Why money makes the world go round
January 30th, 2008 by moniesPlaying swapsies Money has not always been about coins and notes.
In the old days, thousands of years ago, the way you paid for something was by “bartering”, or swapping.
Just like today, people had different skills. Some were very good at making clothes or tools. Others were good at gardening: they could grow lots of tasty fruit and vegetables.
A few people might be excellent hunters: they had the sharpest spears. Or they could hit a target with an arrow better than anyone else.
Then there were those who might not have a special skill. But they could work hard. So they would offer to work for someone in return for food, or clothing, or a roof over their head.
If you wanted something, like potatoes or a chicken, you had to swap it with something you had, maybe a woollen shirt, or an animal skin to keep warm in winter.
Bartering worked well as long as everything you needed was easy toget hold of when you wanted it. And you didn’t need that many thingsto live on.
But things could get complicated. If you all lived far from each other, you would have to carry your things to one friend’s house, then the other, swapping every time. They would all have to do the same.
What would happen if you woke up one morning and you fancied a pizza and an ice cream for supper instead of potatoes? That’s a load of extra bartering!
And what happens if you don’t have anything the ice cream seller wants? Maybe one of your friends does. But then you have to make more and more journeys, carrying out clever swaps. Then you would be too tired to enjoy what you have.
Money is a way round that. If everyone uses money, life becomes easier.
Question: Here is a list of three things:
A chocolate biscuit, A large plastic bottle of your favourite drink, A CD of your favourite pop band or singer.
Which costs more? Why might that be?
The first money What kinds of things were used for money in the old days?
Just like today, people needed to have something that they could carry easily with them. It couldn’t be bulky or heavy. At first, it had to be rare or valuable enough so that other people might accept it in exchange for what you wanted.
In many parts of the world, silver or gold was used. Often they were stamped, sometimes with the head of the local ruler.
This was to show that they were “official” coins. Therefore, the amount of gold or silver in each one was exactly the same as in all the other ones you might have in your purse.
Not everyone used coins. In the islands of Fiji, in the Pacific Ocean, whales’ teeth were used as money.
In parts of Africa, salt was used because it was very rare. It could also be used to make some food, like meat, last longer.
In ancient Britain, sword blades were used. Metal was very hard to come by and turning it into a sharp blade was even more difficult.
In ancient Greece, iron nails were used for a similar reason: they were both rare and sought-after to build strong houses.
Question: Think of three things you might use as money if coins were not around.
Would anyone want what you have to offer?
The bank note Bank notes only came along much later. Do you know why?
If you ask your mum or dad, or a teacher, to have a look at a (pounds) 5 or (pounds) 10 note (don’t forget to give it back!), you will see that it promises “to pay the bearer of this note ” If you were travelling very long distances, a “promise to pay” meant that you could carry just a few pieces of paper from one end of the world to the other.
That piece of paper could then be exchanged for coins when you got to the other end. Or maybe used to buy something else altogether.
For such a promise to be believed, it had to come from someone you could trust. You - and whoever you gave the note to - had to be certain that the note could be exchanged for coins at any time. That is how many banks started, by issuing notes that people could redeem in coins, or pass on to someone else. They had to have lots of coins in a safe to do that.
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