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Cash refers to money in the physical form of currency, such as banknotes and coins. After the collapse of the Roman empire, coins, silver jewelry and hacksilver (silver objects hacked into pieces) were for centuries the only form of money, until Venetian merchants started using silver bars for large transactions in the early Middle Ages. In a separate development, Venetian merchants started using paper bills, instructing their banker to make payments. Similar marked silver bars were in use in lands where the Venetian merchants had established representative offices. The Byzantine empire and several states in the Balkan area and Russia also used marked silver bars for large payments. As the world economy developed and silver supplies increased, in particular after the colonization of South America, coins became larger and a standard coin for international payment developed from the 15th century: the Spanish and Spanish colonial coin of 8 reales. Its counterpart in gold was the Venetian ducat.

Coin types would compete for markets. By conquering foreign markets, the issuing rulers would enjoy extra income from seigniorage (the difference between the value of the coin and the value of the metal the coin was made of). Successful coin types of high nobility would be copied by lower nobility for seigniorage. Imitations were usually of a lower weight, undermining the popularity of the original. As feudal states coalesced into kingdoms, imitation of silver types abated, but gold coins, in particular the gold ducat and the gold florin were still issued as trade coins: coins without a fixed value, going by weight. Colonial powers also sought to take away market share from Spain by issuing trade coin equivalents of silver Spanish coins, without much success.

Meanwhile, paper money had been developed. At first, it was thought of as emergency issues, so that they were most popular in the colonies of Europea powers. In the 18th century, important paper issues were made in colonies such as Ceylonmarker and the bordering colonies of Essequibo, Demerara and Berbice. John Law did pioneering work on banknotes with the Banque Royale. However, the relation between money supply and inflation was still imperfectly understood and the bank went under, while its notes became worthless when they were over-issued. The lessons learned were applied to the Bank of England, which played a crucial role in financing Wellington's Peninsular war, against French troops, hamstrung by a metallic Franc de Germinal.

The ability to create paper money made nation-states responsible for the management of inflation, through control of the money supply. It also made a direct relation between the metal of the coin and its denomination superfluous. From 1816, coins generally became token money, though some large silver and gold coins remained standard coins until 1927. The first world war saw standard coins disappear to a very large extent. Afterwards, standard gold coins, mainly British sovereigns, would still be used in colonies and less developed economies and silver Maria Theresa thalers dated 1780 would be struck as trade coins for countries in East Asia until 1946 and possibly later locally.

Cash has now become a very small part of the money supply. Its remaining role is to make small payments conveniently and promptly, a role which is constantly undermined by electronic forms of payment.

In bookkeeping and finance, "cash" refers to current assets comprising currency or currency equivalents that can be accessed immediately or near-immediately (as in the case of money market accounts). Cash is seen either as a reserve for payments, in case of a structural or incidental negative cash flow or as a way to avoid a downturn on financial markets.

Further reading

  • Clyn Davies - A History of Money From Ancient Times to the Present Day (University of Wales Press, 1994) ISBN 0-7083-1351-5
  • Peter Spufford - How rarely did medieval merchants use coin? (Geldmuseum, Utrecht, 2008) ISBN 978-90-73882-21-8
Money has the head of the queen on.

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