Paper money in the economy

How it started the bill that we know and what we use today? At some point in the Middle Ages according to a history text book, which the role of paper money in the economy, people started bringing their gold to the goldsmiths' for safekeeping. Goldsmith is then issued a receipt for the gold.

If the owner of that gold to buy something or want to pay his debts, sometimes they feel no need to take back their gold from the goldsmith and hand: their creditors will happily accept itu.Tanda receive a receipt made out of paper is such that symbolizes ownership of a number of gold, be accepted as valuable as gold itself. During the good reputation of the goldsmith. Such was the origin of paper money , which has become a form of the money the most common.

Of course, in most countries, the right to issue banknotes have long taken over solely by the government usually by representatives of the central bank. Also paper money no longer backed by gold, even though on paper money British pound, as memories of a bygone era, the Bank of England pledged to keep "pay to the bearer of a one pound". That makes the value of paper money no longer support the metal, but the fact that the money is just a little, accepted, and supported by many authorities.

The same is true for coins, although perhaps not so obvious. The coin also has a bit value of the metal, but much smaller than its face value. It's just that sometimes it becomes more valuable metal than the purchasing power of the coin. This has led people to hoard coins or meleburkannya. If this happens as it did with the money of 50 cents Australia in the early 1970's, the coins should be withdrawn from circulation and replaced with a metal whose value is lower.

Before we parted with a goldsmith, there is one other aspect of business that needs to be mentioned. It's a clever goldsmith soon realized that only a few real langgananya come to reclaim their gold, because they're satisfied with your receipt and leave them in situ gold. Situkang gold felt that if he kept only a small fraction of that money as a backup for some people who want their gold back, he can safely lend the rest to anyone who wants to borrow money, to put on interest rates on loans. This is the core banking today. Goldsmiths in the Middle Ages to modern times in the era banker modern economics.  A more detailed discussion about this in a post soon to come.
 

So this post is quite so first.