According to Martin, what is money? Illustrate and explain some of its’ early historical uses. Should a new form of the economic transaction be used today?
Money by Martin:
From the viewpoint of the Felix Martin, the money is considered as the coins and the currency that is utilized for the exchange of the goods and the transaction to be done. From the opinion of the Felix Martin, the currency and the coin in the other words are referred to as the useful tokens that are used to record an underlying credit account system and in order to implement an underlying clearing procedure (Martin).
As in this when a person takes credit from the other, the money is used to clear this credit system. Hence, from the opinion of the Felix Martin, the money is referred to as the system of the credit accounts and transaction and their process of clearing which the currency represents. The money is not the exchange medium of the commodity, but it is the social technology that is composed of the three major fundamental basics.
In these three fundamental social technology elements of the money, the first one is the abstract unit. The abstract unit is referred to as the value or worth in which the money is considered denominated.
The second fundamental element is the system of the accounts that keeps the track of all the institutions or the individual’s debt or the credit balances. This is mainly because of the fact that they are engaged in the trades and trading process with one another (Martin).
In the fundamental element, the third one is referred to as the possibility that an original or the new creditor in the relationship might transfer their borrower or the debtor’s obligations/debts to the third party whether individual or the institutes in the settlement of few unrelated debts.
At the same time as it is right to state that all the money in the world is the credit but not all the presented credits are the money.
In the other word, money can be stated as that it is not just the form of credit, but it is the transferable credit.
Transferable Credit
From the transferable credit, it is mean that they are not simply the credit that people held, but it is the credit that the individuals and the institutions transfer to one another through transaction or exchange in order to meet their needs (Martin).
For instance, the people when purchasing something’s or items from the other in an exchange of the money transfer their credit.
In the investment, the understanding of the money is most important to make the effective investment decision as it seen that with the time the value of the money changes.
The currency of some countries lost their value, and their strong policies appreciate some currency value.
Investors
For the investors to make the decision, they must consider the valuation of the currency and estimate that the value of the currency in the future appreciated or depreciate for making the profitable investment decision.
For this, they check the past trends of the currency valuation and also analyse the economic growth pattern and the monetary policy of the current because they help the individual to understand that is in the future the currency value will appreciate or depreciate (Martin, Money).
In the world history that is related to the money, the money attains the value by the development of the means of keeping out the transaction that involves the medium of the exchange.
Measurement
The money is measured as any of the clearly identified objects of the value which is typically accepted as the mode of the payment for the services and the merchandise and for the repayment and settlement of the amount overdue within the market, or that is the legal tender in the state.
In the early history of the money, it is revealed that some of the sensible persons use it as the form of the merchandise and understand the fact that money was different and something higher than the physical embodiment.
Medium
While the money is always the medium of the exchange, but it is noticeable that not all the mediums of the exchange are considered as the money in a numismatic sense.
The nations at the ancient time used the barter system for trading the things. In which the country exchanges the things that are inferior or less in their country with the things that are superior in their country and by this they fulfil the needs of their public.
Like some people harvest the excess rice and then plan to exchange this excessive rice with the people who having the excess cotton so by this manner they become able to fulfil the necessity of their population but the issue arises about the value of the merchandise like the worth of the rice is higher than the cotton, and the other thing that enhances the need of the physical money was not having the equal measuring units of the diverse type of the stock
From the perception and ideas of the Felix Martin, the real trading and trade agreement between the different world countries was made in the monetary terms. But this monetary terms was done on the credit ledgers relatively to the actual currency (Martin).
In order to resolve this matter of different valuation of the merchandise, the world changes the transaction system from barter system of exchange to the monetary system.
Consequently, it’s effective to state that in old times the people engaged in the barter system in order to exchange the one merchandise with the other merchandise without the value equivalence.
This unequal valuation of the merchandise creates the most issue in this system. But to solve this issues the money or currency was introduced.
In the ancient time, the money is originated by the Denarius Roman Coin that was introduced as money and widely used in trading. The 1st World Currency that was introduced as money was used in the Middle East states.
In the ancient times, the money is found in the form of the small spades or the knives that are made of the bronze. This money is used in the China country during a Zhou dynasty.
Therefore, it is precise to say that in the ancient times there was no existence of the money in the physical form.
The primarily manufactured coins appear to have the appeared distinctly in China, India and the other cities around the area of the Aegean Sea from 700 and the 500 BCE. After the coin the currency notes, banknotes are introduced.
The trade bills of the exchange are introduced after this and become the expansion of the European trade. After this, in the present era, the other form of the money is introduced that is cryptocurrencies (Martin, Money).
The cryptocurrencies are the digital currencies that are gaining much popularity in this new advanced digital world. Where people don’t want to carry the physical money and require the transparent transaction source.
This helps the people to do the transaction without carrying the physical money like currency notes or the coins. In this, they use the digital currency like the Ripple, Bitcoin, and Ethereum etc. for the exchange or transaction.
The currency worth is valued in the form of the time value of money today. Because it is the fact that the present value of the money is different from the future value of the money.
And when the person makes the investment decision or gives credit to the people for a period more than one year the concept of the time value of the money occur and is most important to understand and estimates in order to make the effective investment decision.
For instance, it is stated that the worth of the money that person have today is not considered the same value that it will have in some future time. This changes in the price of the money will be because of the change in the exchange rate and the change in the valuation of the money.
It is seen that the value of the currency changes and it’s the chance that its price in future increase or decrease. Therefore, by utilizing the various measures like the IRR, NPV, MIRR and political stability etc. the value of the money will be evaluated in order to make the appropriate profitable investment decision.
The amount of the money also changes because of the change in the demand and the supply as by this the value of the currency effects and this imposes a significant impact on the valuation of the money nowadays.
In the present era through the discounted rate, the value of the money is calculated, and all the forms of the money whether it is physical or the digital are considered as the money and used widely in the transaction and the exchange of commodities from one country or individual to the other.
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In the historical era, the money is extremely the political issue. It is seen that the political conducts change the currency value. At present, it’s also seen that the political actions impose the direct impact on the value of the currency.
After the merchandise, in the 17th century, the John Locke introduce the coin as the form of the currency and change the money term.
After this, the other fiat currencies that are physical in the forms were introduced. Most of the countries nowadays have their own different forms, and their currency value is different from other.
Subsequently, the expansion in the digitalization the money is also introduced in the new form like the debit cards, credit cards and the most now form that the Martin also address is the cryptocurrencies.
This digital currency changes the transaction and the exchange process. As by this, the people attain the benefits that they don’t require to carry the physical currency like currency notes or the coin with them (Martin)
When we observe the advantages of the digitalized currencies like the cryptocurrencies, we notice that their cost of the transaction is less as compared to other currency and they are a decentralized form of the online currency which is mined.
The foremost issue with the fiat currency is the exchange rate fluctuation, but in the virtual currency like bitcoin, the fluctuation is less as they are the stable money type. They don’t have the physical value but are used extensively in different economic exchanges.
Therefore, it is concluded that the new form of the economic transaction must be utilized today in most of the business transaction and the investors make huge investments in these virtual currencies in order to minimize the investment risk and to earn high profits margins in the world complex market.
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