April 22, 2012

Bhavikkshah 's Comments on Gold

HOW IS THE EVOLUTION OF MONEY HURTING US

It all started with “BARTER TRADE SYSTEM”: Long time ago the first trade was conducted via Barter. All goods were directly exchanged for all other goods. But this method had its own problems. If you want to swap your chicken for a loaf of bread, but baker happened to want firewood, you had a task to find someone with firewood who wanted to have chicken.
Then came the medium of gold exchange, under which everyone agreed to accept gold in return for whatever they were selling. This transition allowed the swapping of chickens for gold and then gold for anything else. The thing with gold was that it was indestructible and could be stored for the future. As gold also become the “Store Of Value” – if you had lots of chickens you could swap all of chickens for gold, spend only part of the gold on bread and keep a few gold for a rainy day.
Gold as a mode of money, created its own set of problems – Governments in financial troubles, would call back their gold coins, then melt it down and reform the same metal into more coins with lower gold content in it or mixing any other metal in it. For government, it generated a nice new stock of gold for conversion into coins. This is what called “Debasement of Currency”.
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http://bhavikkshah.blogspot.in/2012/04/is-evolution-of-money-hurting-us.html

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