,,How was money made’’

Content

Introduction……………………………....……… 3

Overview…………………………………………..4

Theories of money…………………….……..…..6

Designing Money……………………….……….7

The Materials………………………….………….7

Making the Money………………………………7

Conclusion ……………………………………...10

References……………………………………… 11

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Introduction

The history of money concerns the development of social systems that provide at least
one of the functions of money. Such systems can be understood as means of trading
wealth indirectly; not directly as with barter. Money is a mechanism that facilitates this
process.

Money may take a physical form as in coins and notes, or may exist as a written or
electronic account. It may have intrinsic value (commodity money), be legally
exchangeable for something with intrinsic value (representative money), or only have
nominal value (fiat money) Money creation is the process by which the money supply of
a country, or of an economic or monetary region,[note 1] is increased. In most modern
economies, most of the money supply is in the form of bank deposits. Central banks
monitor the amount of money in the economy by measuring the so-called monetary
aggregates

The term "money supply" commonly denotes the total, safe, financial assets that
households and businesses can use to make payments or to hold as short-term
investment. The money supply is measured using the so-called "monetary aggregates",
defined in accordance to their respective level of liquidity: In the United States, for
example, M0 for currency in circulation; M1 for M0 plus transaction deposits at
depository institutions, such as drawing accounts at banks; M2 for M1 plus savings
deposits, small-denomination time deposits, and retail money-market mutual fund
shares.

The money supply is understood to increase through activities by government

authorities, by the central bank of the nation, and by commercial banks. The money
supply is mostly in the form of bank deposits

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Overview

The invention of money took place before the beginning of written history. Consequently
any story of how money first developed is largely based on conjecture and logical
inference.

The significant evidence establishes many things were bartered in ancient markets that
could be described as a medium of exchange. These included livestock and grain –
things directly useful in themselves – but also merely attractive items such as cowrie
shells or beads were exchanged for more useful commodities. However, such
exchanges would be better described as barter, and the common bartering of a
particular commodity (especially when the commodity items are not fungible) does not
technically make that commodity "money" or a "commodity money" like the shekel –
which was both a coin representing a specific weight of barley, and the weight of that
sack of barley

Due to the complexities of ancient history (ancient civilizations developing at different

paces and not keeping accurate records or having their records destroyed), and
because the ancient origins of economic systems precede written history, it is
impossible to trace the true origin of the invention of money and the transition from
"barter systems" to the "monetary systems". Further, evidence in the histories supports
the idea that money has taken two main forms divided into the broad categories of
money of account (debits and credits on ledgers) and money of exchange (tangible
media of exchange made from clay, leather, paper, bamboo, metal, etc.).

Regarding money of account, the tally stick can reasonably be described as a very
primitive ledger – the oldest of which dates to the Aurignacian, about 30,000 years ago.
While it may not be reasonable to conclude the most ancient tally sticks were used to
keep accounting records in the monetary system sense of the term, their existence does
show that "accounting" – keeping a written record of things counted – is far more
ancient than many people assume. The 20,000-year-old Ishango Bone - found near one
of the sources of the Nile in the Democratic Republic of Congo - seems to use matched
tally marks on the thigh bone of a baboon for correspondence counting. Accounting

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records -- in the monetary system sense of the term accounting -- dating back more
than 7,000 years have been found in Mesopotamia,[8] and documents from ancient
Mesopotamia show lists of expenditures, and goods received and traded and the history
of accounting evidences that money of account pre-dates the use of coinage by several
thousand years. David Graeber proposes that money as a unit of account was invented
when the unquantifiable obligation "I owe you one" transformed into the quantifiable
notion of "I owe you one unit of something". In this view, money emerged first as money
of account and only later took the form of money of exchange.

Regarding money of exchange, the use of representative money historically pre-dates

the invention of coinage as well.In the ancient empires of Egypt, Babylon, India and
China, the temples and palaces often had commodity warehouses which made use of
clay tokens and other materials which served as evidence of a claim upon a portion of
the goods stored in the warehouses. Because these tokens could be redeemed at the
warehouse for the commodity they represented, they were able to be traded in the
markets as if they were the commodity or given to workers as payment.

While not the oldest form of money of exchange, various metals (both common and
precious metals) were also used in both barter systems and monetary systems and the
historical use of metals provides some of the clearest illustration of how the barter
systems gave birth to monetary systems. The Romans' use of bronze, while not among
the more ancient examples is well documented, and it illustrates this transition clearly.
First, the "aes rude" (rough bronze) was used. This was a heavy weight of unmeasured
bronze used in what was properly a barter system—the barter-ability of the bronze was
related exclusively to its usefulness in blacksmithing and it was bartered with the intent
of being turned into tools. The next historical step was bronze in bars that had a 5-
pound pre-measured weight (presumably to make barter easier and more fair), called
"aes signatum" (signed bronze), which is where debate arises between if this is still the
barter system or now a monetary system. Finally, there is a clear break from the use of
bronze in barter into its undebatable use as money because of lighter measures of
bronze not intended to be used as anything other than coinage for transactions. The

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aes grave (heavy bronze) (or As) is the start of the use of coins in Rome, but not the
oldest known example of metal coinage.

Theories of money

The earliest ideas included Aristotle's "metallist" and Plato's "cartalist" concepts, which
Joseph Schumpeter integrated into his own theory of money as forms of
classification.Specifically, the Austrian economist attempted to develop a catallactic
theory of money out of Claim Theory. Schumpeter's theory had several themes but the
most important of these involve the notions that money can be analyzed from the
viewpoint of social accounting and that it is also firmly connected to the theory of value
and price.

There are at least two theories of what money is and these can influence the
interpretation of historical and archeological evidence of early monetary systems. The
commodity theory of money (money of exchange) is preferred by those who wish to
view money as a natural outgrowth of market activity. Others view the credit theory of
money (money of account) as more plausible and may posit a key role for the state in
establishing money. The Commodity theory is more widely held and much of this article
is written from that point of view. Overall, the different theories of money developed by
economists largely focus on functions, use, and management of money.

Who Makes Our Money?

People use money every day, but we rarely take the time to really think about what goes
into making the money in our wallets or the people who worked hard to make it. The
U.S. Department of Treasury is the government body in charge of the production of
money. It oversees two branches that produce the money: The U.S. Mint makes coins,
while the U.S. Bureau of Engraving and Printing is in charge of making paper money, or
dollar bills. Now, let's explore the process of making money, from the design to the
distribution.

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Designing Money

The U.S. Department of Treasury hires designers who create sketches and models of
paper money and coins. After the designers submit their designs, the Secretary of the
Treasury chooses one to be made into money, though there may be additional changes
to come to a final design. But why do we need new designs? As technology improves, it
becomes easier for people to make their own fake money. This is called counterfeiting,
which is illegal. To cut down on counterfeiting, the government redesigns our money by
adding new features.

The Materials

If you compare a dollar bill and a piece of computer paper, you'll notice they don't feel
the same. That's because paper money is made out of a special blend of cotton and
linen that makes it harder to counterfeit. The ink is also specially made by the Bureau of
Engraving and Printing. All paper money uses black and green ink, though some of the
newer bills (in denominations of $10 and higher) also use metallic or color-shifting ink,
which helps prevent counterfeiting.

Our coins are made of metal and alloy. This use of bi-metallic materials not only helps
cut down on counterfeiting of coins, but it also reduces the cost of making coins. If a
coin were made purely out of metal, it could be worth more than the face value. This
might lead people to melt the coins and sell them as metals rather than using them as
currency.

Making the Money

Paper Money

After paper money is designed, the design is sent to the Bureau of Engraving and
Printing to be engraved onto a plate. The single plate is then reproduced many times
onto a much larger plate that can print multiple bills at once. The plate is are covered

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with ink and then pressed onto the paper. Each sheet of bills requires 72 hours to dry
per side.

How is money made?

The ways in which money has been made, and the materials used to make it, are an
important part of the history of money. Making coins, paper money and plastic cards
involves complex processes, different in each case.

How coins are made

Coins have nearly always been made of metal since their development in the seventh
century BC. Metal-working demands considerable skill and technology. The metal has
to be extracted from its natural state, often by mining, and then turned into the required
form.

Making metal into coins is also complicated, both in design and production. Quality
control and consistency are vital. Each coin has to be the same as the next, so that
people accept that they are worth the same amount of money.

The two most important methods of coin production are striking and casting. The
Western tradition tended to strike coins between engraved dies, while the Chinese and
Far Eastern tradition has, until the twentieth century, made coins by casting them in
moulds.

pic 1

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Machine-made coins

During the seventeenth and eighteenth centuries there were dramatic changes in the
ways money was made. New machines, including the screw-press and the first steam-
powered machinery for striking coins, were introduced. To start with, however, these
new methods were slower and less accurate than traditional hand-striking, and it took
time to convince all mints to change over to machine-striking coins. The new machines
hugely increased the numbers of coins which could be produced for circulation, to
satisfy the increasing worldwide demand for coinage.

How paper money is made

The manufacture of banknotes plays an important role in allowing them to be used as

money with confidence. Early banknotes were$A 10 note, Australia, AD 1988 black and
white, but now almost all banknotes are brightly coloured, and feature sophisticated
designs which make them recognisable as national currency as well as making them
harder to counterfeit.

The threat of forgery is a constant problem, despite severe penalties, and new
developments like the polymer banknotes pioneered by the Reserve Bank of Australia
help to reduce the number of forgeries in circulation

pic.2

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Conclusion

In modern times economists have sort to classify the different types of money supply.
The different measures of the money supply have been classified by various central
banks, using the prefix "M". The supply classifications often depend on how narrowly a
supply is specified, for example the "M"s may range from M0 (narrowest) to M3
(broadest). The classifications depend on the particular policy formulation used:

M0: In some countries, such as the United Kingdom, M0 includes bank reserves, so M0
is referred to as the monetary base, or narrow money.

MB: is referred to as the monetary base or total currency. This is the base from which
other forms of money (like checking deposits, listed below) are created and is
traditionally the most liquid measure of the money supply.

M1: Bank reserves are not included in M1.

M2: Represents M1 and "close substitutes" for M1.M2 is a broader classification of

money than M1. M2 is a key economic indicator used forecast inflation.

M3: M2 plus large and long-term deposits. Since 2006, M3 is no longer published by the
U.S. central bank.However, there are still estimates produced by various private
institutions.

MZM: Money with zero maturity. It measures the supply of financial assets redeemable
at par on demand. Velocity of MZM is historically a relatively accurate predictor of
inflation

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