Introduction
- Money is a widely accepted tool used to buy or sell goods and services, acting as a link between the present and the future (as quoted by economist John Maynard Keynes).
- Before money existed, people used the barter system, where goods or services were directly exchanged without a common medium.
1. The Barter System
Definition
- The barter system is a method of exchanging goods or services directly without using money.
- Example: If you have an extra eraser and need a pencil, you trade your eraser for a classmate’s extra pencil.
How It Worked
- People swapped items they had (e.g., food grains, beads) for things they needed.
- Various commodities (tradeable goods) were used, such as:
- Cowrie shells
- Salt
- Tea
- Tobacco
- Cloth
- Cattle (cows, goats, horses, sheep)
- Seeds
Historical Examples of Barter Money
- Rai Stones: Large stone discs used as money on Yap Island, Micronesia.
- Tevau: Red feather coils made from bird feathers, used in the Solomon Islands.
- Aztec Copper Tajadero: Chopping knife-shaped copper pieces used as money in Central Mexico and Central America.
Significance
- The barter system was the earliest form of exchange, with evidence found worldwide.
- It allowed people to meet their needs by trading what they had for what they wanted.
2. Why Do We Need Money?
The barter system had several limitations, which made a common medium of exchange (money) necessary.
Limitations of the Barter System
Imagine a farmer who has an ox and needs shoes, a sweater, and medicines. The challenges he faces highlight the problems of bartering:
Double Coincidence of Wants:
- Both parties must want what the other offers.
- Example: The farmer needs to find someone who wants an ox and can offer shoes, a sweater, and medicines. This is rare and difficult.
Lack of Common Standard Measure of Value:
- There’s no agreed-upon way to measure the value of goods.
- Example: How many bags of wheat equal a pair of shoes? Deciding fair trade quantities is tricky.
Divisibility:
- Some items cannot be divided into smaller parts for smaller trades.
- Example: You can’t cut an ox into pieces to trade for a sweater.
Portability:
- Carrying large or heavy items is inconvenient.
- Example: Transporting an ox or multiple bags of wheat to different places is difficult.
Durability:
- Some goods spoil or get damaged over time, making them unsuitable for long-term storage.
- Example: Wheat can rot or be eaten by rats, unlike money, which can be stored safely.
How Money Solves These Problems
- Medium of Exchange: Money is accepted by everyone, eliminating the need for double coincidence of wants.
- Standard Value: Money provides a common way to measure the value of goods (e.g., ₹100 for a book).
- Divisible: Money comes in small units (e.g., ₹1, ₹5) for small or large purchases.
- Portable: Coins, notes, or digital payments are easy to carry.
- Durable: Money (especially coins and digital forms) lasts longer than perishable goods like wheat.
3. Modern Barter Practices
Even though money is widely used, some barter practices still exist today:
Junbeel Mela (Assam):
- A three-day annual fair in Morigaon, Assam, starting with Agni Puja (fire worship) for universal well-being.
- Originated in the 15th century when Tiwa, Karbi, Khasi, and Jaintia tribal leaders met to discuss political issues and build friendships.
- People barter local products like roots, vegetables, fruits, herbs, spices, and handmade goods (e.g., artifacts made from forest materials).
- Example: Hill tribes trade forest goods for rice cakes from the plains.
Book Exchange:
- People trade old books for new ones, like swapping an adventure book for a mystery story.
- It’s a fun way to get new stories without spending money.
Clothes for Utensils:
- Vendors visit homes to exchange new utensils or household items for old clothes.
- Benefits: Households clear unwanted items, and vendors resell or recycle the clothes.
Activity
- Observe similar barter practices in your area. Ask people about their experiences and what they trade.
4. Basic Functions of Money
Money was invented because the barter system became impractical as trade grew and distances increased. Money serves the following key functions:
Medium of Exchange:
- Money is used to buy or sell goods and services, making trade simple.
- Example: You pay ₹50 to a shopkeeper for a notebook.
Store of Value:
- Money can be saved and used later without spoiling.
- Example: Unlike wheat, which rots, money can be kept for future purchases.
Common Denomination:
- Money measures the value of goods and services, allowing price comparisons.
- Example: A book costs ₹100, and a pencil costs ₹10, making it easy to compare.
Standard of Deferred Payment:
- Money allows payments to be made later.
- Example: If a book costs ₹100 but you have only ₹50, you can pay the rest later with the shopkeeper’s permission.
5. The Journey of Money
Money has evolved significantly over time, adapting to the needs of society and advancements in technology.
A. Timeline of Money’s Evolution
- 6000 BCE: Barter system using commodities like cowrie shells.
- 1000 BCE: Metal coinage made of iron, silver, gold, or copper.
- 600 BCE: Official coinage systems controlled by rulers.
- 1861: Paper money introduced in India.
- 1980: Debit and credit cards introduced.
- 2016: Digital money and UPI (Unified Payments Interface) became popular.
B. Coinage (Metallic Money)
Features of Ancient Coins
- Made of precious metals (gold, silver, copper) or alloys (mixtures of metals for strength).
- Called kārṣhāpaṇas or paṇas in ancient India.
- Had rūpas (symbols) punched on them.
- Obverse (Head): Main design, like animals, kings, queens, or deities.
- Reverse (Tail): Other symbols, like a parasol or motifs.
- Example: Chalukya coins had a Varaha (Vishnu avatar) on one side and a three-tiered parasol on the other.
Role of Coins
- Issued by rulers for use in their kingdoms.
- Coins of powerful rulers were accepted across regions, facilitating trade.
- Minting: The process of making coins in a mint (a coin factory).
- Example: Roman gold coins found in Pudukkottai, Tamil Nadu, show India’s maritime trade with the Roman Empire, indicating India’s favorable trade balance.
Fun Facts
- The word paṇa is still used in Tamil, Telugu, Malayalam (paṇaṁ), and Kannada (haṇa) for money.
- Ancient coins used alloys of silver and copper; modern coins use iron with chromium, silicon, and carbon.
- In 1947, 1 anna (1/16 of a rupee) could buy a dozen bananas.
- Modern coins have Hindi and English inscriptions and are minted for special events, like India’s 75th independence anniversary in 2021.
Activity
- Collect old coins from family, neighbors, or shopkeepers. Document their material, year, and designs on obverse/reverse. Research to verify their historical significance.
C. Paper Money
Introduction
- First used in China, introduced in India in the late 18th century.
- Paper money replaced coins for large transactions because coins were heavy and hard to store.
Features
- Used for higher denominations (e.g., ₹10, ₹20, ₹50, ₹100, ₹200, ₹500).
- Reverse side shows India’s cultural heritage:
- Example: ₹50 note has Hampi, ₹500 note has Red Fort.
- Special features (e.g., raised prints, tactile marks) help visually impaired people identify denominations.
- Example: Early notes included uniface notes from the Bank of Bengal and ₹10 notes from the Bank of Bombay.
Authority
- The Reserve Bank of India (RBI) is the only legal body in India authorized to issue currency.
- It ensures notes have security features (e.g., watermarks, security threads) to prevent counterfeiting.
Activity
- Examine ₹50 and ₹100 notes. Identify cultural motifs and features for the visually impaired. Research more about these motifs.
D. New Forms of Money
As technology advanced, money became intangible (cannot be touched) and digital.
Digital Money
- Stored electronically, not as physical coins or notes.
- Example: Krishnappa, a fruit seller, uses a QR code (Quick Response code) on his cart. Customers scan it with their phones to pay digitally, and the money goes to his bank account.
- QR codes are black-and-white squares containing bank account information, readable by smartphones.
Other Payment Methods
- Debit Cards: Use money directly from your bank account.
- Credit Cards: Borrow money to pay, repaid later.
- Net Banking: Online bank transfers.
- UPI (Unified Payments Interface): Instant money transfer between bank accounts using apps.
- These methods are fast, convenient, and widely used for transactions.
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