How gold became paper?

Money is just an illusion. We give it value but have we realized that it is just one of man’s creation. Yes, we use these to buy the food and water we drink, we aspire to accumulate plenty of riches, and we save and invest so we’ll experience the indulgence of life. But no matter how many pieces of coin you have on your purses or the number of bills you have in your wallet, money is a fiction. Put things simply a coin is a scrap of metal and a bill is nothing but a piece of paper. Undoubtedly, a rectangular paper or a round metal will never relieve your hunger, quench our thirst, provide a shelter, never give you love, and offer you comfort or happiness.

Give this thought a plain view, we can infer that one of the great ironies of our current civilization has been to value money over and above anything else. But for what reason — how did money got its value?

Money, as we know it today, has evolved over time. At the beginning, there was no money. We all know that people engaged in barter, the exchange of merchandise for another. However, in a society with only barter transactions, an exchange with value equivalence was obviously difficult to achieve.

Consequently, money evolved in what is called commodity money whose market value as a commodity is approximately equal to its value as money. From diverse places, commodities that served as money in their societies include shells, salt, wood, sugar, cocoa, tobacco, and metals such as copper, silver, and gold.

Eventually money evolved around eighteenth and nineteenth centuries where convertible paper money became prevalent. Its origins can be traced with individuals bringing gold to a goldsmith for safekeeping. The goldsmith will issue a note or receipt that could be used to redeem the gold or silver on demand. Much like the concept of checks in our modern day banking, these were used to make payments and slowly the paper / notes started to circulate from one person to another.

Before long, the individuals that stored gold became banks until governments replaced them. The practice of tying money to gold however was stopped because it caused hyperinflation and depression after the World War.

Since 1970’s, the world has had a system of fiat money, in which government-issued money is not backed by anything of tangible value. Instead, money derives its value from government regulation or law that guarantees the extinguishment of obligations. In the Philippines, the sole power and authority to issue currency is the Bangko Sentral ng Pilipinas pursuant to Sec. 50 of R.A. 7653. Additionally, the total amount of banknotes and coins that the BSP may issue shall not exceed the total assets of the BSP.

Like anything else in this world money will continue to evolve and change. Today, you don’t need to have commodities on hand or silver and gold in your pockets. Transactions are now made through plastic cards, mobile services and online transactions. However, no matter where money goes and flows we would do no better if we don’t learn to adopt and remember that the real measure of our wealth is how much we’d be worth if we lost all of our money.

Incoming search terms:

    investment ng bangko, mutual funds bsp

  • mutual fund philippines
  • This field is for validation purposes and should be left unchanged.