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Money: Who Needs It?

October 12, 2016

finance

 

It seems like money makes the world go round. There have however been plenty of experiments involving doing away with the official currency.

Before there was proper money goods and services were exchanged directly for each other. Eventually Sumerian types decided that it was easier to trade using granary receipts rather than the grain itself.

Systems of barter have often been used instead of currency. There are some big problems with this however. For example you need to have something that the other party either wants or is confident enough in the value of. The second is the inconvenience and lack of portability of certain things for trading with.

While there are definitely those who would relish the hassle they could cause by paying a parking fine with a sheep, difficulties involved in barter often lead to the creation of so-called ‘alternative currencies’.

Sometimes alternative currencies are local. An example of this being London’s ‘Brixton Pound‘. There are also places where the currencies of other nations are used (often illegally due to instabilities in the local currency). An example of this is Zimbabwe, where US dollars are used.

A high tech example of an alternative currency on the very cutting edge is Bitcoin. This is a totally digital currency (based on cryptography) intended to bypass the need to use troublesome online payment systems.

Bitcoin has been the subject of a certain amount of controversy. Part of this is because because of its percieved (arguably not actual) anonymity it was being used by some to facilitate illegal activities. There are also open questions about whether the whole Bitcoin project is actually an elaborate ‘pump and dump’ scam – though that is a question for another day.

The issue of alternative currencies is perhaps a timely one. The single European currency has been kept operational – barely. How long this situation can continue is anybody’s guess, though the desire of members to control their own monetary policies is certainly growing.

A country leaving the Euro would need its own currency. There have been rumours that governments have begun to print their own replacement currencies in readiness for such a scenario.

In the event that a country such as Greece were to ditch the Euro it is likely that the exchange rate for the new country would be set to match the Euro. After the launch date however it is inevitable that the value of the new currency would plummet.

Perhaps the difficulties surrounding government backed currencies will lead to alternatives being widely sought and accepted. One thing is certain however: while currencies may come and go wealth will remain.

What is your view on alternative currencies ?

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