How did money originate?

Answer

Ug gave his friend Org a pretty rock in exchange for a bite of Org's apple. Org later exchanged the rock for a bite of Iggy's rabbit. The following day, Iggy's wife found the rock and used it to buy a purse. Iggy would spend the rest of his days making sure the purse has new pretty rocks in it.

Added on by Kayors:

Originally, man survived by barter trading. yes, exchange of good for good. There were evident problems with that and that started a search for a trade mechanism. There was evidence man once used cowrie shells, gold bars and coins. Given the weight and bulk of coins, use of paper notes was more favoured given traders usually travelled long distances in the past.

Added on by Cartvo:

Gold lost it's value to money because it has bad portability functions. Money is more easily portable. When people were in prisoner of war camp they traded cigarettes as there only currency. Cool eh? One problem people smoked their "cash" away.

Additionally...

Money as we know it, paper money (which will henceforth be called by its technical term, fiat - French for "fake" - money), originated, as was kind of touched on above, due to the need for liquidity of value. Consider a hypothetical: you are a corn farmer and want Joe's plumbing service. In barter trading, you ONLY have corn to trade. But what if Joe wants potatoes instead of corn? In that case, both you and Joe lose, because you don't get your plumbing fixed and Joe doesn't get his potatoes. With money, you can sell your corn to someone who wants it in exchange for money, which you can then pay Joe for his plumbing service, who can then buy potatoes.

Fiat money has another characteristic that needs to be examined: it is easily manipulated (and by that I mean changed in value, not manipulated in a bad connotation). Governments that print fiat money have a much greater amount of control over their economies than they would in a barter system or a commodity-currency system (ex: the gold standard). For instance, if the economy has slowed down, the government might wish to make it better, so they can print more money to give to people so they can spend, which helps the economy. But with that we might experience inflation, which the government is able to combat by printing less money (practically this is done by raising interest rates, but that's not the scope of this question).

First answer by Fledermaus. Last edit by Sefner. Contributor trust: 22 [recommend contributor]. Question popularity: 77 [recommend question]