Money Banking And Finance

Money

2012-05-01T14:59:00.001-07:00

MONEY

After studying this post,You should be able to:

*Define Money

*Trace origin of Money

*Classify Money under different traits

The evolution of civilization has leads to the evolution of money.Skins of animals were as money during hunting stage.Cattle were used as money during pastoral stage.In agricultural period wheat and other food items were used as money.

During barter stage people exchange surplus of money.Stones,shells,grains,fruits and tools were used as money after barter stage.With the passage of time different metals like iron,copper and bronze were used.Them precious metals like silver and gold replaced the old things.Later on paper money was put into practice.

The development of banking system introduced credit money like cheque,bills of exchange,and promissory notes.At present metallic money,paper money like credit money is being used.The banks are introducing plastic money like credit card,visa card and cheque card etc.The money to be used in future depends upon the time.

DEFINITION:

1.F.A Walker says that money is that money does.

2.Richard Ely says that money is any thing that passes freely from hand-to hand as a

medium of exchanges and is generally received in the final discharge of debts.

3.R.P Kent says that money is any thing.Which is commonly used and generally accepted as medium of exchange or as a standard of value.

4.G.N Halm says that money has been used to designate the medium or exchange as well as the standard of value.

5.Knapp says that is anything,which is declared,as money by government becomes money.

"It is clear that money may be anything like metal,coin and paper.It must be commonly used and generally accepted by people moreover the government should approve it."

ORIGIN OF MONEY:

The word money has been made up from Latin word "Moneta" which means goddess Juno.The money was minted in her temple in Rome.Some people think that Latin word "Pecunia" has been derived from pecus that means Cattle.In the early stages cattle were used as medium of exchange and measure of value.The earliest know use money occurred in Mesopotamia (Iraq) around 2500 Bc.

Barter System

2012-04-28T09:41:00.000-07:00

BARTER

After Studying this Post,You should be able to :

Define Barter.

Describe advantages and disadvantages of Barter.

Narrate defects or problems of Barter.

Explain how money has removed defects of Barter.

In the ancient time man was self sufficient in his needs.He was able to arrange his food by hunting and gathering fruit from the trees.The exchange became possible when man produced surplus goods.The man was able to production is due to comparative advantage which a region or country has over the other dueto natural resources like coal,iron ore,oil,gas,mineral,and climatic conditions.

Similarity one person has an advantage over the other due to training ; education and personal abilities.It became necessary to exchanges the surplus goods with each other.Barter is the direct exchange of goods and services for goods.

DEFINITION:

R.H Parker says that barter is the direct exchange of goods and services without the use of money as either means of payments or a unit of account.

G. Thomas says barter is a form of trading in which goods are exchanged directly for other goods without the use of money as an intermediary.

H.S. Sloan says barter is the direct exchange of one commodity or services for an other without the use of money.

It is clear that barter is direct exchange of goods and services of one person for goods and services of other people without the use of money.

ADVANTAGES OF BARTER:

INCREASE IN PRODUCTION:

There is more production in barter stage as compared to self sufficiency stage.The exchange takes place only when people produce surplus goods.The caste system , is the result of specialization.Thus increased production helps to use goods of other people.

2.GAIN IN EXCHANGE OF GOODS:

The barter provides gain to both parties through exchange of goods.There is no loss to any party in the exchange because the commodity meet the needs of each other.

3. INDEPENDENT WORK:

The work of every person is independent in barter system.The farmer can produce wheat and weaver can makes cloth.The farmer can exchange his goods with goods of weaver.

4. PROMPT PAYMENTS:

Barter does not involve future payments.Both parties have ready stock of goods.The goods are exchanged for goods on the spot.There is no risk of bad debts.There is no loss to any party under barter system.

5. NO INFLATION:

Barter is moneyless economy.Inflation is the result of money.Many countries have used barter to eliminate inflation.The workers were paid in kind in France years and years back.Thus barter is the enemy of inflation.

6. POPULAR IN RURAL AREAS:

Barter system is popular in rural areas.The farmers share the crops with laborers working on the farms.They also pay in kind for services of carpenters and iron-smiths for repairing agricultural tools.

7.EVOLUTION OF SOCIETY:

Barter system has helped in Evolution of society.The exchange system provides opportunities to meet the people of different nations.There is exchange of culture and ideas through trade.The society moves towards barter living standard.

8.INDUSTRIAL REVOLUTION:

Barter trade has encouraged people to introduce industrial revolution for production of goods on large scale basis.Due to increase in population there was increase in demand for goods.The producers and manufacturers were compelled to produce goods on large scale basis.

9.INTERNATIONAL TRADE:

The early stage of barter was a local trade.Later on people were able to exchange goods at international level.The exchange of goods for goods at local level provides idea of trade at world level.

DEFECTS OR PROBLEMS OF BARTER

NON-MATCHING OF WANTS:

The barter system cannot work properly due to non-matching of wants.The exchanges of goods is possible if the wants of two parties meet the requirements of each other.For example"A Person has to find another who is ready to accept his goods.Money has solved this problem as it is used as medium of exchange."

2. LACKS COMMON MEASURE:

The barter system lacks common measure of value.The values of various commodities are fixed at random.When many goods are exchanged one has to remember several exchanges ratios.The series of exchange ratios create confusion in the minds of the parties.Money is used as medium as standard of value.

3.LACKS OF SUB-DIVISION:

The third defect of barter is the lack of sub-division of goods.For instance exchange value of one table is equal to two chairs.The owner of one chair cannot accept half table.Money is divisible for purchase of items of nominal value.

4.NO BANKING SYSTEM:

The banking system can work properly in money system.The banks deal in money that is durable and portable.There is no money in barter system so there is no concept of banking.Banks are essential for economic development.

5.NO STOCK EXCHANGE:

There is need of stock exchanges in the country of development of money and capital market.Industrial development depends upon stock exchanges for supply of long term funds.Barter fails to set up stock exchange so there is no possibility of industrial progress.

CONCLUSION

Money has replaced barter system.No doubt barter is still used in the international trade but it cannot work properly to meet the challenges of modern production and distribution system.Therefore role of barter is nominal in trade.

Preface

2012-04-28T02:06:00.000-07:00

Money, banking and finance are part and parcel of each other.

The blog"Money Banking and Finance" is written according to the revised syllabus to meet the needs of commerce learners.It covers all the topics given in new syllabus of "Money Banking & Finance".The subject matter is presented in easy language and style.The contents of every topic provide reasonable details.I am indebted to the author for consulting their blog on the subject in order to complete this blog which is written in view of the local scenario and cover all the major regulations such as Negotiable Instruments Act 1881,Foreign Exchange Act 1947,State Bank Of Pakistan Act 1956, Banking Companies Ordinance 1962, Companies Ordinance 1984, and Prudential Regulations issued by the State Banks Of Pakistan.

I am thankful to my friends in the field of banking for their suggestions and guidance in writing this Blog.Any suggestion for improvement of present blog will be Welcome.