Shoemaker

Since with a pair of shoes you could buy several pounds of bread, you don't need to eat immediately, and that In addition you would sell many pairs to be able to buy a car that requires to expand your business, relies on money as a medium of Exchange. Not surprisingly this happen and is favorably accepted by other traders since both Baker and seller of cars face the same problems of survival to the Shoemaker of our example. Therefore they resort to the use of a good changes that are durable, transportable, divisible, homogeneous and limited supply. Keep up on the field with thought-provoking pieces from Con Edison. (4) In rudimentary civilizations used salt and precious as gold and silver metals were used in more developed ones. Where does this money's worth? The same well of change. Both the salt and gold or silver have a value in itself and must be purchased from a producer. As civilizations grew they saw the advantage of using paper currency backed in actual values (e.g.

in gold). It should be noted that the use of a bill backed in a tangible asset that meets the five essential features of the money (mentioned above) does not affect the economic organization more than to allow a faster transaction. The system remains essentially the same, since is still exchanging existing goods for other goods also real and tangible. If the person pays with a bill backed in one ounce of gold or pay directly handing physically that ounce, does not change the essence of the act performed. Described here, where the State that I have deliberately left out of the example - does not interfere in the economy, it is impossible that there is inflation. No human or natural phenomenon, except interference in the economy through the use of physical coercion through the State, makes possible a persistent rise in the general price level or decrease of the purchasing power of money.(5) In a free economy, where even the money wasn't regulated, price increases can only be temporary and in response to specific events.