You walk by a store and look…there they are! A pair of shoes that you’ve been wanting for months. They’re in your size and your favorite color, too. Bingo! All that’s left to do is grab them, right? But who’s that angry dude in the security outfit coming after you yelling “Stop!”? Oh, yeah. That money thing. You’ve got to pay for those shoes.
You see, as nice as it would be, we can’t just walk into a store and take whatever catches our attention. We need to give the shopkeeper something in return.
We use money to pay up because it has value. As a tool for trade, it’s worth something. So those bills, pounds, pesos, and francs are mighty useful when you want to buy or sell goods like cars, computers, or cosmetics. They’re also used to buy and sell services at home and around the globe, which helps other people buy and sell their goods and services, too.
For instance, if you bought those shoes you wanted, the store would make a profit. If the store makes a profit, the manager can hire more salespeople. If more salespeople sell more shoes, the person who cobbles together the shoes makes more money, too. When enough people have money to buy things, the whole economy improves. When the economy improves, more people feel like buying things, and on it goes…
So money does make the world go round and round, both at home and on the other side of the planet.
Still, money has negative power, too. When it doesn’t work, people lose their jobs, many don’t have the money to pay for things they need to survive, and sometimes entire countries go to war over it. So money is useful to us only if we can use it to buy things and we can trade it without getting into fights over it or hurting other people out of greed.
“Hey man, will you pass me that pig? I want to use it to buy myself a new skateboard.”
Money—usually defined as anything that can be used to make a payment—must be:
Huh? Believe it or not, everything from salt, shells, feathers, animals, and even 12-foot stones has been used as currency in the past. And even though these items didn’t look like our money today, many of them did the same job. That’s because they possessed a few important characteristics that all successful money needs.
Have all of these traits, or at least most of them, and what do you get? Money, money, money!
But that’s not all it is. Many financial experts say that money is actually more like a nifty and useful idea. They say it is an agreement between people in an economy.
Weird, huh? At first I was confused, too, but look at it this way: If you and six friends wanted to trade comic books at recess, the comics would actually be your currency. That’s because you all got together and decided they were worth something. A country makes a similar decision about money when nearly all its citizens agree that a dollar has value.
But now let’s imagine that everybody decides a dollar is worthless. It would soon become worthless—even though the coin hasn’t physically changed since yesterday.
Here’s an experiment to try with your friends: Go to you room and gather up all the clothes, toys, and knickknacks you no longer want and throw them into bags. Ask your friends to do the same thing. Then all of you can get together and trade. Hello, “new” video game and excellent “new” jeans.
People have been trading—also known as bartering—since the day Cave Guy wanted to swap his piece of leg meat for Cave Dude’s more succulent slab of belly meat. And bartering is still going strong today. Think about it. You’ve probably bartered at school, trading stickers, colorful rubber bands, and music.
But there’s a problem with bartering.
Bartering only works when both people have something the other wants. This is not a big deal if you’re merely trading toys or a snack at school. But it is a major concern if you’re trying to trade your wares for, say, food, warm clothing, or other items you need for survival. (And no, your friend’s stack of chocolate chip cookies doesn’t count.)
So money is a superior way to trade for a very good reason: everybody wants it.
Now that you know why money rules, have you ever looked at a quarter and wondered how that piece of cold, hard cash was created so it would be cold and hard? A country’s mint—that’s who actually makes the money (for instance, the United States Mint or the Royal Canadian Mint)—strikes coins between two dies to make the patterns that tell us how much the coin is worth.
Paper money, however, relies on a special offset printing press that gives it colors and lines. Then another press uses tons of pressure per square inch to press the ink into the paper and give it a raised texture that’s hard to copy.
At least, that’s how countries’ banks have been making their paper money for decades. But times are a-changing, and technology is chugging right along with it. Here’s what I mean…
Sorry to break it to you, but if your hands reek metallic after handling coins, it’s not the dirty pennies’ fault. It’s yours. German scientists have discovered that the smell is actually human body odor, created by the breakdown of oils in skin after touching objects that contain certain metals. And just to jack up the eww factor, the same stink occurs when iron-rich blood meets skin. No wonder some people swear that blood smells like pennies.
Imagine you’re a five-dollar bill crammed into a pocket in a pair of jeans. Admit it, things have been a tad boring since your owner chucked his pants into a heap on the floor two days ago. But what’s this? Someone just picked up the load of laundry and is now hoisting you down the stairs to the—gasp—washer and dryer!
You know what’s coming next. Going through the wash with all that soapy wiggling and jiggling is not going to be pretty.
Too bad you don’t live in Australia, New Zealand, Vietnam, Zambia, Indonesia, Mexico, or any of the other dozens of countries that use currency made from polymers—plastic money. (By the time you read this, Canada will be on the plastic-banknote bandwagon, too.)
Plastic bills actually make a lot of sense for countries with warm, humid, or wet climates that tend to break paper money down. But slick, waxy polymer banknotes? Not only do they absorb a smaller amount of dirt and grime, but they’re less likely to grow nasty bacteria that can make you sick. (Seriously, if you had any idea how many people pick their noses before handling their cash, you’d never touch the stuff again!)
Most of us can recognize money today. But would you know it if you saw it in the past? As far as we can tell, this money concept didn't simply start in one place and then travel around to other communities. Instead, lots of different people from many different cultures all seemed to come up with the idea at generally the same time. It seems common cents were just, well, common sense. Here are a few kooky currencies that caught on around the world.
Want those comfy sandals? Time to shell out…
Smooth and with a scalloped edge, cowrie shells were widely accepted as currency all over Asia, Africa, and the Pacific Islands. Even Native Americans used shell money at one time. The most valuable shells? Those used inland away from the sea.
What it bought: Cowrie value was all over the map, literally. But in 1850 in Congo, 10 cowries could be traded for a chicken.
When in Rome, do as the Romans did—pay with hard-earned denarii.
Unfortunately, a lot of dishonest folks didn’t actually want to work for the silver coins, which were used until the fall of the Roman Empire in the 3rd century A.D. Instead, counterfeiters used baked clay molds then washed the bogus tender in silver.
What it bought: A Roman soldier could expect to make a 225 denarii salary for one year.
Beans, beans, the lucrative fruit…
Powerful Aztecs didn’t merely use cocoa beans to make delish cups of hot chocolate. Most people wanted them to buy and sell things at the market. The Aztecs were the original bean counters, by the way. They couldn’t actually grow cocoa beans on their lands, so they made the tribes they conquered hand them over as tax. The only drawback? Their sweet investment (the beans) would eventually go bad. Rotten luck!
What it bought: A rabbit for dinner in 1513.
Leave it to the new guy to turn our nice gesture into money.
Traditionally, the Iroquois and their neighbors traded a string of wampum beads as a sign of good faith after a deal was done. But then European ships arrived in northeastern North America. The new settlers encouraged wampum beads to take on new value—as currency—and they were used for buying and selling.
What it bought: In 1657, two strings of wampum beads could buy a fine beaver skin.
Talk about gambling away your fortune.
In 1685, coins were scarce in New France (now the Canadian province of Quebec). Faced with a mob of angry soldiers, Intendant Jacques de Meulles did what any creative (read: desperate) leader would do—he took ordinary playing cards, wrote a value number on them, and had powerful people give them their stamp of approval. Instant money! To make it clear that fakes were a big no-no, Meulles sentenced one counterfeiter to have his hands tied behind his back…for three years.
What it bought: Anything you needed, until the fall of New France to the British. Then the cards were practically worthless.
Shoes too big? Use Shinplaster™ and treat those tender toes today!
Sadly, some money isn’t worth the paper it’s printed on. That’s what soldiers discovered during the American Revolution when paper money the Continental Congress issued became practically worthless. So worthless, in fact, that the troops stuffed it into their stockings for extra warmth.
What it bought: A couple of extra hours before frostbite set in.
And now for something completely different.
Without a doubt, Kissi pennies are unlike the coins most of us know. Rather than round, the money, used in Sierra Leone, Liberia, and Guinea in West Africa, were twisted iron rods, about the length of a ruler. They were generally used to make small purchases. It was believed every rod had a soul. Break or melt down the rod for its useful iron and…Poof! Good-bye value, hello guilt.
What it bought: You’d have to pay 600 Kissi pennies to buy a cow in 1918.
This dollar has been brought to you by the Bank of New York City!
Until the U.S. Congress put the Federal Reserve in charge of issuing official notes, thousands of U.S. banks were allowed to print and issue their own cash! Today, you can still buy stuff with the newfangled Federal Reserve notes, the only currency still being manufactured by the Bureau of Engraving and Printing.
What it bought: Your full money’s worth, that’s what. (The value of the dollar started dropping after 1914 and was worth a measly 62 cents in 1929, when the Great Depression hit.)
English or French? French or English? Why not both?
Money was in a muddle when the Bank of Canada formed in 1935. It wanted to eliminate the practice of different banks and even businesses printing their own bills. Good idea, but weirdly, the new official bank issued separate French and English versions that first year. Since then, all Canadian bank notes have been bilingual.
What it bought: Smack dab in the middle of the Great Depression, you could snag a hockey sweater for two bucks. (Today, they can start at over $100!)
The plastic variety of money is gaining currency over the traditional cotton- or paper-based options for another important reason: it’s harder to counterfeit. Many of the existing plastic bills boast little clear windows or swirls that are tough to imitate. Sure, polymer notes cost more to produce, but according to the Bank of Canada, they’re recyclable and last two to three times longer. That means the bank will print fewer of them in the end.
Your mom is right—much of the world’s money doesn’t grow on trees—and now you know why.
Speaking of printing on polymer, it’s a high-tech business. You’ve got to melt plastic chips, gather the polymer they create into rolls of even thickness, and run them through a press, adding lots of layers of white ink. Small transparent spaces are left to dot the sheets and a laser burns an image into them. It’s kind of like a hologram, which makes the bills really almost impossible to scan or photocopy. The rolls are cut into sheets before layers upon layers of ink are applied to give the bills texture. Slap on some serial numbers and they’re good to go.
Manuel Parreira
Bank of Canada
When Manuel moved to Canada from Portugal as a kid, little did he know that some day he’d be burning money—and someone would pay him to do it!
But that’s exactly what happened when he took a job with the Bank of Canada, the nation’s central bank, about 30 years ago. Back then, when bills were too old or tattered to be used anymore, the other banks would gather the unfit notes up in bags, send them to the Bank of Canada, and Manuel would check that the bags contained what they were supposed to—loads of cash. Once they counted the money, employees would hoist it into a big furnace and burn it up. (Gives new meaning to the phrase “burning through money,” doesn’t it?)
“After working at the Bank of Canada for a while, money just becomes colored paper,” Manuel admits. “You do get used to just throwing it into an incinerator, but at first it’s strange.”
Since the 1980s, the bank has turned to shredding banknotes instead, something Manuel learned how to do when they stopped printing thousand-dollar bills in 2000. His job? Throwing hundreds of thousands of dollars into the jaws of death.
Today, he’s traded in that position to represent the bank. He works with retailers, the police, other banks, and even talks to kids about money and how to stop counterfeiters who make fake bills.
“I’m the eyes, ears, and voice of the bank. The neatest thing about my job is that it provides instant gratification. I can go out and see a difference,” he says.
So, for a lot of countries around the world, paper money is going the way of the Dodo, while plastic money is riding a wave of popularity. Change is good, right? Not so fast. Some nations are not always willing to embrace anything but traditional dollars and cents.
Take the United States. As far back as 1971, the government has tried to release new dollar coins into circulation to replace the paper dollars. And why not? We know that coins last about 30 years, while paper money hits the shredder after approximately four years. Then there’s something called “seigniorage,” or the profit made when the feds make the coins for about 30 cents each but sell them to the public for a dollar. By minting dollar coins, the government would save, well, a mint.
Sounds reasonable. But many American citizens refuse to use these shiny, newfangled bucks. They say they’re too heavy and inconvenient. Some vending machines won’t accept them either.
Looking to unload a little extra cash—say, over $7 million? Then you too could be the proud owner of the world’s most expensive coin ever to be sold: the American 1933 gold double eagle. Although 445,000 of these coins were minted that year, President Roosevelt, the U.S. president during the Great Depression, decided wasting all that valuable gold on coins was a great big blooper. The solution? Smelt ’em down! Only a few escaped the inferno, and in 2002, one was sold for $6.6 million (plus a pesky 15 percent buyer’s fee). That’s what we call paying a mint!
So here’s what’s happening: In 2011, it was reported that over $1 billion of the new coins has been quietly building up in the Federal Reserve vaults—because no one will use them! And this mountain of money is expected to grow, since the government created a congressional mandate (kind of like an order) to make more.
Hmmm. Letting a billion dollars just sit in a heap. Kind of crazy, isn’t it? That money is enough to buy 284,900,285 hamburgers, or the world’s largest private yacht, the Eclipse (complete with two helicopter pads, eleven guest cabins, two swimming pools, and a bunch of hot tubs).
Dollar coins? They’re not funny money. Use ’em right and they turn into fun money.
