Why Money Has Price and Can Be Exchangeable With Various Goods?

This All About Money

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Paper money is a medium of exchange made of paper. Paper money is paper. However, banknotes today are used as a means of exchange for all goods and services. Paper money can be used to buy anything. Though it's just paper that has no benefits. Money must be spent to benefit. For example, money is used to buy food and the food is eaten. After that new money provides benefits.

However, have you ever wondered why the paper became valuable? Have you ever wondered why people crowded so much money? Or why money can be used as a medium of exchange? The answer is because of the bank. Why banks? Follow the following explanation.

Before the emergence of banknotes, the public knew the barter system or the exchange. This is done between the goods and the goods. For example, Jimi has bread while Jacki has water. Jimi needs water while Jacki needs bread, so Jimi and Jacki make the exchange. Jimi can water and Jacki can bread. Simple. Easy and simple. But it is not practical.

Then, gold and silver were found. Gold and silver are used as jewelry because it has its own beauty. Gold and silver are sometimes used for other things such as making vessels or other equipment. Finally gold and silver have value. Gold and silver are popular and people are looking for them. Gold and silver can be exchanged for anything. Gold and silver eventually became money. People began to collect gold and silver.

Humans need security. Finally emerged an institution that provides gold and silver storage services. Bank was born. People keep gold and silver in banks and banks are issuing a letter of keteranagan that the person is keeping gold in the bank. Well, a letter issued by this bank was eventually become the forerunner of paper money.

The letter becomes valuable and can be exchanged for anything. The degree is the same as gold or silver. Finally the exchange can be done with the paper. paper money was born and spread. Uniquely, banks continue to issue paper money even without any gold reserves. Banks are in the paper money market. Banks keep printing money.

This is considered a danger. Because banks do not have enough gold reserves. Nowadays if everyone takes all the money in the bank there will be rush money and that is dangerous. Therefore, the state continues to maintain the stability. the state must keep the outstanding banknotes stable and have an exchange rate. If paper money no longer has a price then the economic stability of a country can be damaged. The state can go bankrupt.

Well, that's the explanation for the origin of paper money. Of course paper money greatly facilitates the current market transactions. However, having real assets would certainly be better than storing a sheet of paper. Got land and property would be a more convincing investment.

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Reference

Wikipedia
Money
Detik
Kompas
Jadi Berita
CNN

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M. Fajarli Iqbal
@fajarli

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