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Guest post by: Francis Kamau Become an Author

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They say if you do not know where you are coming from the you cannot know where you are going. By understanding the way the trade and money has evolved over the year will make you appreciate the role of different types of money in existence today. Let’s start by understanding the different business postures which have existed in this world. Some of those postures are old and dead, some are still around. We start looking at the historical changes in trading and different currencies used.

First there was subsistence stage, here we produced what we needed, our needs were few, however as life improved, we could not produce everything we needed. Trading came in and in the beginning there was the barter trade, here the mode of exchange was you bring your goats; I bring my wheat, them we exchange. This mode of transactions had its own shortcomings; for example how many goats for a bale of wheat? The method lacked standardization and measure, the buyer and the sellers had to bargain for the right amount of exchange for each commodity and this wasted time. Transactions took long.

Business realized that they needed a more standardized mode of transacting their business. They developed some kind of measures by using sea shells, ivory, animal skins among other form of exchanged developed then. India for example used their spice as a form of trading currency. It was the most sought currency then, making people search for the shortest way to India by sea.

Eventually the governments were becoming more focused on trade as a way of making that extra coin. These central governments developed some form of coins which were used by its citizens to pay for tribute and taxes. Precious and other metals were used in making these coins; the amount of the metal used determined the value of the coin. Gold, silver coins started getting into the business. Pirates flourished, if your stole gold coins from a merchant ships you could sell them and become rich.

Security become an issue and it was at this juncture that the governments developed the concept of central banks, here you could deposit your gold and get a receipt for the value. You could use the receipt for transactions; this receipt was and is still known as the legal tender. The legal tender is what we call money today. The money you have is equal to a specific amount of gold held at the country’s central bank and you can use it anywhere within that country and its value is standardized, i.e. 100 dollar bill has the same perceived value either in New York or Hawaii.

Now we have moved further to plastic money. All these efforts were driving to a point where one could get what they want anywhere anytime without much hassle. All was driving towards what we call today the marketing posture. There could be no marketing without the legal tender. The legal tender was the core of brick and mortar business. The plastic money is core of today’s on-line business.

To ignore the role of plastic money in our present day is a disaster because the customer is not the guy who lives down the street but another person in a foreign country.

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