Money is any item or verifiable record that's widely accepted as payment for goods and services and debt repayment within a specific country or socio-economic context. Its main functions are as a medium of exchange, facilitating trade by replacing bartering with a more efficient system. It acts as a unit of account, providing a standard measure of value for goods and services, simplifying price comparisons and economic calculations. Money serves as a store of value, allowing individuals to save purchasing power for the future, although its effectiveness in this role can be impacted by factors like inflation. Lastly, it can function as a standard of deferred payment, enabling borrowing and lending by setting future payment values.
1900: Industrial Nations Adopt Gold Standard
By 1900, most industrialized nations had adopted a gold standard, where paper notes and silver coins circulated, but the ultimate backing was gold. Banks, following Gresham's law, tended to retain gold and silver reserves while issuing paper money.
1919: Jevons's Four Functions of Money Summarized
By 1919, William Stanley Jevons's four functions of money—a medium of exchange, a common measure of value (or unit of account), a standard of value (or standard of deferred payment), and a store of value—were condensed into a concise couplet, simplifying a key economic concept.
1971: United States Leaves Gold Standard
In 1971, the United States officially abandoned the gold standard, becoming one of the last countries to do so. This marked a global shift towards floating fiat currencies.
1971: End of the Gold Standard
In 1971, the United States unilaterally suspended the direct convertibility of the US dollar to gold, effectively ending the Bretton Woods system that had pegged global currencies to the dollar's value in gold. This decision led many other countries to abandon their fixed exchange rates with the US dollar, marking a significant shift in the international monetary system toward floating exchange rates primarily based on government fiat and market forces.
1990: Electronic Transfers in the US
In 1990, all monetary transfers between the US central bank and commercial banks transitioned to electronic form, paving the way for a digital financial system.
2002: Counterfeiting of the Euro
Following the introduction of the euro in 2002, there were notable instances of counterfeiting, though less prevalent than with the US dollar. The emergence of counterfeit currency highlighted the ongoing challenges associated with maintaining the integrity of new forms of money.
2008: Bitcoin's Conception
In 2008, the concept of Bitcoin, a decentralized digital currency operating without a central authority, was introduced. This innovation marked a significant step in the evolution of digital money and its potential to transform financial systems.
2012: Rise of Electronic Transactions
By 2012, electronic transactions accounted for a substantial portion of global financial activity, ranging from 20% to 58% depending on the country, reflecting the increasing prevalence of digital currency.