MULTIFACETED IMPLICATIONS OF MONEY

By Aurangzeb Soharwardi

History of Money

Money and currency are the factors which rule the world in trade ,business and social life as a tool for all transactions. According to some theories, money is inherently an intangible concept, while currency is the physical (tangible) manifestation of the intangible concept of money. The history of money concerns the development of social and economic systems that provide at least one of the functions of money.

Trading of Wealth

Such systems can be understood as means of trading wealth indirectly; not directly as with barter. Money–in some way, shape or form–has been part of human history for at least the last 3,000 years. Before that time, historians generally agree that a system of bartering was likely used. In 600 B.C., Lydia’s King Alyattes minted the first official currency.

The coins were made from electrum, a mixture of silver and gold that occurs naturally, and the coins were stamped with pictures that acted as denominations. Around 700 B.C., the Chinese moved from coins to paper money. In 1685, soldiers were issued playing cards denominated and signed by the governor to use as cash instead of coins from France.

Money is a mechanism that facilitates this process. Money may take a physical form as in coins and notes, or may exist as a written or electronic account. It may have intrinsic value (commodity money), be legally exchangeable for something with intrinsic value (representative money), or only have nominal value (fiat money).

True origin of the invention of money and the transition from “barter systems” to the “monetary systems“. Further, evidence in the histories supports the idea that money has taken two main forms divided into the broad categories of money of account (debits and credits on ledgers) and money of exchange (tangible media of exchange made from clay, leather, paper, bamboo, metal, etc.).

Anthropologists have noted many cases of ‘primitive’ societies using what looks to us very like money but for non-commercial purposes, indeed commercial use may have been prohibited.Plato suggested that currency should be an arbitrary «symbol» to help exchanges. Plato discusses the five different types of regimes and constitutions people can live under, Aristocracy, Timocracy, Oligarchy, Democracy and Tyranny.

As regimes shift into the next, virtue decreases and corruption in the state arises. He was against using gold and silver because, in his opinion, the value of currency should be independent from the material with which money was made.

Aristotle, consciously opposing Plato’s theory, gave birth to the following reasoning: the existence of a non-communal society implies the exchange of goods and services; this exchange at the beginning takes the shape of a barter; but the person who wants what another has, perhaps does not possess what this other person wants.

it will then be necessary to accept in exchange something we do not want, in order to obtain what we want by means of another barter this, fact will then induce people to choose a merchandise as a means of exchange. Schumpeter himself, in his impressive work on the history of economic analysis, admits that «whatever may be its shortcomings, this theory (Aristotle’s), though never unchallenged, prevailed substantially to the end of the nineteenth century and even beyond.

It is the basis of the bulk of all analytic work in the field of money.» It has had such a strong influence that, nowadays, ordinary citizens still think that the paper money being issued corresponds to an amount of gold which is kept in the vaults of the central bank, and in general they ignore the creation of money by the banks.

Present-day monetary theories acknowledge and accept the changes which have taken place in the progressive abstraction of currency, but in spite of the fact that many of them describe a monetary theory completely detached from the metallist theory, generally speaking they are still blocked as far as the imagination of a different monetary system is concerned.

The monetary system becomes then the result of the agreements reached by the economic powers, and the result of the failures of the world monetary authorities. These authorities always tempted to drag the weight of metals in face of the «magic» of a currency which is detached from everything, which the bank system has created and which they cannot control.

There were Manillas , Axe-monies ,coins, currency notes and then plastic money came in the form of debit and credit cards , which preceded by Digital currency and now the crypto currency (Bitcoins) are ruling the world. Money creation, or money issuance, is the process by which the money supply of a country, or of an economic or monetary region, is increased.

In most modern economies, most of the money supply is in the form of bank deposits. Central banks monitor the amount of money in the economy by measuring the so-called monetary aggregates.

The classifications of modern money supply depend on the particular policy formulation used: M0: In some countries, such as the United Kingdom, M0 includes bank reserves, so M0 is referred to as the monetary base, or narrow money. MB: is referred to as the monetary base or total currency.

This is the base from which other forms of money (like checking deposits, listed below) are created and is traditionally the most liquid measure of the money supply. M1: Bank reserves are not included in M1.M2: Represents M1 and “close substitutes” for M1. M2 is a broader classification of money than M1.

M2 is a key economic indicator used to forecast inflation. M3: M2 plus large and long-term deposits. Since 2006, M3 is no longer published by the U.S. central bank.

However, there are still estimates produced by various private institutions. MZM: Money with zero maturity. It measures the supply of financial assets redeemable at par on demand. Velocity of MZM is historically a relatively accurate predictor of inflation. Besides the monetory and economic aspect of money there are various other aspects attached to money which enable us to understand the impact of money in a much scientific ways.

Finology

Finology is  The study of human value exchange , the relationships between human beings and money , minds, brains, customs and behaviors with respect to money and the money forces.

Richard  Wagner, an American financial planner with more than forty years’ experience who has made a significant contribution to the study of advice, is believed to be the first person to coin the term finology, back in 2011.

It is viewed as a way to re-imagine the process of financial advice, complementing an adviser’s technical ability with ‘soft’ skills, which enable greater engagement between adviser and client. finology is integral to the transformation of advice into a profession.

Price-to-Earnings Ratio

The price-to-earnings ratio (P/E ratio) is the ratio for valuing a company that measures its current share price relative to its per-share earnings (EPS). It can also be used to compare a company against its own historical record or to compare aggregate markets against one another or over time.

Ticker is a revolutionary equity research tool that provides you with Three-Way Assistance for Intelligent Stock Picking. Finology solves real business problems and addresses the financial economic aspects of complex international disputes.

Rigorous conceptual Frameworks

Finology combines the rigorous conceptual frameworks of practically-oriented academics with the seasoned business experience of academically-oriented consultants. There is also a psychology attached to the money which was explained by Morgan Housel in his 2018 book Psychology of Money.

It’s the study of how people behave with money. He narrates that a tendency to underestimate the role of luck and risk, and a failure to recognize that luck and risk are different sides of the same coin. Cost avoidance syndrome:

A failure to identify the true costs of a situation, with too much emphasis on financial costs while ignoring the emotional price that must be paid to win a reward. The paradox of wealth is that people tend to want it to signal to others that they should be liked and admired.

He also adds about a tendency to adjust to current circumstances in a way that makes forecasting your future desires and actions difficult, resulting in the inability to capture long-term compounding rewards that come from current decisions. He explains that anchored-to-your-own-history bias: Your personal experiences make up maybe 0.00000001% of what’s happened in the world but maybe 80% of how you think the world works. The most important driver of anything tied to money is the stories people tell themselves and the preferences they have for goods and services.

Those things don’t tend to sit still. They change with culture and generation. And they’ll keep changing. The history of money is useful for that kind of stuff. But specific trends, specific trades, specific sectors, and specific causal relationships are always a showcase of evolution in progress. He also highlights a very important point that the social utility of money coming at the direct expense of growing money; wealth is what one doesn’t see.

He says that most important thing which affects the financial management is a tendency to be influenced by the actions of other people who are playing a different financial game than we are. An attachment to financial entertainment due to the fact that money is emotional, and emotions are revved up by argument, extreme views, flashing lights, and threats to your well being.

Optimism bias in risk-taking is also an important factor. Extrapolating the recent past into the near future, and then overestimating the extent to which whatever you anticipate will happen in the near future will impact your future.Another researcher and psychiatrist Prudy Gourguechon explains the relevance of money emotions and writes that Much of our emotional world is unconscious.

But it’s not that hard to access if you know what to look for and have a blueprint for the kinds of emotions and family stories that can influence your personal relationship with money. Despite auspicious beginnings with Georg Simmel’s Philosophy of Money (1900), twentieth-century sociology has tended to leave monetary questions to economists, write Philipp Degens and Aaron Sahr in their introduction to the current issue of Mittelweg 36 (‘Perspectives on the sociology of money’).

In recent years, however, there has been an explosion in the sociological research of money. According to Degens and Sahr, there are several reasons for this. First, the de materialization of money and the emergence of a ‘cash-less society’.

Second, the de-nationalization of monetary systems and the rise of private actors in the field. Third, the ascent of financial capitalism in the late-twentieth century, which heightened the significance of derivatives, capital and stock markets in thane increasingly globalized value production chain.

Fourth, the politicization of money: the euro crisis precipitated a re-evaluation of text-book economics and, with monetary institutions resorting to increasingly ‘unconventional’ solutions, a focus on the architecture of the monetary order as such. Klaus Kraemer on the social meaning of money as institution and the everyday distinction between trust and certainty; Nigel Dodd on the social practices, organizational structures and utopian ambitions of Bitcoin; Christine Desan on the legal, institutional and material conditions for money production and their impact on systemic roles and distribution of profits; Andreas Langenohl on publicly financialized money, debt derivatives and the transformation of money into a source of value production; and Supriya Singh on migrants’ remittances and the technical and logistic challenges this poses for governments in the global South.

SOCIOLOGY and PHILOSOPHY

Nigel Dodd in his 1994 book The Sociology of Money: Economics, Reason & Contemporary Society  analyzes differing conceptions of the nature of money in economics, sociology, and anthropology, and subjects each of these to a systematic critique.

IN the book The Meanings of Money:A Sociological Perspective ,Bruce G. Carruthers writes that Money under girds market exchange, but the social significance of money goes well beyond the obvious importance of its highly uneven distribution in modern market economies.

In addition, modern money imposes an ostensibly precise and uni dimensional valuation on social products, processes and relations that often conflicts with other modes of social valuation. In this regard, monetization is a particular instance of quantification.

Money’s status as an official economic metric is the result of a long, contingent, and uneven historical process. Given alternative forms of valuation, people manage and constrain the commensurability of money through a variety of individual, institutional and organizational practices (often akin to “earmarking”).

The social reception of money is active, not passive. A variety of examples are discussed to illustrate and develop these points. The Philosophy of Money (1900; German: Philosophie des Geldes) is a book on economic sociology by German sociologist and social philosopher Georg Simmel.

Considered to be the theorist’s greatest work, Simmel’s book views money as a structuring agent that helps people understand the totality of life . In this book Money and value ,Money and freedom ,  Personal values ,Style of life and Social effects of money are highlighted.

Plato discusses the five different types of regimes and constitutions people can live under, Aristocracy, Timocracy, Oligarchy, Democracy and Tyranny. As regimes shift into the next, virtue decreases and corruption in the state arises.

When obtaining wealth and acquiring private property is a motivating factor for humans, people start making self-interested decisions; choosing to take part in politics and fighting in wars for personal gains, and not for the benefit of the whole.

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