Another Explanation of Currency

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News.goldseek.com provides another explanation of the history of currency, barter, and the application of gold as the best currency available. More and more of these kinds of sites are cropping up all over the internet, and informercials constantly convince Joe Plumber to send in his gold jewelry and get cash for it.

Money is primarily a medium of exchange or means of exchange. It is a way for a person to trade what he has for what he wants. Ideal money serves three critical functions: it acts as a medium of exchange; a store of value; and a means of economic calculation.

Medium of Exchange

To properly understand money as a medium of exchange one must first go back to the first methods of trade. Before money was invented one would have to engage in direct barter. A farmer who produced grain – but wanted shoes for his family – would have to find someone who, a) had shoes and, b) wanted grain. You can imagine the difficulty involved in finding that perfect someone who had what the farmer wanted and wanted what the farmer had.

Out of necessity, this gave rise to indirect barter. Continuing with our example above, let’s assume that the farmer found a shoemaker but discovered that the shoemaker did not want grain – he wanted candlesticks. While having a drink at the local pub he overheard the gentleman next to him lamenting that he needed grain in exchange for his candlesticks. Naturally, the farmer traded his grain for the candlesticks and went back to the shoemaker and traded the candlesticks for shoes. In this example, the farmer performed indirect barter when he used the candlesticks as a medium of exchange.

Bartering, with a trade exchange, is better than direct trade, and hopefully, with a well managed exchange, more stable than whatever currency you are working in within the national boundaries you live in. Every currency, including gold, is only as good as the goods and services it can purchase. When those that you wish to do business with are no longer accepting your currency, then business stops, no matter the form of the currency. Barter exchanges have a unique opportunity right now. They can, for the first time in my memory, become the currency of choice for many businesses. If an exchange garners enough support from a local, national, or international base of member busiensses, that barter dollar can become LIKE gold to those who have them.

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