Money Article Summary

Today almost everyone with any possessions at all, beyond the clothes he stands up in, usually owns some money.  Of all forms of wealth, money is the most widely distributed; in modern economic systems, indeed, it is practically impossible to live without using money.The essential characteristics of complex modern economics is "specialization". As economic development proceeds, people tend moreand more to earn theirliving by doing specialist jobs and to rely on being able to buy the goods and services they consume but do not produce, This process of specialization, which is known as the division of labor, permits greater efficiency andconsequently higher living standards; but specialization is really only possible when money is used as a medium of exchange. Money, in fact, is the lubricant of modern market economies. Of course, it is possible for people to live without money. For example, in some parts of the world there are still communities in which the family produces almost everything it needs - its food, its shelter, its clothing - and has few economic relationships with other families. Even in an advanced country, it isususual for members of a family to pay one another for their services: A husband does not pay his wife for cooking meals nor the wife her husband for the vegetables he grows. In a family economy all economic relationships are like these, and money is unnecessary. Higher degrees of economic sophistication exist in economies that have no money, but pratice gift exchange or barter. On the whole, gift exchange operates within a community of families, barter among external groups. Both practices allow a considerable degree of specialization.  The dificulty is extending a gift-exchange system to the large number of people involved in a complex modern economy is that such exchanges realy on well-defined relationships to ensure eventual reciprocation; the difficulty with barter is that it involves a direct swap of one commodity for another. Nevertheless, just as families are important economic units in complex industrial societes, so gift exchange (between individuals, families, or even large groups) and barter (between nations) operate on a scale large enough not to be overlooked.  It is possible indeed for a modern economy to keep going on a hand-to-mouth basis on barter alone.  That is in fact what happened in Germany for a time after World War II, when the ordinary monetary system broke down completely.  Curiously enoght, when this happened a new kind of money took its place: cigarettes, People world accept them as payment, not because they wanted to smoke them, bu because they knew that they could use them to buy other things. xactly the same kind of development must have taken place with the evolution of the first primitive monetary syatems.  The medium of echange would not, of course, have been cigarettes, but cowrie shells, or gold or silver. Fishermen might come to a marlet to exchange their fish, but instead of bartering them for, say, furs, or giving them on the understanding that they would receive furs at a future date, they would have received silver, which they knew they could exchange for anything else they might want. All these characteristics are possessed to an even greater extent by more modern moneys, notably gold and silver cois and banknotes. But money is not simply a medium of exchange. It is also one of the ways in which people hold their welth.  The are, of course, many ways of holding wealthe - owning land, stocks and shares, or machinery, for example. But money is in a special position. It is a store of wealth that is also as a medium of exchange