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Electronic money frees exchange from the restrictions

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Unformatted text preview: Electronic money frees exchange from the restrictions of time and place. Once again we see an evolution which helps to reduce the transactions cost of exchange. We are only beginning to grasp the importance and implications of the shift toward electronic money. In the way 33 Econ 350 U.S. Financial Systems, Markets and Institutions Class 4 that the automobile changed the 20 th century, electronic money and the internet will change the 21 st century. This very course, the fact that we are all sitting around in different parts of the country (and world) communicating with each other, is a profound example of the changes yet to come. The effects on our society, politics, culture and environment remain to be seen. This is a copy of the latest $20 bill issued by the Federal Reserve Bank. It describes the various security features meant to prevent counterfeiting. Note that the front says 34 Econ 350 U.S. Financial Systems, Markets and Institutions Class 4 “This note is legal tender for all debts, public and private.” It does not promise to redeem the bill in $20 of gold or silver. It is fiat money. A Money Timeline Here is a brief timeline in the history of money: 640 B.C. Lydia introduces the first coins, known as staters, made of electrum, a natural alloy of gold and silver. Lydia lies between Turkey and Greece. Stater of Croseus (Lydia) source: Federal Reserve Bank of Richmond 630 B.C. Greek city-states begin to follow Lydia’s lead as commerce begins to flourish. Aegina begins to mint its own staters. 600 B.C. Aethenian tetradrachma is introduced. Worth “four handfuls” of iron nails. First Evidence of Chinese coins during Chou dynasty. Athenian Tetradrachma source: Federal Reserve Bank of Richmond 35 Econ 350 U.S. Financial Systems, Markets and Institutions Class 4 500s B.C. As more and more coins become acceptable and standardized, commerce thrives in the Greek city-states. People are freed from the land and tributary systems, or having to pay their taxes in tribute or what they produced. A merchant class could develop, along with culture, the arts, and science. 490 B.C. Corinthian “ponies” are the first with denominations. 350s B.C. Greek city-states are conquered by Macedonia. Phillip sets an exchange rate of ten silver to one gold. Alexander the Great then standardizes money from the Indus River to Naples. 323 B.C. When Alexander the Great dies, his image becomes the first of a mortal man on a coin. 320s B.C. Rome begins minting silver coins and expanding its empire. 200s B.C. Rome issues the silver Denarius, which followed it as it expanded into the Italian Peninsula, Spain and Gaul. As Rome expanded, they melted down Greek coins and other symbols of external power. 100s B.C. Rome accumulates a large gold reserve....
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