prohibited, it is quite common for goods such as cigarettes to take on a monetary quality. Gold has emerged naturally from the world of barter again and again to take on a monetary function. It should be noted that the emergence of monetary goods is not dependent on central authority or government. It is a quite natural market phenomenon.

Commodity money

Many early instances of money were objects which were useful for their intrinsic value as well as their monetary properties. This has been called commodity money; historical examples include iron nails (in Scotland), pigs, rare seashells, whale's teeth, and (often) cattle. In medieval Iraq, bread was used as an early form of currency.

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An Okpoho manilla from Nigeria

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A Katanga Cross. An archaic form of money from West Africa.

The use of shells or ivory was nearly universal before humans discovered how to work with precious metals; in China, Africa, and many other areas, use of cowrie shells was common. In China the use of cowrie shells was superseded by metal representations of the shells, as well as representations of metal tools. These imitations may have been the precursors of coinage.

Salt and spices have been used as money. From 550 B.C.E., accepting salt from a person was synonymous with receiving a salary, taking pay, or being in that person's service. Definite indications are available that both black and white pepper have been used as commodity money for hundreds of years before Christ, and several centuries thereafter. Being a valuable commodity, pepper has naturally been used as payment. Alaric I reportedly demanded 3,000 pounds in weight of pepper in 408 C.E. as part of a ransom for the city of Rome. In the Middle Ages, there was a French saying, 'As dear as pepper'. In England, rent could be paid in pounds of pepper, and so a symbolic minimal amount is known as a "peppercorn rent."

Precious metals have been a common form of money, such as this gold from Sveriges Riksbank.

Even in the modern world, in the absence of other types of money, people have occasionally used commodities such as tobacco as money. This happened on a wide scale after World War II when cigarettes became used unofficially in Europe, in parallel with other currencies, for a short time. It also occurs in some remote parts of countries such as Colombia and Bolivia, where cocaine, or its precursor, coca paste, is used as commodity money.

Another example of "commodity money" is shell money in the Solomon Islands. Shells are painstakingly chipped into rough circles, filed down, and threaded onto large necklaces, which are then used during marriage proposals; for instance, a father may charge twenty shell money necklaces for his daughter's hand in marriage.

One interesting example of commodity money is the huge limestone coins from the Micronesian island of Yap, quarried with great peril from a source several hundred miles away. The value of the coin was determined by its size — the largest of which could range from nine to twelve feet in diameter and weigh several tons. Displaying a large coin, often outside one's home, was a considerable status symbol and source of prestige in that society. (Owing to the great inconvenience, islanders would often trade only promises of ownership of an individual coin instead of actually moving it. In some cases, coins which had been lost at sea were still used for exchange in this way. These agreements could be thought of as a kind of representative money, described below.)

Once a commodity becomes used as money, it takes on a value that is often different from its intrinsic worth or usefulness. Having the property of money adds an extra use to the commodity, and so increases its value. This extra use is a convention of society, and the scope of its use as money within the society affects the value of the monetary commodity. So although commodity money is real, it should not be seen as having a fixed value in absolute terms. To a large extent its value is still socially determined. A prime example is gold, which has been valued differently by many different societies, but perhaps valued most by those who used it as money. Fluctuations in the value of commodity money can be strongly influenced by supply and demand, whether current or predicted (if a local gold mine is about to run out of ore, the relative market value of gold may go up in anticipation of a shortage).

An 8-foot "coin" from the village of Gachpar, on Yap.

Money can be anything which the trading parties agree has transferable value, but the usability of a particular sort of money varies widely. Desirable features of a good basis for money include being able to be stored for long periods of time, dense so it can be carried about easily, and difficult to find on its own so it is actually worth something.

Metals like gold and silver have been used as commodity money for thousands of years, being in the form of metal dust, nuggets, rings, bracelets and assorted pieces. Eventually the Lydians began coining gold and silver around 560 B.C.E.

Gold and silver are both quite soft metals, and coins minted from the pure metals suffer from wear or deformation in daily use. Fortunately these metals are also easily alloyed with a less expensive metal, frequently copper, to improve durability of the resulting coins. Typically alloys of coinage metals, such as sterling silver or 22 carat (92%) gold, are used to make coins more durable. These are alloys of 90% or more precious metal, for alloys of less than 90% do not improve hardness or durability much, and so are typically considered to be liable to fall into monetary debasement.

Standardized coinage

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A Roman denarius, a standardized silver coin.

It was the discovery of the touchstone which led the way for metal-based commodity money and coinage. Any soft metal can be tested for purity on a touchstone, allowing one to quickly calculate the total content of a particular metal in a lump. Gold is a soft metal, which is also hard to come by, dense, and storable. As a result, monetary gold spread very quickly from Asia Minor, where it first gained wide usage, to the entire world.

Using such a system still required several steps and mathematical calculation. The touchstone allows one to estimate the amount of gold in an alloy, which is then multiplied by the weight to find the amount of gold alone in a lump.

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A Persian coin.

To make this process easier, the concept of standard coinage was introduced. Coins were pre-weighed and pre-alloyed, so as long as the manufacturer was aware of the origin of the coin, no use of the touchstone was required. Coins were typically minted by governments in a carefully protected process, and then stamped with an emblem that guaranteed the weight and value of the metal. It was, however, extremely common for governments to assert the value of such money lay in its emblem and thus to subsequently debase the currency by lowering the content of valuable metal.

Although gold and silver were commonly used to mint coins, other metals could be used. For instance, Ancient Sparta minted coins from iron to discourage its citizens from engaging in foreign trade. In the early seventeenth century Sweden lacked more precious metal and so produced "plate money," which were large slabs of copper approximately 50 cm or more in length and width, appropriately stamped with indications of their value.

Metal based coins had the advantage of carrying their value within the coins themselves — on the other hand, they induced manipulations: the clipping of coins in the attempt to get and recycle the precious metal. A greater problem was the simultaneous co-existence of gold, silver and copper coins in Europe. English and Spanish traders valued gold coins more than silver coins, as many of their neighbors did, with the effect that the English gold-based guinea coin began to rise against the English silver based crown in the 1670s and 1680s. Consequently, silver was ultimately pulled out of England for dubious amounts of gold coming into the country at a rate no other European nation would share. The effect was worsened with Asian traders not sharing the European appreciation of gold altogether — gold left Asia and silver left Europe in quantities European observers like Isaac Newton, Master of the Royal Mint observed with unease.

Stability came into the system with national Banks guaranteeing to change money into gold at a promised rate; it did, however, not come easily. The Bank of England risked a national financial catastrophe in the 1730s when customers demanded their money be changed into gold in a moment of crisis. Eventually London's merchants saved the bank and the nation with financial guarantees.

See also: Roman currency, coinage metal, for conversions of the European coins before the introduction of paper money: The Marteau Early 18th-Century Currency Converter.

Representative money

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An example of representative money, this 1896 note could be exchanged for five US Dollars worth of silver.

The system of commodity money in many instances evolved into a system of representative money. This occurred because banks would issue a paper receipt to their depositors, indicating that the receipt was redeemable for whatever precious goods were being stored (usually gold or silver money). It didn't take long before the receipts were traded as money, because everyone knew they were "as good as gold." Representative paper money made possible the practice of fractional reserve banking, in which bankers would print receipts above and beyond the amount of actual precious metal on deposit.

So in this system, paper currency and non-precious coinage had very little intrinsic value, but achieved significant market value by being backed by a promise to redeem it for a given weight of precious metal, such as silver. This is the origin of the term "British Pound" for instance; it was a unit of money backed by a Tower pound of sterling silver, hence the currency Pound Sterling. For much of the nineteenth and twentieth centuries, many currencies were based on representative money through use of the gold standard.

Fiat money

Fiat money refers to money that is not backed by reserves of another commodity. The money itself is given value by government fiat (Latin for "let it be done") or decree, enforcing legal tender laws, previously known as "forced tender," whereby debtors are legally relieved of the debt if they (offer to) pay it off in the government's money. By law the refusal of "legal tender" money in favor of some other form of payment is illegal, and has at times in history (Rome under Diocletian, and post-revolutionary France during the collapse of the assignats) invoked the death penalty.

Governments through history have often switched to forms of fiat money in times of need such as war, sometimes by suspending the service they provided of exchanging their money for gold, and other times by simply printing the money that they needed. When governments produce money more rapidly than economic growth, the money supply overtakes economic value. Therefore, the excess money eventually dilutes the market value of all money issued. This is called inflation. See open market operations.

In 1971 the US finally switched to fiat money indefinitely. At this point in time many of the economically developed countries' currencies were fixed to the US dollar (see Bretton Woods Conference), and so this single step meant that much of the western world's currencies became fiat money based.

Following the first Gulf War the president of Iraq, Saddam Hussein, repealed the existing Iraqi fiat currency and replaced it with a new currency. Despite having no backing by a commodity and with no central authority mandating its use or defending its value the old currency continued to circulate within the politically isolated Kurdish regions of Iraq. It became known as the Swiss Dinar. This currency remained relatively strong and stable for over a decade. It was formally replaced following the second Gulf War.

Credit money

Credit money often exists in conjunction with other money such as fiat money or commodity money, and from the user's point of view is indistinguishable from it. Most of the western world's money is credit money derived from national fiat money currencies.

In a modern economy, a bank will lend all but a small portion of its deposits to borrowers, this is known as fractional reserve banking. In doing so, it increases the total money supply above that of the total amount of the fiat money in existence (also known as M0). While a bank will not have access to sufficient cash (fiat money) to meet all the obligations it has to depositors if they wish to withdraw the balance of their cheque accounts (credit money), the majority of transactions will occur using the credit money (cheques and electronic transfers).

Strictly speaking a debt is not money, primarily because debt can not act as a unit of account. All debts are denominated in units of something external to the debt. However, credit money certainly acts as a substitute for money when it is used in other functions of money (medium of exchange and store of value).

Indo-European and Semitic etymology

The origin of the word "money" comes from the Latin word "moneta," an epithet of Juno (Hera)—Juno Moneta, "June the Alone"—the deity that protected and oversaw finances in the early days of Rome.

In Greek language, "Hera Mone tas" means the lonely Hera ("Mone tas" in Doric Greek, "Mone tes" in Ionic dialect). Zeus punished Hera and tied her with a golden chain between the earth and sky. Hera, because she was alone between the sky and earth tied with gold, was called moneres or mone (μόνη) (lonely in Greek), and the word money was derived from this. Hera, with the help of Hephaestus, broke the golden chain and released herself. It is said that all gold found on earth (which forms approximately a single cube 20 m a side) originates from the fragments of this golden chain, which fall from the sky and became human's mone (money).

Perhaps because of this fable, gold was used in ancient Greece only in temples, graves and jewels and there is not any ancient Greek golden coin, until the days around 390 B.C.E., when the Greek king Philip II of Macedon minted golden coins. The first golden coins in history were coined by Lydian king Croesus, around 560 B.C.E. The first Greek coins were made initially of copper, then of iron because copper and iron were powerful materials used to make weapons. Pheidon king of Argos, around 700 B.C.E., changed the coins from iron to a rather useless and ornamental metal, silver, and, according to Aristotle, dedicated some of the remaining iron coins (which were actually iron sticks) to the temple of Hera[4]. King Pheidon coined the silver coins at Aegina, at the temple of the goddess of wisdom and war Athena the Aphaia (the vanisher), and engraved the coins with a Chelone, which is to this day as a symbol of capitalism. Chelone coins[5] were the first medium of exchange that was not backed by a real value good. They were widely accepted and used as the international medium of exchange until the days of Peloponnesian War, when the Athenian Drachma replace them. According other fables, inventors of money were Demodike(or Hermodike) of Kymi (the wife of Midas), Lykos (son of Pandion II and ancestor of the Lycians) and Erichthonius, the Lydians or the Naxians.

The Romans of the late Republic had their own alternative theories for why the Temple of Juno was known as Juno Moneta. Cicero, and others, claimed the epithet was of goddess, in honor of Juno's role as warder (monitor) who sent warnings to Rome, often through her geese; alternately, the name could be the name of the temple itself, Juno of the Hill (mons, montis).[6]

It is very unusual for someone to share his money with others and let them know where his/her money is, almost everyone wants to be alone in front of it and tries to hide it and protect it from others. Everyone is alone in front of money, and money makes everyone to be alone. So the etymology of money deriving from the Greek μόνη (lonely) makes sense.

The word money in Greek language is not μόνη (money), it is νόμισμα (nomisma or numisma) which derives from the word νομίζω (nomizo=putative, I think so, I suppose so) and from the word νόμος (nomos=law). So numisma gives the exact meaning and definition of mone(y). It is something we think has value, or something which someone has convinced us has, but in reality has not. In case we are unconvinced that mone(y) has value and we do not recognize the mone(y) maker authority, mone(y) is also something that we are enforced by law to use it as the unique medium of exchange in trades. In case an individual or a community refuses to accept mone(y) as the unique medium of exchange, then the powerful mone(y) maker authority, using violence and the taxes procedure, steals the real value goods (home,food,transport,energy) that the individual or the community owns. That is why many individuals or communities hide their goods from mone(y)-maker authorities. The crime of hiding goods from a mone(y)-maker authority is called tax evasion.

" He who has an ear, let him hear what the Spirit says to the churches. To the winner, I will give some of the hidden manna and I will also give him a white vote with a new name written on it which no one knows except the one who receives it."(Book of Revelation 2:17).

One of the words for money in the Hebrew language is mammon. Mammon does have more than one meaning depending on its linguistic and etymological contexts. The Hebrew and Christian Bible gives the word mammon a broader context in its socioeconomic, cultural, and theological usages. Mammon, a word of Aramaic origin, means "riches," but has an unclear etymology; scholars have suggested connections with a word meaning "entrusted," or with the Hebrew word "matmon," meaning "treasure." ^{[citation needed]} It is also used in Hebrew as a word for "money" - ממון.

The Greek word for "Mammon," mamonas, occurs in the Sermon on the Mount (Matthew vi 24) and in the parable of the Unjust Steward (Luke xvi 9-13). The Authorised Version keeps the Syriac word. Wycliffe uses "richessis." Other scholars derive Mammon from Phoenician "mommon," benefit. It is interesting to note that if mammon(as) (μαμωνᾶς) is considered as a Greek word and as a composite one (the majority of Greek words are composites), the two parts "mam-mon(as)" could be explained (in Greek doric) as "lonely mother," which recalls Hera's myth mentioned above. Other explanations could be mamm(means "mother" or "food")-onas(means "a place where you can find mamm"), also mam(means "mother" or "food")-m(means "with")-on(means "being")-as(with Circumflex, means "owner or seller").

Another word for money in Hebrew is the word Kessef-כסף, that translates to silver. Also the French word for money, Argent, derives from the Greek άργυρος, and translates also to silver.

According to the Book of Revelation, the mark of the beast seems to be a form of money: "And he causeth all, both small and great, rich and poor, free and bond, to receive a mark in their right hand, or in their foreheads: And that no man might buy or sell, save he that had the mark, or the name of the beast, or the number of his name. Here is wisdom. Let him that hath understanding vote the number of the beast: for it is the number of a man; and his(its) number is ΧΞς." (Book of Revelation 13:16-13:18).

Quotations on money

• "God made Man. Man made Money. Money made Man mad."
• "No man can serve two masters: for either he will hate the one, and love the other; or else he will hold to the one, and despise the other. Ye cannot serve God and Mammon." Gospel of Matthew 6:24 (KJV)
• "For the love of money is the root of all evil: which while some coveted after, they have erred from the faith, and pierced themselves through with many sorrows." First Epistle to Timothy 6:10 (KJV)
• "When it's a question of money, everybody is of the same religion." Voltaire
• "Only when the last tree has died and the last river been poisoned and the last fish been caught will we realise we cannot eat money." Cree proverb
• "When I have money, I get rid of it quickly, lest it find a way into my heart." John Wesley
• "Money. It's a gas." Pink Floyd
• "Everybody loves 'money'. That's why it's called money." Danny DeVito
• "Money doesn't talk, it swears." Bob Dylan
• "So you think that money is the root of all evil? Have you ever asked what is the root of money? Money is a tool of exchange, which can't exist unless there are goods produced and men able to produce them. Money is the material shape of the principle that men who wish to deal with one another must deal by trade and give value for value. Money is not the tool of the moochers, who claim your product by tears or of the looters, who take it from you by force. Money is made possible only by the men who produce. Is this what you consider evil?" Ayn Rand
• "The study of money, above all other fields in economics, is one in which complexity is used to disguise truth or to evade truth, not to reveal it. The process by which banks create money is so simple the mind is repelled." John Kenneth Galbraith
• "Money is a stupid measure of achievement, but fortunately it is the only universal measure we have." - Charles Steinmetz
• "When money talks, bullshit walks" Proverb used by officials in finance
• "Money don't make a man, but man make money, because if you plan to be the man it's gonna take money." Da'unda'dogg
• "What is money? Money is what makes a man act funny" Eminem

References

ISBN links support NWE through referral fees

• Davies, Glyn, History of Money from Ancient Times to the Present Day
• Jevons, W. S. (1875), Money and the Mechanism of Exchange, London: Macmillan.
• Menger, Carl, "On the Origin of Money"
• Szabo, Nick, Shelling Out—The Origins of Money
• United States Mint
• Royal Mint
• American Numismatic Association
• World Bank

External links

• Current Currency Exchange Rates by boc
• Linguistic and Commodity Exchanges by Elmer G. Wiens. Examines the structural differences between barter and monetary commodity exchanges and oral and written linguistic exchanges.

• Linguistic and Commodity Exchanges by Elmer G. Wiens. Examines the structural differences between barter and monetary commodity exchanges and oral and written linguistic exchanges.

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