Money the Chameleon – About the four Functions and manifold Forms of Money
Money is more than coins and bills. Anything may be used as money as long as it embodies certain characteristics and is accepted by a larger group. What kind of characteristics are required? You will learn that in this short video.
Have you ever asked yourself what that actually is? Money? No?
Probably you think that this is a pretty stupid question. Money, that’s a 1,000 francs banknote, a dollar bill, a euro coin.
Well, in a way you’re right and, for your everyday life, this might be all you need to know. But there’s more to it. Banknotes have only been around for one and a half centuries. Coins have been around a little bit longer. But they do not go back more than 2,600 years. What we understand as money, however, existed a long time before that. That is because ever since mankind started bartering goods and living in permanent shelters, money was a necessary means to satisfy these needs.
First of all, there was the need to barter goods. Of course, you can also barter goods directly for other goods. However, you may not always find someone who needs just what you have and who, in return, has just that what you need. Hence, you need an intermediary between both your needs. Right, you need money.
Then, of course, money puts things in relation to each other. Suddenly, there is a common denominator for things as diverse as a flight to New York, a pretzel from the bakery around the corner and a new haircut: All three can be measured by the value attributed to them by the amount of money they cost.
Further, money is a way of keeping values over long periods of time. Well, as long as there is no inflation. And there usually is. Normally, when the money’s value does not correspond to a material value. In the past, that tended to be the exception. Most currencies had an intrinsic value, they were made of gold or silver or copper, and could thus still be spent even centuries after they’d been acquired.
Let’s see, have we covered all functions that money can fulfil now? No, wait, one is still missing. People tend to forget about it, even if it is omnipresent in our daily routine.
Money can make up for things which are actually irreparable or irreversible. Once you’ve driven too fast, you can’t turn back time. What you can do, though, is pay a fine and go home a respectable citizen again.
You think that’s not a very important function of money? I think you’re mistaken. Before the invention of the prison, that was the way to maintain peace in every community. Money was already used for that purpose 2,000 years before Christ, as we know from the Codex Hammurapi. It tells us for instance: If a man should hit a slave so that he loses his eye or breaks a bone, he is to pay the slave owner a mine of gold. Or, if a free man should hit another free man of the same rank, he is also to pay him one mine of gold.
After all, wasn’t it much more comfortable to put right a wrong with money than to bear two enemies in a small community.
Summing up, we’ve said that money can be a means of barter, a measure for the value of goods and services, it can be turned into savings or used to expiate sins. No mention of banknotes or coins so far.
Anything, in fact, can be used as money as long as a society agrees to do so. After World War II, cigarettes were the most common currency on the German black market.
Still, money has to meet certain criteria.
- It must be highly sought after by all.
- It must be durable over a longer period of time.
- Ideally, it is easy to transport.
- Plus, it must be easily divisible so that it can also be used to pay for smaller objects.
That is why diamonds for instance are not usable as money at all, despite the fact that they are desired by all, durable over centuries and easily transported. Just try buying a loaf of bread with a diamond and you’ll know why.
Cowry shells, on the other hand, have served as money for millennia. Their success story goes back way beyond that of the coin. They were highly sought after as jewellery, talisman or money. You could store them very easily. You could transport them easily, even larger amounts, and they used to be also a convenient means of paying for smaller, less valuable objects.
You see, money can be almost anything. Even if we decided today, to use coloured pencils as our currency in this museum. Red ones, green ones, and blue ones, with different values each. It would work, believe me. As long as we all agree to it.