Money is valuable because we all know it will be accepted universally as a method of payment.
Brief history - money
Money has been on the human timeline for around 3,000 years. Prior to this historians believe barter was the form of currency. It is a direct form of goods and services, so you offer goods in return for a service. After this time, there was a form of 'pre-historic' currency. An example is the trading of animal pelts in exchange for flour or sugar, example American Indians and European Colonists.
Bartering is still used in some parts of the world today, however it is inefficient. If you want produce but someone else who has produce will only trade for fabric and you do not have this, then you have to travel long distances to find someone who will barter in exchange for what you have. This is tiring and you may consider it not a fair exchange if you have a more valuable commodity than what is on offer so the system then becomes complex and clunky.
Fast forward an Economics lesson
As a 16 year old, I did a semester of economics and I remember the teacher asking us what happens when we spend $2. I thought about it and I said, well I buy something, like lollies, chips, or soft drink. The teacher, Mr Doyle said yes that's true and then paused. He went onto say, when we spend $2 it goes to someone else who spends it as part of another purchase. That purchaser uses it in his purchase who then goes onto spend it elsewhere. Before you know it that $2 has circulated several times in the economy, each time increasing the wealth of a recipient, giving pleasure to someone, giving someone something they want or has been used to buy petrol, groceries or pay the electricity bill. This single gold coin has had a ripple effect, circulating, increasing wealth of an individual or business and boosting economies. This is called the 'multiplier effect' and this increase in spending produces an increase in a country's national income and consumerism.
It's interesting, isn't it, when you narrow it down like that to a single coin, you can see the principles of economics in action and in such a way that everyone can understand it.
Thanks Mr Doyle, for making economics so easy-to-understand; you are the epitome of what defines teaching. Even after all these years I still clearly visualise that lesson, right down to sitting on the hard-backed chair, one student amongst 25 in a class of both sexes, with a book and pen for scribbling notes. After all this time, this 30 minute lesson in economics, the way you spoke, your stance, your nasal twang, resplendent of Australia and your lanky frame and fine black hair still resides with me, your presence in the classroom and your teaching stays with me as a pivotal learning experience.
I wonder what you are doing now, Mr Doyle - I trust you are still living and breathing the good life.
Thank you for allowing me to indulge myself, momentarily. Now - getting back to the 'multiplier effect.' The circulation of money throughout economies brings positive benefits. It brings prosperity, profits and wealth for nations. These all have a cumulative effect on a large scale with nation building prosperity, through to individual growth from the local fruiterer selling you his produce to the hotelier taking payment for your holiday in the Grand Hotel in your favourite city's beach suburb.
All of these activities not only creates wealth for countries, individuals and businesses, the 'multiplier effect' has huge social benefits to communities from social capital - you go to your local cafe and spend that $2, beginning a cycle of circulation and increases in economies to the benefits you gain from connecting with the barista, not to mention the contact you get from meeting your friend for coffee.
Alternatively, you may enjoy a coffee while reading the paper so you catch up on current affairs, stay informed and share a few minutes' discussion the following day at work with a colleague.
You may think this is really no big deal - be assured though you are building social capital in your community, for yourself and for others. All of these elements bring increases in social wellbeing and ripple effects in reducing loneliness, social isolation and improving the emotional health of people.
These small acts from you spending $2, buying coffee or making larger purchases are powerful ways to build capital, both social and economical. This impact on larger scale activities such as start-ups, generating employment across a wide range of sectors and industries, means employees spend to live, support themselves, pay bills, run cars, buy homes, go on holidays, raise families, live their dreams and more.
It's exciting to break it down to a micro-level and to know we all make valuable contributions when we spend $2. The ripple effect has long-term social and economic benefits for countries and its people as our $2 circulates and multiplies, used in bigger purchases bringing wealth for countries and its people.
Stay tuned, another post soon on money and money conservation.
|Remembrance Day Poppy Coin - Australian coin|
Background impage displays lady beetles painted with the mouth, Mouth and Foot Painting Artists.