Learn a little bit of finance every day

Chapter 3 Money: A Financial Enlightenment (2)
Another deep-seated reason for the emergence of banknotes is that the legal currency thus established completely got rid of the constraints of gold and silver on the total amount of currency, which made the authorities' control over currency more flexible and flexible.In this way, the government can increase the money supply without restriction to obtain benefits.Of course, the resulting inflation problem was gradually led to an important topic of economics research.Keynes once said about this: "Using (inflation) this method, the government can confiscate the wealth of the people secretly and imperceptibly, and it is difficult for one person in a million people to discover this theft." These are based on On top of a fiat currency system based on fiat notes.

In fact, strictly speaking, paper currency is not currency, because currency is a commodity separated from commodities and fixed as a general equivalent.Since paper money has no value, it is not a commodity, so it is not money.In modern finance, banknotes refer to currency symbols that are circulated instead of metal currency and are issued and compulsorily used by the state.The Renminbi or the U.S. dollar we use today are all currency symbols that use national credit as a guarantee for compulsory circulation.The paper currency itself does not have the same intrinsic value as metal currency, its significance lies in that it is a symbol of currency value.It can perform some of the functions of currency: means of circulation and means of payment, and the banknotes of some countries can also perform the functions of world currency (such as US dollar, euro, RMB, etc.).

Electronic money: a leap forward in the history of money
Every evolution of money surprises people.Electronic money is a miraculous change in the history of money.In recent years, with the development of Internet commercialization, e-commerce online financial services have begun to be carried out worldwide.

In June, it was midsummer in Beijing. Xiaoyan, who has always been keen on online shopping, was eating watermelon in the living room while browsing a wide range of products online.This time, on an Australian website, she fell in love with a sheepskin jacket made in Australia. After a few simple clicks on "Overseas Treasure", she quickly got it into her pocket. On June 6, 2008, the Chinese shopping platform "Waiwaibao" established by Alipay (www.alipay.com.cn), the largest independent third-party payment platform in China, and Paymate, a leading online payment company in Australia, was officially launched. Paymate puts the goods of Australian physical store merchants on the platform. Since this platform supports Alipay as a payment tool and is delivered through unified logistics, Chinese consumers can easily buy goods from Australia just like buying on domestic shopping websites. Various commodities.

It is unbelievable that people can sit at home and buy goods in online stores without leaving home, and complete monetary payment with a click of the mouse.When you go shopping in the mall, you don't need to bring thick cash, you just need to bring a thin magnetic card, and you can complete the transaction with a light swipe and input password.Even when traveling abroad, you only need to take a small magnetic card with you.This is electronic financial services.It is characterized by timely electronic payment and settlement on the Internet through electronic money.Through it, people can complete shopping and consumption activities and make currency payments anytime, anywhere.

Online shopping is actually a kind of online financial service. In addition, online consumption, home banking, personal financial management, and online investment transactions all depend on the emergence and development of electronic money.

Electronic money is based on the financial electronic network, with commercial electronic equipment and various transaction cards as the medium, and with electronic computer technology and communication technology as the means, stored in the computer system of the bank in the form of electronic data, and passed through the computer. The network system realizes the currency of circulation and payment functions in the form of electronic information transmission.

The emergence of electronic money facilitates people to go out shopping and consumption.Electronic money is usually transmitted on a dedicated network and processed through ATM machines located in banks, shopping malls and other places to complete currency payment operations.Electronic means of payment greatly reduces the cost of economic operations.

Europeans realized the benefits of electronic payments long before the advent of personal computers.For a long time, Europeans have adopted the method of direct transfer, in which banks transfer funds directly for consumers to pay bills.Especially in countries with a high proportion of Internet users, such as Finland and Sweden, two-thirds of transactions are completed electronically.Countries such as Finland and Sweden also have more online banking customers than any other country in the world.

As far as the current stage is concerned, most electronic currencies exist on the basis of existing physical currencies (cash or deposits) and have the basic functions of "value measure" and "circulation means", as well as "value preservation" and "storage means". ", "means of payment", "world currency" and other functions.Since the use of electronic money is very convenient, almost all payments can be completed by electronic payment, so people put forward an idea: Will there be a cashless society in the future? In 1975, "Business Week" once predicted: "Electronic payment methods will soon change the definition of money, and will subvert currency itself in a few years." The demise of the system.

As the American writer Mark Twain said: "The judgment on the demise of cash is exaggerated." As a means of transfer payment, most electronic currencies cannot be separated from cash and deposits, but are transferred and transferred electronically to repay creditor's rights and debts. settlement.Therefore, the function and impact of electronic money at this stage is essentially the relationship between electronic money and cash and deposits.

"Precious Gold" - The Gold Standard
Legend has it that in the middle of the 15th century, the Inca Empire, a slave country near Lima, Peru, had a lot of gold.All the temples and palaces in the empire are inlaid with a large amount of gold. Many ordinary families have gold collections, and most women also wear gold ornaments.

The good times didn't last long, and the bright gold of the Inca Empire finally attracted invaders.In 1525 AD, in order to take the huge amount of gold from the Inca Empire as his own, the Spanish colonist Francisco Pizarro led a colonial army to invade the Inca Empire.It took seven years for Pizarro's army to finally capture the Inca Empire and hold Atahualpa, king of the Inca Empire, hostage.Pizarro demanded that the king hand over 40 kilograms of gold or kill him.The king was forced to agree to Pizarro's request and ordered the people to pay gold.Unexpectedly, the ruthless Pizarro killed King Atahualpa after receiving a huge amount of gold.

Afterwards, Pizarro attacked Cusco, the capital of the Inca Empire.He thought that he could get all the gold that the Incas had accumulated all the time.But the picture is not so rosy.After Pizarro led his army to occupy Cusco, he searched for gold everywhere.After a lot of effort, they only found some golden vessels and some precious items made of gold such as crabs, snakes, and birds in a cave on the outskirts of Cusco, but they did not find the legendary giant. amount of gold.Later, I heard that the Incas hid the gold, so Pizarro sent a large number of people to search, but they still couldn't find it.Until 1911, some archaeologists went hunting for treasure, but found nothing.

The search for gold has always been one of the driving forces driving mankind forward.Columbus first discovered the New World in search of gold.After he discovered America, the first task of Portuguese and Spanish colonists was to plunder gold.According to statistics, in the 300 years since Portugal and Spain invaded Latin America, these two countries transported a total of 250 million kilograms of gold and 1 million kilograms of silver, which is an astonishing amount.

Gold is just a kind of metal, and it has no other important uses other than decoration, but why does it have such a powerful magic power?This is all because it represents currency and represents wealth.

Because gold has played the role of currency for a long time, a monetary system with gold as the standard currency came into being, that is, the gold standard system.Under the gold standard, the value of each unit of currency is equivalent to a certain weight of gold (ie, the gold content of the currency); when different countries use the gold standard, the exchange rate between countries is determined by the ratio of the gold content of their respective currencies—the coin parity.

Britain was the first to implement the gold standard. The country stipulated a fixed price ratio between banknotes and gold, so banknotes could be freely exchanged for gold. In 1821, Britain established the gold standard in its own country in the form of law.The prosperity and strength of Britain at this time encouraged other countries to follow suit. In the following half a century, major industrial countries in the world adopted the gold standard one after another, so gold became the unified world currency.The international monetary system has also entered its first stage - the era of the international gold standard.

The gold standard became popular in the mid-19th century.Historically, there have been three forms of the gold standard: the gold coin standard, the gold bullion standard, and the gold exchange standard.Among them, the gold standard system is the most typical form. In a narrow sense, the gold standard system refers to this kind of currency system.The gold coin standard, also known as the classical or pure gold standard, prevailed between 1880 and 1914.Free casting, free exchange and free import and export of gold are the three major characteristics of the system.Under this system, if the pound depreciates below the parity of $5, it will stimulate the flow of gold from the United Kingdom to the United States. Such a transfer will increase the money supply in the United States and reduce the money supply in the United Kingdom, so the pound will appreciate. Back to $5 parity.Therefore, under the gold standard, the exchange rate has the power to automatically adjust, but it cannot reflect the difference in the purchasing power of the currencies of the two countries.As long as countries follow the rules of the gold standard, maintain a gold reserve for currency issuance, and the currency is freely convertible into gold, exchange rates remain fixed.Thus, the gold standard dictates that a country cannot control its monetary policy because its money supply is determined by the flow of gold between countries.Although, as Greenspan pointed out, the gold standard firmly curbed the rampant inflation, the limitations of the gold standard system itself also determined that it would inevitably be eliminated with the development of history.

In 1914, after the outbreak of the First World War, Britain issued a large amount of banknotes in order to raise military expenses, and at the same time paid a large amount of gold to purchase military supplies from the United States.The issuance of banknotes increased sharply, and the amount of gold reserves dropped sharply. The original price ratio between banknotes and gold could not be maintained.Britain had to stop converting the pound to gold during the war, temporarily abandoning the gold standard.In the great world economic crisis from 1929 to 1933, the British gold standard collapsed completely.

After the Great Depression of the world economy in 1929, various countries issued banknotes that could not be cashed and prohibited the free export of gold, and the gold standard system came to an end.With the gradual rise of the US dollar, the era of the Bretton Woods system is coming.

(End of this chapter)