How was money first circulated in society

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Why the money always has to flow

In the beginning there was an exchange. But the more specialized a society becomes, the more complicated it is to trade in goods or services. Goods have different shelf lives, have different seasons and are sometimes difficult to offset against each other in terms of their value.

Dead fish versus living pig? Weak supply - no demand. The introduction of money solves this problem of bartering. Money is a measure of value, easy to transport and can be stored indefinitely. It just has to be accepted by everyone.

Spices, shells or jewelry are the first universal means of exchange. From the Bronze Age 4,000 years ago, copper chunks or half-finished metal tools that can also be melted down again appeared. Later, metal bars that are already embossed form the transition to coins.

The first coins are known from the ancient Greeks, the Celts adopt the coin system.
Soft precious metals that are unusable for weapons or tools quickly form the basis of the money economy.

The Romans created the first coins with fixed denominations. Roman money becomes the first single European currency. It was not until around 800 that Charlemagne's denarius or penny replaced Roman money.

Money stimulates trade. It is now worthwhile to produce more than you need to exchange the goods you need. Because money can be stored - just save.
But the money economy is also addictive. And the longer it circulates, the more unevenly it is distributed. One gets rich, another has nothing.

Beat Weber, Economist, Vienna: "Why does money always have to circulate and stay in circulation? Money is there to buy things that we all want, goods, services, a car, a nice apartment, a good sausage roll. If If money is left lying around, it is unfavorable for the individual because then you cannot buy anything beautiful, and it is unfavorable for the economy as a whole because if nobody buys anything, nobody can produce anything, no wages and salaries can be paid the economy has an interest in the fact that there are consumers who also spend money. "

Banks opened from the Middle Ages, because those who have a lot of money want to keep it safe, those who have too little have to borrow some. The banking industry emerges.

And the banknote - a voucher for deposited gold. But because everyone never exchanges their banknotes back at the same time, the bank can pay out more money than there is gold in the safe - it gives credit against interest. In order to be able to pay this interest, the economy must inevitably keep growing. A constant criticism of capitalism.

Beat Weber: "Interest is part of capitalism like wages or profit, and if you think away from interest, then we have to think away from profit and think away from wages and then we are somewhere else at all. In religious communities there is a ban on interest, as in Islam, and it is also in the Bible. In fact, they also have a financial system, and what we call interest is called different there, but is essentially the same. If there is no interest, Maybe money will also be lent, but only to the people you know personally. And then those who know rich people have an advantage, and the others just don't get any credit. "

Paper money is created because coins are simply too heavy for large amounts. The first banknotes in Europe appear in Spain in the 15th century.

The euro is trusted as a hard currency. You can also buy gold for this, but there is no longer a gold cover for the money supply. That would be too time-consuming today and the currency would be dependent on the fluctuating gold price. But why do we then trust colored paper?

Martin Sch├╝rz, economics analyst, Vienna: "If you trust banknotes, then you trust first and foremost the monetary constitution: The central bank has the monopoly on issuing banknotes, not everyone can spend something and say that's money now. Money is coming also etymologically from gel - "apply" - and not from "gold" and from that point of view it has a lot to do with trust, if everyone trusts it - and a supporting factor for this is that it is legal tender and they trust it because it has a high purchasing power, because it is good money - not like in Zimbabwe, where there is 231 million percent inflation - that is why trust in money is usually there and is only lost for a short time in major crises. "

An economy is crisis-proof as long as goods and services change rapidly and prices and money supply remain reasonably constant.

If the money supply becomes too large in relation to the goods, money loses value and prices rise. The economy collapses with hyperinflation.

But the world economy is currently struggling with money being hoarded. The crisis is unsettling, and so too little money is in circulation. Deflation threatens.

Beat Weber: "What does deflation mean? A falling price level over long periods of time, where we are faced with the situation that no one buys anything because everyone believes it might be cheaper the next day and even cheaper the day after, and people hesitate." Buying out as long as possible. Which is totally stupid for the economy as a whole, because then too few people buy something and the store starts to crack. "

The US Federal Reserve wants to prevent this collapse with the gigantic sum of one trillion dollars hot off the press. If all the machines run through, printing alone will take several years. If the economy picks up, the money has to leave the market again quickly - otherwise the opposite threatens - hyperinflation.