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Communicating Objectives At the conclusion of this lesson, you will be able to trace the evolution of money, explain intrinsic value , summarize the gold standard, and tell where money comes from. You will be able to compare the risks and benefits associated with virtual currency and summarize the responsibilities of the Federal Reserve Bank.
Presentation of Content
How Many Shells Does That Cost? Currency is the particular thing that a group of people agree will serve as their medium of exchange . Money is expressed as currency . Currency, in the form of shells, was used in China in about 1200 B.C. Shells were a common means of payment throughout the ancient world. Throughout history all sorts of things have been used as money including salt, cows, beads, even chocolate! That’s called commodity money . Money Moves to Metal Eventually, societies began using metal for money. As far back as 2500 BC the Egyptians used metal rings. Around 700 BC the Lydians, a Mediterranean civilization near modern-day Turkey, were the first to make and use coins. They cut round pieces out of metal, stamped them with a symbol and – bingo! – the world’s first coin. The making of coins is called minting . The use of coins for money caught on quickly. China began widespread use of coins about 200 BC. Ultimately, the Greeks, Persians, Romans and basically most western civilizations, used metal coins. Metals, mainly precious metals like gold and silver, have almost always been the world’s preferred substance for use as currency. Why metal? And, why precious metals, not common ones like iron? The answer to the first question is pretty obvious: Metal is durable, easy to carry, and can be melted, shaped and imprinted with symbols. The answer to the second question is a little more complicated. Precious metals, like gold and silver, are rare. That makes counterfeit difficult – and pointless. After all, not many people have a bunch of gold and silver laying around and if they did, why bother to counterfeit? The value of a rare metal, like gold, is in the metal itself . The value of the essence of a thing is called intrinsic value . In the old days when a country or empire was conquered and the currency declared invalid, coins still retained value as a precious metal. They were melted down and re-minted with the conqueror’s insignia. Because of intrinsic value, wealth remained intact. Paper Money Comes Late to the Party Paper money was used by the Chinese beginning with the Tang Dynasty (A.D. 618-907), but it didn’t really catch on in Europe until much later – the 17th century. The U.S. government didn’t issue paper money until 1862. The notion of paper money is important though because, while governments didn’t issue paper money until late, private banks had issued bank notes since the medieval days. A bank note is a written promise by a bank which gives the holder the right to collect a certain amount of gold or silver from the bank. SLIDE 4G SLIDE 4H PRODUCT PREVIEW
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THE 21st CENTURY STUDENT’S GUIDE TO FINANCIAL LITERACY
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