MONEY – A Good Or Bad Thing?
Money is the most common currency in the world. It circulates everywhere and is often kept in pockets or hidden in other valuable items. It has always been considered to be of value. With the evolution of the civilization, money has become an inevitable part of people’s lives. Money acts as a medium of exchange and acts as a lever to be used when it is needed most, or at least, as a guarantee to get something back if you miss out on it.
In ancient times, gold, silver and bronze coins were used as a universal unit of exchange. Gold coins were usually accepted everywhere and were traded for other goods. Silver coins were known to have high exchange rates because they were in existence way before the advent of paper money. Bronze coins were traded for food products and other things that the bulk of the population could afford.
Paper money, on the other hand, has become a necessary evil and is now slowly being replaced by the convertible currency, the US dollar. There are currently many people who do not recognize the fallacy of paper money. They think that it is a means of exchange that is equal to all other currencies. It has become a very convenient instrument of trade that allows you to transfer your goods anywhere in the world and at any time. This has made it possible for many people to purchase goods on a whim and for others to invest in stocks and bonds.
The greatest merit of money is that it stabilizes the economy. When the supply of money increases, there is more production of goods and this automatically brings down the prices of other goods. On the other hand, when the supply of money decreases, there is less production of goods and this automatically causes inflation in the economy.
Inflation affects the economy because it makes the goods and services available in the market more expensive. However, if the price level is allowed to rise, there will be an increase in demand for the goods and this will result in the production of even more goods. When this occurs, the economy sinks under the weight of increased production and prices. Since it is difficult for the consumers to pay for all of the increased production, the producers will opt to take the profit out of their goods by charging the consumers higher prices. This process goes on until the economy finally suffers from a serious problem called hyperinflation.
Hyperinflation occurs when there is a sudden increase in the amount of goods produced in the market without a corresponding increase in the population’s income. This usually occurs during times of great economic hardships like a change in tax rates or a devaluation of the currency. For hyperinflation to occur, inflation must be allowed to exceed 10%. Many economists believe that a stable monetary policy is best suited for a thriving economy.