Presentation is about evolution of money - right from the days of barter system till the avatar of electronic money....

1. The Evolution of Money
By Anand Shirur

2. Agenda
What does money signify ?
The ladder of economic civilization
The first evolutionary step
The second evolutionary step
Gold Standard & Brettons Woods
The third evolutionary step
The fourth evolutionary step
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3. What does Money Signify
 Medium for exchange of Value
 Count of „your‟ value addition to society
 Success & Self Esteem
 It's the center around which world revolves
 “ Its all about money, honey”........

4. Why was Money Invented ?
 Specialization of Labour made economic
exchange a fundamental necessity
 When the division of labor has been once
thoroughly established, it is but a very small
part of a man’s wants which the produce of his
own labor can supply..
– Adam Smith, Wealth Of Nations

5. The Ladder of Economic Civilization
Stages in development of money
 Barter trade
 Commodity money
 Standardized Coinage
 Representative Money
 Fiat Money
 Credit Money
 Electronic Money

6. Step 1 – Barter Trade
 Most primitive form of reciprocal exchange
 Barter involves only two people; each has
something the other wants
 “Hungry weaver is searching for a naked farmer”
 Limitations
 Coincidence of wants
 Perishability
 Inefficient

7. The First Evolutionary Step
Commodity Money
 Valued Commodity as means of exchange
 Early examples – Shells, Food Grains, Cow etc
 Evolved into Metallic Money – Durable, Fungible
and Portable

8. The First Evolutionary Step
Standard Coinage
 Egypt used gold bars in 400 BC
 Discovery of Touchstone – tool for assaying
value of gold in an alloy
 Concept of Standard Coinage was introduced
 Govt. assertion that value of money lay in the
emblem
 Debasement of Currency – coin as unit of
value (not weight)

9. The Second Evolutionary Step
Representative Money
 Token or certificate (made of paper), backed by
an equivalent reserve
 Started with 'Warehouse Receipts' issued by
„Girobanks‟
 Receipts as medium of exchange
 Soon receipt issuance overshot actual reserves
to accommodate loan demand
 Girobanks introduced std accounting methods
& deposit accounts for depositors

10. The Second Evolutionary Step
Fiat Money
 Money, not backed by reserves
 Derives stand-alone value by government
decree
 Money is a 'Forced / Legal Tender'

11. Gold Standard – 1901 to 1932
 Money system in which regions' common
medium of exchange are paper notes freely
convertible into pre-set fixed quantities of gold
 Gold standard was intended to force monetary
prudence by respective govt.
 Abandoned due to high war expenses followed
by deflation / depression

12. Brettons Wood – July 1944
 Conference after 2nd World War to discuss
financial architecture
 Resulted in
 Formation of IMF and IBRD (World Bank)
 Gold was replaced with Dollar as
international reserve currency
 However dollar was pegged to gold at
pre-fixed rate
 Currencies were made convertible

13. The Third Evolutionary Step
Credit Money
 IOUs, Promissory Notes, Overdraft
 Exists in conjunction with other forms of
monies
 Enabled 'Fractional Reserve Banking' –
thereby increasing money supply
 When over-leveraged, has led to financial
bankruptcies

14. The Fourth Evolutionary Step
Electronic Money
 Internet fund transfers
 Mobile fund transfers

15. Thanks