A Brief Discussion About Money
Money is a broad concept that includes concepts like cash, income, wealth, capital, etc. Money is any verifiable physical item or reliably accepted account that is normally accepted as payment of debts and purchases, including payments, taxes and in some countries, payment of social obligations, like education and healthcare. Money is the only universal standard of measure that transcends boundaries and is accepted at all times. Theoretically, money has the power to define and regulate exchange. It has the power to make it possible for people to buy and sell with ease. With money, there is the possibility of exchange without bartering.
The definition of money is relatively simple as it involves three key aspects; legal tender, fiduciary money, and debt. Legal tender refers to promises of payment made by public authorities to pay money for the purchase of certain goods or services from a particular issuer. A promissory note is usually issued under this concept for the purpose of collecting accrued interest on loans. The general principle underlying legal tender is that an issuer can make a contract to repay a loan with the consent of the holder of the loan and in the form of a legally binding document.
Fiat money, on the other hand, is money that circulates within a market-determined price level. Fiat money facilitates the transfer of goods and services from one buyer to another. Fiat money is a form of credit that originates with the functioning of the government. It is created through the operation of banks that follow the prescribed monetary standards set by the government and released in the form of bills or coins.
Cryptocurrencies are the most commonly known form of money today. They are the result of an innovative technology called block chain technology that came into existence during the last decade or so. Block chain technology works by allowing the use of digital signatures as transaction components of monetary exchanges. This ensures that the money supply cannot be manipulated easily leading to economic chaos and inflation. In the future, block chain technologies may well be used as a mechanism for stabilizing the value of the national currency.
There are various types of currencies that are currently being traded in the global market. Among them are the US dollar, the Euro, the Japanese yen, the British pound, and the Australian dollar. Each of these currency pairs has its own distinctive characteristic, allowing for it to be a leading international currency. Each of these currencies was created following a specific process that left behind a record of its historical exchange rates. The major international money systems today combine the functions of a medium of exchange with the function of a store of value.
Money is a very important aspect of the global economy. Economists and business people across the world consider it an important factor contributing to the optimal performance of their respective economies. For this reason, a stable and consistent level of money exchange is needed for smooth economic functioning. By using this medium of exchange, the exchange rates of commodities can be controlled enabling businesses to gain access to the global market.