Concept of Money and Banking System

Concept of  Money and Banking system.

Now let us come again on money, as in previous article we focused little on money and as we know little more about it.

Knowing about money is really very interesting and we must know more and more about money .It is mystery and magic and a invisible power, it has of compounding. here we will focus on Fiat Money. because it is the man-made magic to unified the all scattered power..now let us come to know. how Fiat Money came in use or in circulation.

Long-long back ago, Commodity Money was in use. That time commodity money was been used for Trade and Economics and for Exchange. As we know Commodity money has its own value. During the Era peoples used to keeps their Gold, Silver and other precious Items Goldsmiths has, for security purpose. Goldsmiths taken care this all precious valuable Items. for Example, when somebody come to keep their 10 Grams of Gold in Goldsmiths then Goldsmiths used to give him a Acknowledgment/ Receipt in that, it was written " I promise to pay the holder 10 grams of Gold"  

Because it was difficult and risky for Trading and Economical activity by commodity money. so slowly the Acknowledgment came in trend for Trading and Economical activity. because it was trust- able. when people return the acknowledgment, they get their gold back. that time value of the acknowledgment was as per value of Gold or Silver.

and in another word the value of Acknowledgment was determine by the value and the quantity of Gold or Silver. its mean the value of Gold or Silver is equal to Value of the Acknowledgment. 

But Acknowledgment is a just a piece of paper. it does not had its own value but it was a trust. and still it is the trust. slowly people started trust on this acknowledgment and like that, the acknowledgment became symbolic currency .Now slowly it replaced the commodity money into acknowledgement which was now, was Fiat money  came in circulation. Now very less people wants to take back their Commodity. They used to use the acknowledgement for Trade, Economical activity and for Exchange. like that, Commodity money also was in circulation and Fiat money also was in circulation. 

As Because very less people wants to take back their Commodity, so Goldsmiths started giving the gold in Credit as Loan with interest. Now Commodity and Fiat both money was in circulation and it came back to the Goldsmiths. but slowly Fiat money Circulation became more and more and Commodity money circulation become less. Now the Goldsmiths became Banker. and Bank Came in existence. later on Government undertake and Banking and Monetary system. since then after till long time, monetary system was based on Gold standard. But now Gold standard Money Monetary system was stopped.

After stopping The Gold standard Money Monetary system, the control of money supply controlled by Central Bank as it is "Reserve Bank of India" in India but is determine and control by many intuition like Federal Reserve Bank and many more.

Money Monetary and Banking system is very complicated and it never taught us. because it is the Power which is controlled by one and who control this, control whole our Economy and Life.

That is why, Henry Ford Told :

"It is well enough that people of the nation do not understand our banking and monetary system, for if they did, I believe there would be a revolution before tomorrow morning."

This money supply mechanism which is controlled by some powerful people of world is making us and keeping us poor and slave. How Bank make money magically ? How Bank create inflation?
How Bank create Recession.
Banking and Money Monetary system are very complicated but we must understand how it work.
we will keep knowing next.