Unit 11: Currency

Listen to the recording as you read the text. Then complete the activities.

Throughout history, there has always been a need for currency and currency is constantly evolving. A thousand years ago, people would barter with goods the value of which would be determined by the buyers need for the good. Although this system worked, it didn't allow for a standard value of a given product which meant that you could never tell how much something was really worth.

As trade increased it was clear that a new system was needed. Early rulers throughout the world started creating their own currencies by either minting coins made of precious or semi-precious metals, or by endorsing a bond to a certain value. This system has remained the basis of currency for many years but as international trade increased, people were faced with the problem of acquiring goods in foreign currencies. The problem was resolved by the implementation of the exchange rate system which in its current form allows countries to manage their currency in a variety of manners, and for the individual provides a clear and easy method to transfer money from one currency into another.

However in recent years, we have seen the introduction of a common currency - in the Euro. The idea of the common currency allows for easier trade between countries and removes the variable of exchange rate values and doesn't require the exchange of one currency into another. With more and more countries taking the Euro as the official currency, it is gaining in strength and stability. It can even be seen in countries such as Cuba and North Korea as a second currency.

At around the same time as the modern exchange rate system was being created another major change in currency was taking place. Between 1950 and 1980, credit cards and then debit cards were introduced in many countries, these cards give users the possibility of paying for goods directly from their bank accounts without the need for actual currency. The difference between the two is that charges on debit cards are instantly transferred from a designated bank account, while credit cards accrue over the month and leave the user in debt.

As time passed the debit cards came to be the primary method for in-shop purchases. Nowadays, there are more debit card transactions than cash transactions. Initially, however, there was some resistance to debit cards as the general public were unwilling to trust the new system and the number of retailers accepting the cards was low.

The 21st Century has seen the start of the next step in the evolution of currency, virtual currencies, such as BitCoin. BitCoin was the first of these decentralized currencies, which operate independently of governments and often have no physical presence. Proponents of this currency argue that these cryptocurrencies offer many incentives over traditional currency including; added security in the fact that no-one can steal from you, protection against seizure - as there is nothing physical it cannot be seized by a third party wishing to freeze your assets and last but not least freedom from taxes.

There are, of course, those who claim that virtual currencies are not safe particularly those which are not regulated as there are no instruments in place to prevent valuation fluctuations and from a more practical side the limited number of merchants accepting this type of currency means shopping on the high-street is impossible.

BitCoin is undoubtedly the leader in virtual currencies despite heavy criticism and even major theft, but for the time being it is far from being real competition to traditional currencies.

Money, and by extension currency, is a vital part of our daily life but we are unable to predict what form of currency we will be using in 50 years time. Will we all be using virtual currencies? Or, Will we have gone back to barter? Will there be one global currency? Or, Will each country have their own?. With such uncertainty, one thing is for sure - We are all looking for that safe investment.

Now continue to the Activities