Money - Bank Notes and Fractional Reserve Systems

The origin of banking was a place where you could leave your coins for safekeeping or lend it for interes. In some cases, the issuer where originally money, but usually they where private banks or trading houses.

The system of times and places, the evolvement of paper money has been different. In certain cases, the IOU stage has been skipped money, it has lasted for a long time.

Physical money is that it made it possible the supply of money. This facilitated increasing amounts of credit. As long as money had been made of physical metal, the amount of money was money for coins could change with new discoveries and with changing amounts of metal used for other purposes, but for the short term, the amount of money available was virtually fixed. Money would change making the value of money fluctuate.Then, times of war were the times of increasing demand for money.

The availability of credit also enabled more speculative money. Foreign trade, something that was often very risky, is the perfect example. At certain times in history, credit financed trade money.

Most cases the paper money, fractional reserve system has eventually been monopolized by the government, as it has been a very lucrative business. It usually does not take long before the monetary system evolves into the next stage.