Time is money. That is simply to say, time is a valuable resource; a resource whose value is characterized closest only by our universal measure of worth provided in an exchange — Money. But lest the word “universal” be deceptive, if the concept of money as some standard economic gauge is today all pervasive, it was only an emergent evolutionary phenomenon from ages past.
Speaking of time and its proverbial relation to money, the adage further sheds light on related connections between time and money. Opportunity Cost, for instance, tracks “the benefit that a person could have received, but gave up, to take another course of action.” Thus, how time is used productively to make decisions can affect the value we gain and lose. There is also the Time Value of Money; the idea that money today is worth more than the same amount tomorrow. Here again, value is affected through time.
There is, however, a more fundamental relationship between money and time. One that can show us how money came to be from ancient past and help us discern where it is heading in the probable future. Once upon a time, there was no money; not as we know it today anyway. Here follows a brief history of money as we track its evolution in narrative through the ages and beyond.
The Age of Bartering
The world was young. The first community of men begun to progress from hunting and gathering of wants to the exchange of wants. A hunter had excess hide but was in need of grain. A gatherer had excess grain but would love some hide. The two met together to enact their solemn exchange of hide and grain. Behold, barter trading was born. In this system, traders would directly and immediately exchange things they needed less with those they needed more.
As the society of men evolved from the simple to the complex, however, problems in the bartering system became more apparent. One of them was the infamous Coincidence of Wants, where exchanges could only be made between people who had a corresponding need. But what were the odds that a hunter having hide but in need of grain will meet a gatherer having grain but in need of hide? A double coincidence of wants indeed.
What if the hunter having hide but in need of grain rather met a gatherer having fruits but in need of hide? Fruit are sweet, yes, but that is not what the hunter wants. The value of the fruit does not match the hunter’s need. Only grains would be valuable to him in this scenario. It is easy to see that, value in exchange was highly subjective. Value was dependent solely on the coincidence of wants in the exchange of a corresponding good or service agreed upon by the trading parties.
If this was negligible in a simple society, the growing and spreading human population increased the odds exponentially and laid the foundation for the next step in the system of exchange. The invention of money.
The Age of Commodity
As the society advanced, they began to perceive value not just in an exchange to satisfy a subjective and matching need but also value intrinsic to a commodity itself. This intrinsic value soon became a shared common notion. So, in transitioning from bartering, when a shepherd having excess sheep but in need of cocoa contacts a cocoa farmer in need of sheep, a direct exchange became impossible since the cocoa was yet to yield. However, an indirect method presented itself. The farmer offered cowry shells for cattle and when the cocoa was ready for harvest, the shepherd exchanged back the shells for cocoa. This intermediate commodity led to the creation of Commodity Money.
You can see how the cowry shells (like the Akan sedie from which the Ghanaian Cedi was named) became perceived as having worth on its own to serve as a valid intermediary in the exchange of the cocoa and the sheep. Thus, it successfully served as a medium of exchange. More so, the cowry shell offered was kept and reused at a future time to complete the transaction without diminishing in perceived value. Having durability and perceived value in itself, it successfully served as a store of value whether or not it was used in an exchange. The quality of having intrinsic worth coupled with the divisibility of the cowry shells would soon lead to a standardized unit of account where a specified number of cowry shells would be exchanged for a good or service.
Others forms of commodity money later marked the evolving scene of value that satisfied all the above functions of money and even proved more widely accepted as having intrinsic worth than cowry shells. Gold and silver were outstanding examples that retained their perceived values because of their physical properties. This metallic case led to standardized minted coinage whose deficiency paved the way for the next stage in the history of money.
The Age of Representation
The world scene had now reached a point where money was so portable that one could travel with it. Travelling with commodity money such as gold or silver was, however, dangerous. Then came the banking institutions. There was now the convenient option to store money in the bank. A wealthy merchant, hence, decided to keep his gold and silver at the bank. The bank then issued paper receipts to the merchant by which he can later present to redeem the commodity money deposited. So, even though the paper had no intrinsic value, the merchant could use it in exchange for the gold or silver, for it represented the value of the commodity money deposited.
Because of this representation of value, these paper receipts or banknotes eventually became an accepted means of payment and were used as money; that is, Representative Money. This innovation led to the monetary system of the gold and silver standard where paper notes were convertible into predetermined and fixed quantities of silver and gold.
But for something without intrinsic worth, its acceptance would be dependent at the onset on the proximity and reputation of the issuing bank. Its notes would, thus, become less influential, hence, less desirable with distance. More so, as banknotes became extremely popular as a medium of exchange, it became worrying that banks could issue out more notes than what they had gold or silver for. In the worst-case scenario where a bank indeed rans out of gold and silver, corresponding banknotes would become worthless and holders would, of course, lose their money.
This fear and concern inspired the next phase in the evolution of money.
The Age of Fiat
Demand for banknotes was increasing and the banks were unable to maintain a high enough gold and silver reserve to back the notes. In stepped the government. A government decree (a fiat) was sent forth to print paper money whose legitimacy as having value was grounded only in the authority of the government as a legal tender. Like representative money, this new kind of paper money had no intrinsic value. But even more so, it bore no guarantee that it can be converted into a valuable commodity like gold and silver. This was Fiat Money. Money whose value essentially rested on faith in government authority to back it by law and regulation. So, the printed paper and minted coins in the fiat system are valuable simply because the law says so. Different national regulations, therefore, led to different specified money — currencies.
At this point, money had arguably reached an ideological threshold. It had transcended an intrinsic value commodity-based system to a faith-based system where it is what an authority says it is. Money had also reached a physical threshold, and that is where the next revolution proved to be.
Could it reasonably go any flatter or portable than paper or coin? A further innovation promised to do better. A potential to altogether transcend money from the tangible to the intangible.
The Age of the Digital
Welcome to today, where it is only normal for people to keep most of their money in “brick and mortar” financial instructions, regulated by the government controlled central bank. Even though the world is largely a fiat system, it is steadily giving way to a viral trend given origin by the invention of the computer and impetus by its subsequent popularity. The advent of information technology and, also, management information systems meant that money deposited at a financial institution could also exist as a record — an electronic or digital record — in the databases of those institutions.
As the electronic record represented the money deposited, a leap to a new wave of representative money necessarily followed into a digital or electronic proxy to money in the bank. Money now began its transition into the intangible as electronic money (e-Money).
Examples of electronic money today are store-value cards like debit and credit cards, and mobile wallet systems like our local Tigo Cash, MTN Mobile Money, Airtel Money and Vodafone Cash and the international Appleand Android Pay.
The stored electronic records of value are only backed by the corresponding fiat money deposited at the financial institution, without which it is worthless.
As the world streams onward into a total digital representation of cash in bank in a semi-cashless society, the stage is being set for the next logical development in the story of money.
Given, the progressive metamorphoses of money through the ages, can you predict what comes next?
The Future of Money
The key to the future, they say, lies in the past. The future of money becomes obvious if you consider its progression in times past.
So, once upon a time, there was a truly cashless society (no intermediary in exchange) in the age of bartering. Then came the popular perception of naturally occurring commodities like gold and silver as precious and valuable on their own to fittingly serve as an intermediary in exchange; a medium of exchange. The age of commodity led to the situation where gold and silver needed to be stored against theft. Banking institutions took this upon themselves in the age of representation and issued paper receipts that represented the commodity stored. Due to inadequate commodity reserves, this representation was severed when paper notes could exit as money on their own by government decree in the age of fiat. Money then took on a new kind of representation in the age of the digital when electronic records could represent cash in bank.
By this progressive evolution, is it not, therefore, an obvious forecast of a future coming next, when the digital representation of money in bank will be totally severed for digital currency to exist as money on its own?
We’ve come full circle. How fitting.
Now consider this. If you are wondering how a mere digital record on its own can somehow be considered money in the future, then think again. Today, all of us are comfortable with the fact that paper, ladies and gentlemen, PAPER, on its own is money, without thinking twice about it. Why? Well simply because we all agree and maintain assurance (whether by law or common belief) that it is money.
It is the same concept if you go back to the commodity age of gold and silver; there was simply a shared common confidence that gold and silver were precious. People mutually agreed that they were valuable by default.
WRITER- RICHARD YAW BAAFI