The main function of money as is learned is as a medium of exchange, a unit of account, a store of value and sometimes, a standard of deferred payment.
by Victor Cherubim
With the worries of the consequences of Brexit, the trade war between US and China, the aftermath of 21/4 and the slowing down of tourism in Sri Lanka,financial anxiety has become a big part of our lives today.
We hear in UK of people living from paycheque to paycheque. People working three jobs to make ends meet and especially those on the dole or without work all over the world,money management is becoming more than a pastime.
The need to talk about money and understand how it works has been forced on us. The tough thing when it comes to money is that we can akways find something to worry about.
Why? Because our money and its purchasing power is never perfect. Because money is still so private,many people prefer to avoid talking about it.
People and nations are paying off insurmountable mountains of debt.
Money can be incredibly stressful.But,it is possible also to create a healthy relationship with money and recognise it as merely a tool to help create the life we want.
What gives money power?
In order to understand this issue we have to define two terms in our mind,one is value and the other is buying power.
Value comes in two varieties, similar to sweet and sour. There is intrinsic value and relative value. A British Pound is a pound and will always be a pound?
Whereas a pound weight of say, sugar is relative to a measurement of cost value. A pound weight of sugar say 10 years ago did not cost as much as it does today. This is because the British Pound Sterling currency represents relative value.
This relative value is commonly referred to as "buying power". Whereas,intrinsic value is set through the market forces of supply and demand.
The clamour now is for a cashless society
UK wanted to get rid of the one penny and tuppence,2p coins from circulation,as these copper coins are worth more than their relative value.But on second thought the Chancellor of the Exchequer has decided otherwise,due to clamour from small businesses and rural folk.
In 2007 cash accounted for 61% of total transactions.In 2017,this has reduced to 34% of 13 million transactions in the UK.
"A cashless society is an economic state where financial transactions are not conducted with money in the form of physical banknotes and coins, but rather through the transfer of digital information electronically between transacting parties."
The earliest cashless business was based on barter or other methods of exchange of goods and services, which was replaced by physical exchange of paperless currency,such as seashells, hammered metals, where trade even took the form of exchange of animals or belongings of animals such as animal fur,skins or ivory.
In more recent times,the use of digital currencies such as Bitcoin and the Blockchain technology, is replacing currency money.
ABBA, the Swedish band has been singing about "Money,Money, Money" and taking in truck loads of it along the way. But,last year only 13 % of Swedes,a high technology people hardly could remember using cash for a purchase of goods and services.Sweden will become the first cashless society in 2023.
In a society where cash is replaced by its digital equivalent, and peer to peer payments will be made by "messaging apps" a revolution is in the making.
In England and Wales, the legal tender money will continue to exist,will be recorded,will be exchanged not only in its electronic form in commerce, investment and in daily life, but also in money currency.However, to add to the confusion, how many Sri Lankans know that Scottish banknotes are not legal tender in Scotland?
Currency and Money
The difference between Currency,Money and Legal Tender is often not clear.
Currency is a generally accepted form of money,including coins and paper notes,which is issued by an organisation, a State government, a bank and circulated within an economy. It is used as a medium of exchange for goods and services. Currency is the basis for trade and business.
Money is any item of verifiable record that is generally accepted as payment for goods and services and for repayment of debts,such as taxes to government,or social economic obligations.
The main function of money as is learned, is as a medium of exchange,a unit of account,a store of value and sometimes,a standard of deferred payment. Any item, or a verifiable record that fulfills these functions can or may be considered as money.
What is Legal tender?
We are told that Scottish Banknotes are legal currency in England, but are not legal tender. Also, Bank of England currency notes are only legal tender in England and Wales.
No Bank notes are classed as legal tender in Scotland and the Royal Mint explains the phrase in a narrow technical term referring to the settlement of debts and in ordinary transactions both parties can agree to accept "any form of payment."
To make it more complicated Alistair Carmichael, M.P. has lodged a new bill in the House of Commons calling for Scottish Bank notes to be accepted throughout the UK.
This Legal Tender (Scottish Banknotes) Bill would mean no distinction could be drawn between Scottish banknotes and other currency notes in the UK as forms of payment.
In 2009 an attempt to legislate for Scottish banknotes to be accepted throughout the UK was made by the current Scottish Secretary,David Mundall, in his Scottish Banknotes (Acceptability in the UK) Bill, but was not made law.
How to stay in the know?
Legal tender is a medium of payment recognised by a legal system. to be valid for meeting a financial obligation. Paper currency is a common form of legal tender in many countries,but legal tender is defined in different jurisdictions.
To add to the misery £1 and £2 coins are legal tender to any amount in UK, but you can only settle Court debts in coins of up to 20p in penny and tuppenny coins,up to £5 in 5p and 10p coins and up to £10 in 20p and 50p coins. There is a cash clamp in settling debt and now banks in England and Wales charge customers to accept bags of coins.
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