Not everyone knows the meaning of money. Even though every day look for it. Almost all goods in the world can be purchased with objects that have other names of money. Never mind when living, before birth and after death there are many human needs that still need money.

Money-making materials from ordinary paper and metal. Not silk, gold or silver. Even so, the value of money is very high. Please exchange with other items. Money must be valued according to the nominal stated. In fact, the price of materials or intrinsic value is cheaper.

The function of money is very much. Not only as a means of selling and buying. The history of money is also long. Starting from the barter system to the human need for trade exchange. The details for uangindonesia.com are described below. Only times are you curious about the terms and types of future money.

In traditional economics, the notion of money is defined as a medium of exchange. Not only money like now, other things like gold, silver, even salt can be used as goods. The condition is that the object is generally accepted by all local people.

Modern economics defines the notion of money more broadly. Not only as a means of payment for buying and selling goods, services, and other assets, but also debt payments. Some experts mention the function of money as a means of delaying payment.

History of money

Let alone kerts and metal, barter exchange was not known to humans. Life is not as complex now. Humans meet their own needs very simply

They go hunting if they are hungry. Need clothes just make with animal or tree skin. Want to eat other foods, go to the forest to find and pick the desired fruit. So on.

But over time, human life needs are increasing. What they get can not meet their own needs as a whole. Then we look for ways to exchange goods between individuals with each other. This method is known as the barter system.

Barter system

The barter system is used for a long time, for centuries. Until finally humans find obstacles in the system because life is more complex.

Obstacles in the barter system, for example, are difficult to find two property owners who need each other. For example, Si A has fruit and needs fish, he finds it with B who has fish but needs not fruit, but clothes.

Goods money

Facing the problem as above, humans think again to find a new solution. That is using certain objects as a medium of exchange. The specified object is usually generally acceptable. Examples of ancient Romans using salt.

If illustrated by the A and B above, then it is like this. A met the salt producer and exchanged it for fruit. After salt is owned, then meet B who has fish. Despite the need for clothes, B receives salt because it has been designated as goods. So that B will be easier to exchange with other people who have clothes.

Although it is easier than the barter system, as the development of human life is more complex, the goods money system has weaknesses as well. This is because goods money does not have a small fraction, so it is difficult to determine the value, storage and transport that are difficult, and easily destroyed or not durable.

Finally find something that has the following requirements:
Generally accepted
Easier to carry, and durable
The object is a coin that is made of gold and silver.

At that time the owner of the coin has the full right to the money. He is free to hoard as much as possible and even forge to be used as jewelry and there is no prohibition. Until fear arises, the more advanced trade cannot be served by coins. This is due to the limited amount of gold and silver.

After all, coins will also encounter other obstacles if in a large-scale exchange transaction. The amount needed more will certainly make it difficult to transfer. Until finally paper money was created.

However, don't get me wrong. Banknotes circulating at that time were proof of ownership of gold or silver. The papers are guaranteed one hundred percent by gold and silver stored in clever. At any time this money can be exchanged again with a full guarantee.

In subsequent developments, this is the forerunner of the money we use today. People no longer use gold directly for transactions. They prefer to use the proof papers.

Function of money

It has been explained above, the function of money as an intermediary for the exchange of goods with goods, avoiding a barter system that encounters many obstacles, so it is expected that trade transactions will be easier. However, in more detail it can be divided into two. That is the original function and derivative function.

The original function is divided into three:

Money functions as a medium of exchange or medium of exchange which can facilitate exchange
Money also functions as a unit of account: Shows the value of goods / services (price indicator), and as a unit of calculation that facilitates exchange.
In addition, money functions as a store of value (currency).
The derivative function is divided into:

Money as a legal payment instrument.
Money as a debt payment instrument.
Money as a means of stockpiling wealth.
Money as a means of transferring wealth.
Money as a driving force for economic activity
Terms of money

An object can be used as money if it meets the following conditions:

The object must be accepted in general (acceptability)
To meet the criteria for point 1, the object must be of high value or at least guaranteed by the government
Made from materials that can last a long time (durability)
Same quality (uniformity)
The amount can meet people's needs for the money
Not easy to fake (scarcity)
Portable
Easily divided without divisibility
It has a stable tendency of stability.
Type of money

Based on the type, money is divided into two. That is currency and demand deposits.

Currency is a legal payment instrument that is mandatory to be used by the public in conducting daily money transactions (common money).
Demand deposits are money owned by the community in the form of deposits (deposits) that can be withdrawn as needed, for example checks.

Value theory of money

The theory of the value of money is divided into two. That is static money theory and dynamic money theory.

Static money theory
This theory is called static because it does not question changes in the value of money caused by economic development. This theory was made with the aim to answer questions such as: what is money? Why does the money have a price? Why the money has to circulate?

This theory includes:

Metalism theory. The theory is almost the same as understanding intrinsic value.
Convention theory. The theory that states money can be generally accepted in the community because of the agreement / consensus.
Nominalism theory. This theory states the receipt of money based on the value of its purchasing power.
State theory. This theory states that money is an object determined by the state that functions as a medium of exchange and a means of payment. So the value is determined by the government regulated by law.

Dynamic money theory
If the above theory does not question changes in the value of money, then this dynamic money theory is the opposite.

This theory includes:

Quantity theory. In this theory David Ricardo states that the strength or weakness of the value of money depends very much on the amount of money in circulation. Then Irving Fisher perfected the above theory by stating not only depending on the number, but also on the speed of circulation of money, goods and services as a factor that affects the value of money.
Cash supply theory. This theory states that changes in the value of money depend on the amount of money that is not bought by goods.
Production cost theory. This theory states that the value of money in circulation comes from metal and that money can be seen as goods.
That is the discussion of money. Starting from understanding, history, function, conditions, types, and until the theory. If there is something wrong, want to correct, add other information, or just ask, please write in the comments section below.