What's money? PDF Print E-mail
Friday, 30 March 2012 11:44

All coins and banknotes used to pay debts or purchases of goods and services, such as food, clothing, toys, candies…, to pay for services as transportation and utilities, to save or invest, or receive or paid as salary in exchange for work, is called money. 

Historically, when people was living in communities or villages, and needed an article they didn’t produce, they used to go to other towns to exchange goods that were not available at their own town.  This was the way bartering came up.   Bartering is the exchange of goods, without using money.  However, it was not enough because if a person did not have the particular article needed by the other one, they could not exchange.

So people decided to agree on placing a value on certain goods to facilitate exchange, as they could give this valuables for whatever they needed or wanted.    Throughout time, some towns adopted as valuables odd goods such as shells, feathers, tobacco, skins, cacao and salt.   They were used as a form of money to buy and sell merchandise.     Whenever a service had been performed, people  received these goods as payment and they use them later to purchase the goods they needed.

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Bartering grew and people began to use metals to facilitate trade, particularly to precious metals, such as silver and gold as they were generally accepted because of their beauty and rarity; these precious metals were also very resistant and could be divided into smaller portions.

First tradesmen traveled carrying bags full of gold and silver pieces.   They also took along a scale to weigh the metals to pay goods.    Metals were not only heavy, but complicated.

Later, during the VII century before Christ, King Giges, from Lydia, in Minor Asia, put in circulation the first minted coins, made of gold and silver pieces or a combination of both, having a determined weight and value.   Leaders put them in circulation all over their regions, engraving names, drawings or legends in their coins.

However, travel with a sack full of gold coins in search for goods to buy was not a very good idea.  Roads were full of thieves, robbers and bandits.  Tradesmen found a solution to their problem, depositing their coins to trustworthy people, who extended a receipt for the gold, stating that he promised to return the gold when the owner requested it.

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Whenever the tradesman bought any merchandise, he would go to withdraw part of his gold.  At the same time, the owner of the goods received the gold from the tradesman and in turn, he would deposit it at the home of the person he trusted. 

Once the person guarding the gold got tired of issuing receipts for the same gold, so he got the idea that both, buyer and seller, should get to an agreement and only exchange receipts by themselves.. 

These receipts became the first banknotes:  made out of paper they represented an amount of gold and silver.

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First paper notes or bills were used in China more than fourteen hundred years ago, in the VII century.

For a long time, the notes could be changed for gold deposited in the bankers safes.  Nowadays, we still use bills but they are not convertibles in gold as they were in the past, but we do can exchange them for things we need and want. 

Amount of money circulating in each country is controlled by country’s central bank.  Central banks decide when new banknotes must be issued and when old and torn bills must be withdrawn from circulation. 

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Banknotes are manufactured at large, specialized printing houses by request of a central bank.   These industries work under very strict security measures to avoid forgery.  In countries as Canada, United States, Argentina, England, Brazil, Germany and Japan there are Mint Houses in charge of manufacturing banknotes and minting coins for other countries.  A central bank must authorize banknotes issued.   Banknotes are printed using special inks, high security features and excellent quality paper, which is not easily obtainable in marketplace.   
Banknotes also include other security features, different in each country, as almost invisible threads, watermarks that may be easily recognized when the bills are in front of a light or inks that run whenever the banknote is rubbed.
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Coins are minted out of different types of metals or alloys.  Coins vary in diameter from one country to another and they have images engraved on each side of the coin, to identify country of origin.  Coin and banknotes collectors are known as numismatist.

If you want to learn more about the history of money in El Salvador make click in "History" section.


Last Updated on Wednesday, 04 July 2012 12:33
Banco Central de Reserva de El Salvador
República de El Salvador, C. A
Alameda Juan Pablo II, entre 15 y 17 Av. Norte. Apartado Postal (106), San Salvador, El Salvador.
Tels. (503) 2281-8000; Fax. (503) 2281-8011.    E-mail: