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Buying things today is so simple. Just enter a shop, say a book store, choose the desired book
and pay for it. Long ago, before the invention of money, how did people trade?
The most primitive way of exchange should be the barter trade. In this form of transaction,
people used goods to exchange for the things that they had in mind. For instance, if person A
wanted a book and he had a spare goat, he must look for someone who had the exact opposite,
that is, that someone, say person B, must have a spare book of person A's choice and is also in
need of a goat. Having found such a person, the problem does not end here. A big goat may worth
not only one book, hence person B may have to offer person A something else, say five chickens.
However, he runs the risk of person A rejecting the offer as he may not need the chickens. The
above example clearly illustrates the inefficiency of barter trading.
Many years later, the cumbersome barter trade finally gave way to the monetary form of
exchange when the idea of money was invented. In the early days, almost anything could qualify
as money: beads, shells and even fishing hooks. Then in a region near Turkey, gold coins were
used as money. In the beginning, each coin had a different denomination. It was only later, in
about 700 BC, that Gyges, the king of Lydia, standardized the value of each coin and even printed
his name on the coins.
Monetary means of transaction at first beat the traditional barter trade. However, as time
went by, the thought of carrying a ponderous pouch of coins for shopping appeared not only
troublesome but thieves attracting. Hence, the Greek and Roman traders who bought goods from
people faraway cities, invented checks to solve the problem. Not only are paper checks easy to
carry around, they discouraged robbery as these checks can only be used by the person whose
name is printed on the notes. Following this idea, banks later issued notes in exchange for gold
deposited with them. These bank notes can then be used as cash. Finally, governments of today
adopted the idea and began to print paper money, backed by gold for the country's use.
Today, besides enjoying the convenience of using paper notes as the mode of exchange,
technology has led man to invent other means of transaction too like the credit and cash cards.
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Long ago, people bought things through barter trade. However, the difficulty
of having to look for the right partner and dividing the goods led people to
switch over to monetary transaction. at first, beads, shells and fishing
hooks were used as money. Near Turkey, gold coins with irregular
denominations were used for trade. Later, King Gyges standardized the
individual coin value. People soon found carrying coins around for shopping
troublesome and thieves courting. Hence, merchants started to issue checks
with names of the users on them to discourage robbery. Following that, banks
started to issue cash notes in return for gold deposited with them. Finally,
adopting the idea, today, governments printed paper money backed by gold for
the country's usage.
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