The origin of money is shadowed in the dim ages of man's first feeble attempts at trading. Even primitive man must have found direct trading, or barter, an awkward and unsatisfactory expedient. If someone wanted to get an object a he had to find some other person who owned a and was willing to give it to him in exchange for an other object b, where both a and b had to be of equal value to each partner.
As man began to specialize his efforts he became increasingly dependent on some sort of market in which to dispose of the goods which he produced in excess of his consumption wants and to acquire the other goods he wanted to consume. Occasionally, he was forced, in order to make any trade at all, to accept some goods which he did not want for itself but which he knew someone else would be willing to accept in trade for something he did want. A series of such three party trades might well establish in each community the habit of looking upon some particular goods as widely enough acceptable to act as a satisfactory medium for execution of any exchange.
The money idea might also have taken root in a slightly different way. A particular merchandise may have become generally acceptable due to its basic value, not with the idea of receiving and holding it between trades, but merely as a common denominator or standard against which to measure the value of both large (or intensely desired) things and small (or only slightly desired) things in working out the terms of a trade.
Whether money developed by the ``medium of exchange'' or by the ``standard of value'' route is of small consequence. In any economy that has progressed beyond the crudest stage the two functions are equally important, and any commodity that performs one satisfactorily is likely to be called upon to perform the other.
Traces of economic activity in the very earliest civilizations almost
invariably show some commodity - cattle
, grain, shells, trinkets, and the like - used as an exchange
medium. With the passage of the centuries precious metals gained
almost complete ascendancy over other commodities because they
combined the attributes of portability, divisibility, durability,
homogeneity, recognizability, stability of value, high value in
small bulk, security and availability in reasonable amounts.
In the modern world convenience has been further enhanced by the growing acceptability of credit instruments, written promises to pay, represented by paper, plastic, or metallic tokens, as fully functional money with an exchange value clearly rated in terms of the basic unit of account, which is usually a fixed quantity of gold or silver. In the advanced money economy, therefore, goods and services are paid for not directly by other goods and services as in the barter economy, or even by commodities like gold or silver as in the early money economy, but by paper fiduciary moneys (checks, bank notes, government issues) which are offset against each other in the banking system, so that very little gold or silver needs to be transferred.