Food is any substance, usually composed of carbohydrates, fats, proteins and water, that can be eaten or drunk by an animal, including humans, for nutrition or pleasure. Items considered food may be sourced from plants, animals or other categories such as fungus or fermented products like alcohol. Although many human cultures sought food items through hunting and gathering, today most cultures use farming, ranching, and fishing, with hunting, foraging and other methods of a local nature included but playing a minor role.
Most traditions have a recognizable cuisine, a specific set of cooking traditions, preferences, and practices, the study of which is known as gastronomy. Many cultures have diversified their foods by means of preparation, cooking methods and manufacturing. This also includes a complex food trade which helps the cultures to economically survive by-way-of food, not just by consumption.
Many cultures study the dietary analysis of food habits. While humans are omnivores, religion and social constructs such as morality often affect which foods they will consume. Food safety is also a concern with foodborne illness claiming many lives each year. In many languages, food is often used metaphorically or figuratively, as in "food for thought".
Food sources
Almost all foods are of plant or animal origin. However water and salt (both inorganic substances) are important parts of the human diet. Salt is often eaten as a flavoring or preservative.
Other foods not from animal or plant sources include various edible fungi, such as mushrooms. Fungi and ambient bacteria are used in the preparation of fermented and pickled foods such as leavened bread, alcoholic drinks, cheese, pickles, and yogurt. Many cultures eat seaweed, a protist, or blue-green algae (cyanobacteria) such as Spirulina. Additionally baking soda, another inorganic substance, is used in food preparation.
Plants
Many plants or plant parts are eaten as food. There are around 2,000 plant species which are cultivated for food, and many have several distinct cultivars.
Seeds of plants are a good source of food for animals, including humans because they contain nutrients necessary for the plant's initial growth. In fact, the majority of food consumed by human beings are seed-based foods. Edible seeds include cereals (such as maize, wheat, and rice), legumes (such as beans, peas, and lentils), and nuts. Oilseeds are often pressed to produce rich oils, such as sunflower, rapeseed (including canola oil), and sesame. One of the earliest food recipes made from ground chickpeas is called hummus, which can be traced back to Ancient Egypt times.
Fruits are the ripened ovaries of plants, including the seeds within. Many plants have evolved fruits that are attractive as a food source to animals, so that animals will eat the fruits and excrete the seeds some distance away. Fruits, therefore, make up a significant part of the diets of most cultures. Some botanical fruits, such as tomatoes, pumpkins and eggplants, are eaten as vegetables. (For more information, see list of fruits.)
Vegetables are a second type of plant matter that is commonly eaten as food. These include root vegetables (such as potatoes and carrots), leaf vegetables (such as spinach and lettuce), stem vegetables (such as bamboo shoots and asparagus), and inflorescence vegetables (such as globe artichokes and broccoli). Many herbs and spices are highly-flavorful vegetables.
Animals
Animals can be used as food either directly, or indirectly by the products they produce. Meat is an example of a direct product taken from an animal, which comes from either muscle systems or from organs. Food products produced by animals include milk produced by mammals, which in many cultures is drunk or processed into dairy products such as cheese or butter. In addition birds and other animals lay eggs, which are often eaten, and bees produce honey, a popular sweetener in many cultures. Some cultures consume blood, some in the form of blood sausage, as a thickener for sauces, a cured salted form for times of food scarcity, and others use blood in stews such as civet.
Production
Food is traditionally obtained through farming, ranching, and fishing, with hunting, foraging and other methods of subsistence locally important. More recently, there has been a growing trend towards more sustainable agricultural practices. This approach, which is partly fueled by consumer demand, encourages biodiversity, local self-reliance and organic farming methods. Major influences on food production are international organizations, (e.g. the World Trade Organization and Common Agricultural Policy), national government policy (or law), and war.
Preparation
While some food can be eaten raw, many foods undergo some form of preparation for reasons of safety, palatability, or flavor. At the simplest level this may involve washing, cutting, trimming or adding other foods or ingredients, such as spices. It may also involve mixing, heating or cooling, pressure cooking, fermentation, or combination with other food. In a home, most food preparation takes place in a kitchen. Some preparation is done to enhance the taste or aesthetic appeal; other preparation may help to preserve the food; and others may be involved in cultural identity. A meal is made up of food which is prepared to be eaten at a specific time and place.
Animal slaughter and butchering
The preparation of animal-based food will usually involve slaughter, evisceration, hanging, portioning and rendering. In developed countries, this is usually done outside the home in slaughterhouses which are used to process animals en mass for meat production. Many countries regulate their slaughterhouses by law. For example, the United States has established the Humane Slaughter Act of 1958, which requires that an animal be stunned before killing. This act, like those in many countries, exempts slaughter in accordance to religious law, such as kosher shechita and dhabiĥa halal. Strict interpretations of kashrut require the animal to be fully aware when its carotid artery is cut.
On the local level, a butcher may commonly break down larger animal meat into smaller manageable cuts and pre-wrapped for commercial sale or wrapped to order in butcher paper. In addition, fish and seafood may be fabricated into smaller cuts by a fish monger at the local level. However fish butchery may be done on board a fishing vessel and quick-frozen for preservation of quality.
Cooking
The term "cooking" encompasses a vast range of methods, tools and combinations of ingredients to improve the flavor or digestibility of food. Cooking technique, known as culinary art, generally requires the selection, measurement and combining of ingredients in an ordered procedure in an effort to achieve the desired result. Constraints on success include the variability of ingredients, ambient conditions, tools, and the skill of the individual cooking. The diversity of cooking worldwide is a reflection of the myriad nutritional, aesthetic, agricultural, economic, cultural and religious considerations that impact upon it.
Cooking requires applying heat to a food which usually, though not always, chemically transforms it, thus changing its flavor, texture, appearance, and nutritional properties. There is archaeological evidence of roasted foodstuffs at Homo erectus campsites dating from 420,000 years ago. Boiling as a means of cooking requires a container, and was practiced at least since the 10th millennium BC with the introduction of pottery.
Cooking equipment and methods
There are many types of cooking equipment used for cooking. Ovens are one type of cooking equipment which can be used for baking or roasting and offer a dry-heat cooking method. Different cuisines will use different types of ovens, for example Indian culture uses a Tandoor oven is a cylindrical clay oven which operates at a single high temperature, while western kitchens will use variable temperature convection ovens, conventional ovens, toaster ovens in addition to non-radiant heat ovens like the microwave oven. Ovens may be wood-fired, coal-fired, gas, electric, or oil-fired.
Various types of cook-tops are used as well. They carry the same variations of fuel types as the ovens mentioned above. cook-tops are used to heat vessels placed on top of the heat source, such as a sauté pan, sauce pot, frying pan, pressure cooker, etc. These pieces of equipment can use either a moist or dry cooking method and include methods such as steaming, simmering, boiling, and poaching for moist methods; while the dry methods include sautéing, pan frying, or deep-frying.
In addition, many cultures use grills for cooking. A grill operates with a radiant heat source from below, usually covered with a metal grid and sometimes a cover. An open bit barbecue in the American south is one example along with the American style outdoor grill fueled by wood, liquid propane or charcoal along with soaked wood chips for smoking. A Mexican style of barbecue is called barbacoa, which involves the cooking of meats and whole sheep over open fire. In Argentina, asado is prepared on a grill held over an open pit or fire made upon the ground, on which a whole animal is grilled or in other cases smaller cuts of the animal.
Raw food
Certain cultures highlight animal and vegetable foods in their raw state. Salads consisting of raw vegetables or fruits are common in many cuisines. Sashimi in Japanese cuisine consists of raw sliced fish or other meat, and sushi often incorporates raw fish or other seafood as well. Steak tartare and salmon tartare are dishes made from diced or ground raw beef or salmon respectively, mixed with various ingredients and served with baguette, brioche or frites. In Italy, carpaccio is a dish of very thin sliced raw beef, drizzled with a vinaigrette made with olive oil. A popular health food movement known as raw foodism promotes a mostly vegan diet of raw fruits, vegetables and grains prepared in various ways, including juicing, food dehydration, sprouting, and other methods of preparation that do not heat the food above 118 degrees Fahrenheit.
Restaurants
Many cultures produce food for sale in restaurants for paying customers. These restaurants often have trained chefs who prepare the food, while trained waitstaff serve the customers. The term restaurant is credited to the French from the 19th century, as it relates to the restorative nature of the bouillons that were once served in them. However, the concept pre-dates the naming of these establishments, as evidence suggests commercial food preparation may have existed during the age of the city of Pompeii, as well as an urban sales of prepared foods in China during the Song Dynasty. The coffee shops or cafes of 17th century Europe may also be considered an early version of the restaurant. In 2005 the United States spent $496 billion annually for out-of-home dining. Expenditures by type of out-of-home dining was as follows, 40% in full-service restaurants, 37.2% in limited service restaurants (fast food), 6.6% in schools or colleges, 5.4% in bars and vending machines, 4.7% in hotels and motels, 4.0% in recreational places, and 2.2% in other which includes military bases.
Food manufacture
Packaged foods are manufactured outside the home for purchase. This can be as simple as a butcher preparing meat, or as complex as a modern international food industry. Early food processing techniques were limited by available food preservation, packaging and transportation. This mainly involved salting, curing, curdling, drying, pickling, fermentation and smoking. Food manufacturing arose during the industrial revolution in the 19th century. This development took advantage of new mass markets and emerging new technology, such as milling, preservation, packaging and labeling and transportation. It brought the advantages of pre-prepared time saving food to the bulk of ordinary people who did not employ domestic servants.
At the start of the 21st century, a two-tier structure has arisen, with a few international food processing giants controlling a wide range of well-known food brands. There also exists a wide array of small local or national food processing companies. Advanced technologies have also come to change food manufacture. Computer-based control systems, sophisticated processing and packaging methods, and logistics and distribution advances, can enhance product quality, improve food safety, and reduce costs.
Commercial trade
International exports and imports
The World Bank reported that the European Union was the top food importer in 2005, followed at a distance by the USA and Japan. Food is now traded and marketed on a global basis. The variety and availability of food is no longer restricted by the diversity of locally grown food or the limitations of the local growing season.[31] Between 1961 and 1999, there has been a 400% increase in worldwide food exports.[32] Some countries are now economically dependent on food exports, which in some cases account for over 80% of all exports.
In 1994, over 100 countries became signatories to the Uruguay Round of the General Agreement on Tariffs and Trade in a dramatic increase in trade liberalization. This included an agreement to reduce subsidies paid to farmers, underpinned by the WTO enforcement of agricultural subsidy, tariffs, import quotas and settlement of trade disputes that cannot be bilaterally resolved. Where trade barriers are raised on the disputed grounds of public health and safety, the WTO refer the dispute to the Codex Alimentarius Commission, which was founded in 1962 by the United Nations Food and Agriculture Organization and the World Health Organization. Trade liberalization has greatly affected world food trade.
Marketing and retailing
Food marketing brings together the producer and the consumer. It is the chain of activities that brings food from "farm gate to plate." The marketing of even a single food product can be a complicated process involving many producers and companies. For example, fifty-six companies are involved in making one can of chicken noodle soup. These businesses include not only chicken and vegetable processors but also the companies that transport the ingredients and those who print labels and manufacture cans. The food marketing system is the largest direct and indirect non-government employer in the United States.
In the pre-modern era, the sale of surplus food took place once a week when farmers took their wares on market day, into the local village marketplace. Here food was sold to grocers for sale in their local shops for purchase by local consumers. With the onset of industrialization, and the development of the food processing industry, a wider range of food could be sold and distributed in distant locations. Typically early grocery shops would be counter-based shops, in which purchasers told the shop-keeper what they wanted, so that the shop-keeper could get it for them.
In the 20th century supermarkets were born. Supermarkets brought with them a self service approach to shopping using shopping carts, and were able to offer quality food at lower cost through economies of scale and reduced staffing costs. In the latter part of the 20th century, this has been further revolutionized by the development of vast warehouse-sized, out-of-town supermarkets, selling a wide range of food from around the world.
Unlike food processors, food retailing is a two-tier market in which a small number of very large companies control a large proportion of supermarkets. The supermarket giants wield great purchasing power over farmers and processors, and strong influence over consumers. Nevertheless, less than ten percent of consumer spending on food goes to farmers, with larger percentages going to advertising, transportation, and intermediate corporations.
Prices
Consumers worldwide faced rising food prices, it was reported on March 24, 2008. Reasons for this development are freak weather, dramatic changes in the global economy, including higher oil prices, lower food reserves and growing consumer demand in China and India. In the long term, prices are expected to stabilize. Farmers will grow more grain for both fuel and food and eventually bring prices down. Already this is happening with wheat, with more crops to be planted in the United States, Canada and Europe in 2009. However, the Food and Agriculture Organization projects that consumers still face at least until 2018 more expensive food. It is rare that the spikes are hitting all major foods in most countries at once. Food prices rose 4 percent in the United States 2007, the highest rise since 1990, and are expected to climb as much again 2008. As of December 2007, 37 countries faced food crises, and 20 had imposed some sort of food-price controls. In China, the price of pork has jumped 58 percent in 2007. In the 1990s and 1980s, farm subsidies and support programs allowed major grain exporting countries to hold large surpluses, which could be tapped during food shortages to keep prices down. But new trade policies have made agricultural production much more responsive to market demands—putting global food reserves at their lowest since 1983.
Food prices are rising, wealthier Asian consumers are westernizing their diets, and farmers and nations of the third world are struggling to keep up the pace. The past five years have seen rapid growth in the contribution of Asian nations to the Global Fluid and Powdered Milk Manufacturing industry, which in 2008 accounts for more than 30% of production, while China alone accounts for more than 10% of both production and consumption in the Global Fruit and Vegetable Processing and Preserving industry. The trend is similarly evident in industries such as Soft Drink and Bottled Water Manufacturing, as well as Global Cocoa, Chocolate and sugar Confectionery Manufacturing, forecast to grow by 5.7% and 10.0% respectively during 2008 in response to soaring demand in China and Southeast Asian markets.
Famine and hunger
Food deprivation leads to malnutrition and ultimately starvation. This is often connected with famine, which involves the absence of food in entire communities. This can have a devastating and widespread effect on human health and mortality. Rationing is sometimes used to distribute food in times of shortage, most notably during times of war.
Starvation is a significant international problem. Approximately 815 million people are undernourished, and over 16,000 children die per day from hunger-related causes.[43] Food deprivation is regarded as a deficit need in Maslow's hierarchy of needs and is measured using famine scales.
Food aid
Food aid can benefit people suffering from a shortage of food. It can be used to improve peoples' lives in the short term, so that a society can increase its standard of living to the point that food aid is no longer required. Conversely, badly managed food aid can create problems by disrupting local markets, depressing crop prices, and discouraging food production. Sometimes a cycle of food aid dependence can develop. Its provision, or threatened withdrawal, is sometimes used as a political tool to influence the policies of the destination country, a strategy known as food politics. Sometimes, food aid provisions will require certain types of food be purchased from certain sellers, and food aid can be misused to enhance the markets of donor countries. International efforts to distribute food to the neediest countries are often co-ordinated by the World Food Programme.
Safety
Foodborne illness, commonly called "food poisoning," is caused by bacteria, toxins, viruses, parasites, and prions. Roughly 7 million people die of food poisoning each year, with about 10 times as many suffering from a non-fatal version. The two most common factors leading to cases of bacterial foodborne illness are cross-contamination of ready-to-eat food from other uncooked foods and improper temperature control. Less commonly, acute adverse reactions can also occur if chemical contamination of food occurs, for example from improper storage, or use of non-food grade soaps and disinfectants. Food can also be adulterated by a very wide range of articles (known as 'foreign bodies') during farming, manufacture, cooking, packaging, distribution or sale. These foreign bodies can include pests or their droppings, hairs, cigarette butts, wood chips, and all manner of other contaminants. It is possible for certain types of food to become contaminated if stored or presented in an unsafe container, such as a ceramic pot with lead-based glaze.
Food poisoning has been recognized as a disease of man since as early as Hippocrates. The sale of rancid, contaminated or adulterated food was commonplace until introduction of hygiene, refrigeration, and vermin controls in the 19th century. Discovery of techniques for killing bacteria using heat and other microbiological studies by scientists such as Louis Pasteur contributed to the modern sanitation standards that are ubiquitous in developed nations today. This was further underpinned by the work of Justus von Liebig, which led to the development of modern food storage and food preservation methods. In more recent years, a greater understanding of the causes of food-borne illnesses has led to the development of more systematic approaches such as the Hazard Analysis and Critical Control Points (HACCP), which can identify and eliminate many risks.
Allergies
Some people have allergies or sensitivities to foods which are not problematic to most people. This occurs when a person's immune system mistakes a certain food protein for a harmful foreign agent and attacks it. About 2% of adults and 8% of children have a food allergy. The amount of the food substance required to provoke a reaction in a particularly susceptible individual can be quite small. In some instances, traces of food in the air, too minute to be perceived through smell, have been known to provoke lethal reactions in extremely sensitive individuals. Common food allergens are gluten, corn, shellfish (mollusks), peanuts, and soy. Allergens frequently produce symptoms such as diarrhea, rashes, bloating, vomiting, and regurgitation. The digestive complaints usually develop within half an hour of ingesting the allergen.
Rarely, food allergies can lead to a medical emergency, such as anaphylactic shock, hypotension (low blood pressure), and loss of consciousness. An allergen associated with this type of reaction is peanut, although latex products can induce similar reactions. Initial treatment is with epinephrine (adrenaline), often carried by known patients in the form of an Epi-pen or Twinject.
Diet
Cultural and religious diets
Dietary habits are the habitual decisions a person or culture makes when choosing what foods to eat. Although humans are omnivores, many cultures hold some food preferences and some food taboos. Dietary choices can also define cultures and play a role in religion. For example, only kosher foods are permitted by Judaism, and halal foods by Islam, in the diet of believers. In addition, the dietary choices of different countries or regions have different characteristics. This is highly related to a culture's cuisine.
Diet deficiencies
Dietary habits play a significant role in the health and mortality of all humans. Imbalances between the consumed fuels and expended energy results in either starvation or excessive reserves of adipose tissue, known as body fat. Poor intake of various vitamins and minerals can lead to diseases which can have far-reaching effects on health. For instance, 30% of the world's population either has, or is at risk for developing, Iodine deficiency. It is estimated that at least 3 million children are blind due to vitamin A deficiency. Vitamin C deficiency results in scurvy. Calcium, Vitamin D and phosphorus are inter-related; the consumption of each may affect the absorption of the others. Kwashiorkor and marasmus are childhood disorders caused by lack of dietary protein.
Moral, ethical, and health conscious diet
Many individuals limit what foods they eat for reasons of morality, or other habit. For instance vegetarians choose to forgo food from animal sources to varying degrees. Others choose a healthier diet, avoiding sugars or animal fats and increasing consumption of dietary fiber and antioxidants. Obesity, a serious problem in the western world, leads to higher chances of developing heart disease, diabetes, and many other diseases. More recently, dietary habits have been influenced by the concerns that some people have about possible impacts on health or the environment from genetically modified food. Further concerns about the impact of industrial farming (grains) on animal welfare, human health and the environment are also having an effect on contemporary human dietary habits. This has led to the emergence of a counterculture with a preference for organic and local food.
Nutrition
Between the extremes of optimal health and death from starvation or malnutrition, there is an array of disease states that can be caused or alleviated by changes in diet. Deficiencies, excesses and imbalances in diet can produce negative impacts on health, which may lead to diseases such as scurvy, obesity or osteoporosis, as well as psychological and behavioral problems. The science of nutrition attempts to understand how and why specific dietary aspects influence health.
Nutrients in food are grouped into several categories. Macronutrients means fat, protein, and carbohydrates. Micronutrients are the minerals and vitamins. Additionally food contains water and dietary fiber.
Legal definition
Some countries list a legal definition of food. These countries list food as any item that is to be processed, partially processed or unprocessed for consumption. The listing of items included as foodstuffs include any substance, intended to be, or reasonably expected to be, ingested by humans. In addition to these foodstuffs, drink, chewing gum, water or other items processed into said food items are part of the legal definition of food. Items not included in the legal definition of food include animal feed, live animals unless being prepared for sale in a market, plants prior to harvesting, medicinal products, cosmetics, tobacco and tobacco products, narcotic or psychotropic substances, and residues and contaminants.
Thursday, September 17, 2009
Drink
A drink, or beverage, is a liquid which is specifically prepared for human consumption. In addition to filling a basic human need, beverages form part of the culture of human society.
Water
Despite the fact that all beverages contain water, water itself is not a beverage. The word beverage has traditionally been defined as not referring to water.
Alcoholic beverages
An alcoholic beverage is a drink that contains ethanol, commonly known as alcohol (although in chemistry the definition of “alcohol” includes many other compounds).
Beer has been a part of human culture for 8000 years.
Non-alcoholic beverages
Orange juice is usually served cold.Main article: Non-alcoholic beverage
Non-alcoholic beverages are drinks that usually contain alcohol, such as beer and wine, but contain less than .5% alcohol by volume. This category includes low-alcohol beer, non-alcoholic wine, and apple cider.
Soft drinks
The name "soft drink" specifies a lack of alcohol by way of contrast to the term "hard drink" and the term "drink", the latter of which is nominally neutral but often carries connotations of alcoholic content. Beverages like colas, sparkling water, iced tea, lemonade, squash, and fruit punch are among the most common types of soft drinks, while hot chocolate, hot tea, coffee, milk, tap water, alcohol, and milkshakes do not fall into this classification. Many carbonated soft drinks are optionally available in versions sweetened with sugars or with non-caloric sweeteners.
Hot beverages
A cup of coffee.Hot beverages
Coffee-based beverages
Cappuccino
Coffee
Espresso
Café au lait
Frappé
Flavored coffees (mocha etc.)
Latte
Hot chocolate
Hot cider
Mulled cider
Glühwein
Tea-based beverages
Flavored teas (chai etc.)
Green tea
Pearl milk tea
Tea
Herbal teas
Yerba Mate
Roasted grain beverages
Sanka
Others
Masala buttermilk.Some substances may be called either food or drink, and accordingly may be eaten with a spoon or drunk, depending upon their thickness and solid ingredients.
Buttermilk
Soup
Yogurt
Water
Despite the fact that all beverages contain water, water itself is not a beverage. The word beverage has traditionally been defined as not referring to water.
Alcoholic beverages
An alcoholic beverage is a drink that contains ethanol, commonly known as alcohol (although in chemistry the definition of “alcohol” includes many other compounds).
Beer has been a part of human culture for 8000 years.
Non-alcoholic beverages
Orange juice is usually served cold.Main article: Non-alcoholic beverage
Non-alcoholic beverages are drinks that usually contain alcohol, such as beer and wine, but contain less than .5% alcohol by volume. This category includes low-alcohol beer, non-alcoholic wine, and apple cider.
Soft drinks
The name "soft drink" specifies a lack of alcohol by way of contrast to the term "hard drink" and the term "drink", the latter of which is nominally neutral but often carries connotations of alcoholic content. Beverages like colas, sparkling water, iced tea, lemonade, squash, and fruit punch are among the most common types of soft drinks, while hot chocolate, hot tea, coffee, milk, tap water, alcohol, and milkshakes do not fall into this classification. Many carbonated soft drinks are optionally available in versions sweetened with sugars or with non-caloric sweeteners.
Hot beverages
A cup of coffee.Hot beverages
Coffee-based beverages
Cappuccino
Coffee
Espresso
Café au lait
Frappé
Flavored coffees (mocha etc.)
Latte
Hot chocolate
Hot cider
Mulled cider
Glühwein
Tea-based beverages
Flavored teas (chai etc.)
Green tea
Pearl milk tea
Tea
Herbal teas
Yerba Mate
Roasted grain beverages
Sanka
Others
Masala buttermilk.Some substances may be called either food or drink, and accordingly may be eaten with a spoon or drunk, depending upon their thickness and solid ingredients.
Buttermilk
Soup
Yogurt
Sex
Sexual intercourse or sex, also known as copulation or coitus, commonly refers to the act in which the male reproductive organ enters the female reproductive tract. The two entities may be of opposite sexes or not, or they may be hermaphroditic, as is the case with snails. In recent years, penetration of non-sexual organs (oral intercourse, anal intercourse) or by non-sexual organs (fingering, fisting) are also sometimes included in this definition. Traditionally, intercourse has been viewed as the natural endpoint of all sexual contact between a man and a woman.
Non-penetrative sexual contacts (oral sex may or may not be penetrative) and mutual masturbation have been referred to as "outercourse". "Outercourse" is something of a misnomer, as it contrasts "outer" with "inter" but the "inter" in "intercourse" means "between two people" or beings. It does not describe being inside or outside of the body. The word sex, in the context of sexual intimacy, is often, if not universally, understood to include any mutual genital stimulation, i.e. both intercourse and outercourse.
Mating is the term most often used to refer to sexual intercourse between animals other than humans; for most, mating occurs at the point of estrus (the most fertile period of time in the female's reproductive cycle), which increases the chances of successful impregnation. However, bonobos, dolphins, and chimpanzees are known to engage in sexual intercourse even when the female is not in estrus, and to engage in sex acts with same-sex partners. In most instances, humans have sex primarily for pleasure. This behavior in the above mentioned animals is also presumed to be for pleasure, which in turn strengthens social bonds.
In humans
Vaginal sexual intercourse, also called coitus, is the human form of copulation. While a purpose and effect is reproduction, it is often performed exclusively for pleasure and/or as an expression of love and emotional intimacy. Sexual intercourse typically plays a powerful bonding role; in many societies it is normal for couples to have frequent intercourse while using birth control, sharing pleasure and strengthening their emotional bond through sex even though they are deliberately avoiding pregnancy.
Sexual intercourse may also be defined as referring to other forms of insertive sexual behavior, such as oral sex and anal intercourse. The phrase to have sex can mean any or all of these behaviors, as well as other non-penetrative sex acts not considered here.
Coitus may be preceded by foreplay, which leads to sexual arousal of the partners, resulting in the erection of the penis and natural lubrication of the vagina. To engage in coitus, the erect penis is inserted into the vagina and one or both of the partners move their hips to move the penis backward and forward inside the vagina to cause friction, typically without fully removing the penis. In this way, they stimulate themselves and each other, often continuing until orgasm in either or both partners is achieved. Penetration by the hardened erect penis is also known as intromission, or by the Latin name immissio penis (Latin for "insertion of the penis").
Coitus is the basic reproductive method of humans. During ejaculation, which usually accompanies male orgasm, a series of muscular contractions delivers semen containing male gametes known as sperm cells or spermatozoa from the penis into the vagina.
The subsequent route of the sperm from the vault of the vagina is through the cervix and into the uterus, and then into the fallopian tubes. Millions of sperm are present in each ejaculation, to increase the chances of one fertilizing an egg or ovum. When a fertile ovum from the female is present in the fallopian tubes, the male gamete joins with the ovum, resulting in fertilization and the formation of a new embryo. When a fertilized ovum reaches the uterus, it becomes implanted in the lining of the uterus, known as endometrium, and a pregnancy begins.
Unlike most species, human sexual activity is not linked to periods of estrus and can take place at any time during the reproductive cycle, even during pregnancy.
Sex Health benefits
Sex has been claimed to produce health benefits as varied as improved sense of smell, weight loss, stress reduction, increased immunity, and decreased risk of prostate cancer.
Sex between cohabiting partners lowers blood pressure and reduces stress, according to Stuart Brody, professor of psychology at the University of the West of Scotland. Brody's team monitored 24 women and 22 men who were exposed to stressful situations, such as speaking in public and doing verbal arithmetic, and kept records of their sexual activity. The men and women who had penile-vaginal intercourse responded more positively to stress "than those who engaged in other sexual behaviors or abstained". A study by Keith Light of the University of North Carolina went as far as to find a link between "partner hug" and lower blood pressure in women.
Frequent sexual intercourse was held to reduce the risk of the common cold by Carl Charnetski and Francis X. Brennan of Wilkes University in Wilkes-Barre, Pa. These scientists linked frequent sexual intercourse (once or twice a week) to increased production of the antibody called Immunoglobulin A or IgA, which can protect the body from getting colds and other infections. They took samples of saliva, which contain IgA, from 112 college students who reported the frequency of sex they had. The students in the "frequent" group had higher levels of IgA than those in the other three groups, consisting of people who were celibate, had sex less than once a week, or had it "very often" (three or more times weekly). The other three groups had comparable IgA levels. Charnetski and Brennan had previously shown that exposure to elevator music has a similar effect on IgA levels.
"Sex is a great mode of exercise," according to Patti Britton, PhD, past president of the American Association of Sexuality Educators, Counselors and Therapists (AASECT) and currently host of the website "Your Sex Coach". She notes that thirty minutes of sex burns 85 calories or more. She concludes that 42 half-hour sessions, or 21 hour-long sessions, will burn 3,570 calories - sufficient to lose one pound.
"Boosting self-esteem" was one of 237 reasons people have sex, collected by University of Texas researchers and published in the journal Archives of Sexual Behavior. Some subjects who already had high self-esteem said they sometimes have sex to "feel even better".
Sexual intimacy, as well as orgasms, increases levels of the hormone oxytocin, also known as "the love hormone" which helps people bond and build trust. Researchers from the University of Pittsburgh and the University of North Carolina at Chapel Hill evaluated 59 premenopausal women before and after warm contact with their husbands and partners ending with hugs. They found that the more contact, the higher the oxytocin levels. Oxytocin allows people to feel the urge to nurture and to bond. Generosity has also been credited and linked to a higher level of oxytocin. In addition, as the hormone oxytocin surges, endorphins increase, and pain declines. In a study published in the Bulletin of Experimental Biology and Medicine, 48 volunteers who inhaled oxytocin vapor and then had their fingers pricked lowered their pain threshold by more than half. The oxytocin released during orgasm also promotes sleep.
Men who have frequent ejaculations, especially men in their 20s, may reduce their risks of prostate cancer later in life. Australian researchers reported in the British Journal of Urology International that they followed men diagnosed with prostate cancer and those without. They found no association of prostate cancer with the number of sexual partners as the men reached their 30s, 40s, and 50s, but men who had five or more ejaculations weekly while in their 20s reduced their risk of getting prostate cancer later by a third. Another study, reported in the Journal of the American Medical Association, "found that frequent ejaculations, 21 or more a month, were linked to lower prostate cancer risk in older men, as well, compared with less frequent ejaculations of four to seven monthly".
During sex, pelvic floor muscle exercises known as Kegels offer benefits for women. More sexual pleasure is expected to result, strengthening of the area, and help to minimize the risk of incontinence later in life.
Non-penetrative sexual contacts (oral sex may or may not be penetrative) and mutual masturbation have been referred to as "outercourse". "Outercourse" is something of a misnomer, as it contrasts "outer" with "inter" but the "inter" in "intercourse" means "between two people" or beings. It does not describe being inside or outside of the body. The word sex, in the context of sexual intimacy, is often, if not universally, understood to include any mutual genital stimulation, i.e. both intercourse and outercourse.
Mating is the term most often used to refer to sexual intercourse between animals other than humans; for most, mating occurs at the point of estrus (the most fertile period of time in the female's reproductive cycle), which increases the chances of successful impregnation. However, bonobos, dolphins, and chimpanzees are known to engage in sexual intercourse even when the female is not in estrus, and to engage in sex acts with same-sex partners. In most instances, humans have sex primarily for pleasure. This behavior in the above mentioned animals is also presumed to be for pleasure, which in turn strengthens social bonds.
In humans
Vaginal sexual intercourse, also called coitus, is the human form of copulation. While a purpose and effect is reproduction, it is often performed exclusively for pleasure and/or as an expression of love and emotional intimacy. Sexual intercourse typically plays a powerful bonding role; in many societies it is normal for couples to have frequent intercourse while using birth control, sharing pleasure and strengthening their emotional bond through sex even though they are deliberately avoiding pregnancy.
Sexual intercourse may also be defined as referring to other forms of insertive sexual behavior, such as oral sex and anal intercourse. The phrase to have sex can mean any or all of these behaviors, as well as other non-penetrative sex acts not considered here.
Coitus may be preceded by foreplay, which leads to sexual arousal of the partners, resulting in the erection of the penis and natural lubrication of the vagina. To engage in coitus, the erect penis is inserted into the vagina and one or both of the partners move their hips to move the penis backward and forward inside the vagina to cause friction, typically without fully removing the penis. In this way, they stimulate themselves and each other, often continuing until orgasm in either or both partners is achieved. Penetration by the hardened erect penis is also known as intromission, or by the Latin name immissio penis (Latin for "insertion of the penis").
Coitus is the basic reproductive method of humans. During ejaculation, which usually accompanies male orgasm, a series of muscular contractions delivers semen containing male gametes known as sperm cells or spermatozoa from the penis into the vagina.
The subsequent route of the sperm from the vault of the vagina is through the cervix and into the uterus, and then into the fallopian tubes. Millions of sperm are present in each ejaculation, to increase the chances of one fertilizing an egg or ovum. When a fertile ovum from the female is present in the fallopian tubes, the male gamete joins with the ovum, resulting in fertilization and the formation of a new embryo. When a fertilized ovum reaches the uterus, it becomes implanted in the lining of the uterus, known as endometrium, and a pregnancy begins.
Unlike most species, human sexual activity is not linked to periods of estrus and can take place at any time during the reproductive cycle, even during pregnancy.
Sex Health benefits
Sex has been claimed to produce health benefits as varied as improved sense of smell, weight loss, stress reduction, increased immunity, and decreased risk of prostate cancer.
Sex between cohabiting partners lowers blood pressure and reduces stress, according to Stuart Brody, professor of psychology at the University of the West of Scotland. Brody's team monitored 24 women and 22 men who were exposed to stressful situations, such as speaking in public and doing verbal arithmetic, and kept records of their sexual activity. The men and women who had penile-vaginal intercourse responded more positively to stress "than those who engaged in other sexual behaviors or abstained". A study by Keith Light of the University of North Carolina went as far as to find a link between "partner hug" and lower blood pressure in women.
Frequent sexual intercourse was held to reduce the risk of the common cold by Carl Charnetski and Francis X. Brennan of Wilkes University in Wilkes-Barre, Pa. These scientists linked frequent sexual intercourse (once or twice a week) to increased production of the antibody called Immunoglobulin A or IgA, which can protect the body from getting colds and other infections. They took samples of saliva, which contain IgA, from 112 college students who reported the frequency of sex they had. The students in the "frequent" group had higher levels of IgA than those in the other three groups, consisting of people who were celibate, had sex less than once a week, or had it "very often" (three or more times weekly). The other three groups had comparable IgA levels. Charnetski and Brennan had previously shown that exposure to elevator music has a similar effect on IgA levels.
"Sex is a great mode of exercise," according to Patti Britton, PhD, past president of the American Association of Sexuality Educators, Counselors and Therapists (AASECT) and currently host of the website "Your Sex Coach". She notes that thirty minutes of sex burns 85 calories or more. She concludes that 42 half-hour sessions, or 21 hour-long sessions, will burn 3,570 calories - sufficient to lose one pound.
"Boosting self-esteem" was one of 237 reasons people have sex, collected by University of Texas researchers and published in the journal Archives of Sexual Behavior. Some subjects who already had high self-esteem said they sometimes have sex to "feel even better".
Sexual intimacy, as well as orgasms, increases levels of the hormone oxytocin, also known as "the love hormone" which helps people bond and build trust. Researchers from the University of Pittsburgh and the University of North Carolina at Chapel Hill evaluated 59 premenopausal women before and after warm contact with their husbands and partners ending with hugs. They found that the more contact, the higher the oxytocin levels. Oxytocin allows people to feel the urge to nurture and to bond. Generosity has also been credited and linked to a higher level of oxytocin. In addition, as the hormone oxytocin surges, endorphins increase, and pain declines. In a study published in the Bulletin of Experimental Biology and Medicine, 48 volunteers who inhaled oxytocin vapor and then had their fingers pricked lowered their pain threshold by more than half. The oxytocin released during orgasm also promotes sleep.
Men who have frequent ejaculations, especially men in their 20s, may reduce their risks of prostate cancer later in life. Australian researchers reported in the British Journal of Urology International that they followed men diagnosed with prostate cancer and those without. They found no association of prostate cancer with the number of sexual partners as the men reached their 30s, 40s, and 50s, but men who had five or more ejaculations weekly while in their 20s reduced their risk of getting prostate cancer later by a third. Another study, reported in the Journal of the American Medical Association, "found that frequent ejaculations, 21 or more a month, were linked to lower prostate cancer risk in older men, as well, compared with less frequent ejaculations of four to seven monthly".
During sex, pelvic floor muscle exercises known as Kegels offer benefits for women. More sexual pleasure is expected to result, strengthening of the area, and help to minimize the risk of incontinence later in life.
Money
Money is anything that is generally accepted as payment for goods and services and repayment of debts. The main functions of money are distinguished as: a medium of exchange, a unit of account, a store of value, and occasionally, a standard of deferred payment.
Money originated as commodity money, but nearly all contemporary money systems at the national level are fiat money systems. Fiat money is without value as a physical commodity, and derives its value by being declared by a government to be legal tender; that is, it must be accepted as a form of payment within the national boundaries of the country, for "all debts, public and private". By law, the refusal of a legal tender (offering) extinguishes the debt in the same way acceptance does. Some bullion coins such as the Australian Gold Nugget and American Eagle are legal tender, however, they trade based on the market price of the metal content as a commodity, rather than their legal tender face value (which is usually only a small fraction of their bullion value).
The money supply of a country is usually held to consist of currency (banknotes and coins) and demand deposits or 'bank money' (the balance held in checking accounts and savings accounts). These demand deposits usually account for a much larger part of the money supply than currency. Bank money is intangible and exists only in the form of various bank records. Despite being intangible, bank money still performs the basic functions of money, as checks are generally accepted as a form of payment and as a means of transferring ownership of deposit money.
More generally, the term "price system" is sometimes used to refer to methods using commodity valuation or money accounting systems.
History of money
The use of barter-like methods may date back to at least 100,000 years ago, though there is no evidence of a society or economy that relied primarily on barter. Instead, non-monetary societies operated largely along the principles of gift economics. When barter did occur, it was usually between either complete strangers or potential enemies.
Many cultures around the world eventually developed the use of commodity money. The shekel was an ancient unit of weight and currency. The first usage of the term came from Mesopotamia circa 3000 BC. and referred to a specific mass of barley which related other values in a metric such as silver, bronze, copper etc. A barley/shekel was originally both a unit of currency and a unit of weight. Societies in the Americas, Asia, Africa and Australia used shell money – usually, the shell of the money cowry (Cypraea moneta) were used. According to Herodotus, and most modern scholars, the Lydians were the first people to introduce the use of gold and silver coin. It is thought that these first stamped coins were minted around 650–600 BC.
The system of commodity money eventually evolved into a system of representative money. This occurred because gold and silver merchants or banks would issue receipts to their depositors – redeemable for the commodity money deposited. Eventually, these receipts became generally accepted as a means of payment and were used as money. Paper money or banknotes were first used in China during the Song Dynasty. These banknotes, known as "jiaozi" evolved from promissory notes that had been used since the 7th century. However, they did not displace commodity money, and were used alongside coins. Banknotes were first issued in Europe by Stockholms Banco in 1661, and were again also used alongside coins. The gold standard, a monetary system where the medium of exchange are paper notes that are convertible into pre-set, fixed quantities of gold, replaced the use of gold coins as currency in the 17th-19th centuries in Europe. These gold standard notes were made legal tender, and redemption into gold coins was discouraged. By the beginning of the 20th century almost all countries had adopted the gold standard, backing their legal tender notes with fixed amounts of gold.
After World War II, at the Bretton Woods Conference, most countries adopted fiat currencies that were fixed to the US dollar. The US dollar was in turn fixed to gold. In 1971 the US government suspended the covertability of the US dollar to gold. After this many countries de-pegged their currencies from the US dollar, and most of the world's currencies became unbacked by anything except the governments' fiat of legal tender.
Etymology
The word "money" is believed to originate from a temple of Hera, located on Capitoline, one of Rome's seven hills. In the ancient world Hera was often associated with money. The temple of Juno Moneta at Rome was the place where the mint of Ancient Rome was located. The name "Juno" may derive from the Etruscan goddess Uni (which means "the one", "unique", "unit", "union", "united") and "Moneta" either from the Latin word "monere" (remind, warn, or instruct) or the Greek word "moneres" (alone, unique).
In the Western world, a prevalent term for coin-money has been specie, stemming from Latin in specie, meaning 'in kind'.
Functions
In the past, money was generally considered to have the following four main functions, which are summed up in a rhyme found in older economics textbooks: "Money is a matter of functions four, a medium, a measure, a standard, a store." That is, money functions as a medium of exchange, a unit of account, a standard of deferred payment, and a store of value. However, most modern textbooks now list only three functions, that of medium of exchange, unit of account, and store of value, not considering a standard of deferred payment as a distinguished function, but rather subsuming it in the others.
There have been many historical disputes regarding the combination of money's functions, some arguing that they need more separation and that a single unit is insufficient to deal with them all. One of these arguments is that the role of money as a medium of exchange is in conflict with its role as a store of value: its role as a store of value requires holding it without spending, whereas its role as a medium of exchange requires it to circulate. Others argue that storing of value is just deferral of the exchange, but does not diminish the fact that money is a medium of exchange that can be transported both across space and time. The term 'financial capital' is a more general and inclusive term for all liquid instruments, whether or not they are a uniformly recognized tender.
Medium of exchange
When money is used to intermediate the exchange of goods and services, it is performing a function as a medium of exchange. It thereby avoids the inefficiencies of a barter system, such as the 'double coincidence of wants' problem.
Unit of account
A unit of account is a standard numerical unit of measurement of the market value of goods, services, and other transactions. Also known as a "measure" or "standard" of relative worth and deferred payment, a unit of account is a necessary prerequisite for the formulation of commercial agreements that involve debt. To function as a 'unit of account', whatever is being used as money must be:
. Divisible into smaller units without loss of value; precious metals can be coined
from bars, or melted down into bars again.
. Fungible: that is, one unit or piece must be perceived as equivalent to any other, which is why diamonds, works of art or real estate are not suitable as money
. A specific weight, or measure, or size to be verifiably countable. For instance, coins are often made with ridges around the edges, so that any removal of material from the coin (lowering its commodity value) will be easy to detect.
Store of value
To act as a store of value, a commodity, a form of money, or financial capital must be able to be reliably saved, stored, and retrieved — and be predictably useful when it is so retrieved. Fiat currency like paper or electronic money no longer backed by gold in most countries is not considered by some economists to be a store of value.
Standard of deferred payment
While standard of deferred payment is distinguished by some texts, particularly older ones, other texts subsume this under other functions. A "standard of deferred payment" is an accepted way to settle a debt – a unit in which debts are denominated, and the status of money as legal tender, in those jurisdictions which have this concept, states that it may function for the discharge of debts. When debts are denominated in money, the real value of debts may change due to inflation and deflation, and for sovereign and international debts via debasement and devaluation.
Money supply
In economics, money is a broad term that refers to any financial instrument that can fulfill the functions of money (detailed above). These financial instruments together are collectively referred to as the money supply of an economy. Since the money supply consists of various financial instruments (usually currency, demand deposits and various other types of deposits), the amount of money in an economy is measured by adding together these financial instruments creating a monetary aggregate. Modern monetary theory distinguishes among different types of monetary aggregates, using a categorization system that focuses on the liquidity of the financial instrument used as money.
Market liquidity
Market liquidity describes how easily an item can be traded for another item, or into the common currency within an economy. Money is the most liquid asset because it is universally recognised and accepted as the common currency. In this way, money gives consumers the freedom to trade goods and services easily without having to barter.
Liquid financial instruments are easily tradable and have low transaction costs. There should be no (or minimal) spread between the prices to buy and sell the instrument being used as money.
Measures of money
The money supply is the amount of financial instruments within a specific economy available for purchasing goods or services. The money supply is usually measured as three escalating categories M1, M2 and M3. The categories grow in size with M1 being currency (coins and bills) and checking account deposits. M2 is currency, checking account deposits and savings account deposits, and M3 is M2 plus time deposits. M1 includes only the most liquid financial instruments, and M3 relatively illiquid instruments.
Another measure of money, M0, is also used, although unlike the other measures, it does not represent actual purchasing power by firms and households in the economy. M0 is base money, or the amount of money actually issued by the central bank of a country. It is measured as currency plus deposits of banks and other institutions at the central bank. M0 is also the only money that can satisfy the reserve requirements of commercial banks.
Types of money
Currently, most modern monetary systems are based on fiat money. However, for most of history, almost all money was commodity money, such as gold and silver coins. As economies developed, commodity money was eventually replaced by representative money, such as the gold standard, as traders found the physical transportation of gold and silver burdensome. Fiat currencies gradually took over in the last hundred years, especially since the breakup of the Bretton Woods system in the early 1970s.
Commodity money
Many items have been used as commodity money such as naturally scarce precious metals, conch shells, barley, beads etc., as well as many other things that are thought of as having value. Commodity money value comes from the commodity out of which it is made. The commodity itself constitutes the money, and the money is the commodity. Examples of commodities that have been used as mediums of exchange include gold, silver, copper, rice, salt, peppercorns, large stones, decorated belts, shells, alcohol, cigarettes, cannabis, candy, etc. These items were sometimes used in a metric of perceived value in conjunction to one another, in various commodity valuation or Price System economies. Use of commodity money is similar to barter, but a commodity money provides a simple and automatic unit of account for the commodity which is being used as money. Although some gold coins such as the Krugerrand are considered legal tender, there is no record of their face value on either side of the coin. The rationale for this is that emphasis is laid on their direct link to the prevailing value of their fine gold content. American Eagles are imprinted with their gold content and legal tender face value. South Africa ranks among the very few countries where gold coins have been minted as negotiable currency and still remain available for general purchase The ISO currency code of gold bullion is XAU. ISO 4217 includes codes not only for currencies, but also for precious metals (gold, silver, palladium and platinum; by definition expressed per one troy ounce, as compared to "1 USD") and certain other entities used in international finance, e.g. Special Drawing Rights.
Fiat money
Fiat money or fiat currency is money whose value is not derived from any intrinsic value or guarantee that it can be converted into a valuable commodity (such as gold). Instead, it has value only by government order (fiat). Usually, the government declares the fiat currency (typically notes and coins from a central bank, such as the Federal Reserve System in the U.S.) to be legal tender, making it unlawful to not accept the fiat currency as a means of repayment for all debts, public and private.
Fiat money, if physically represented in the form of currency (paper or coins) can be accidentally damaged or destroyed. However, fiat money has an advantage over representative or commodity money, in that the same laws that created the money can also define rules for its replacement in case of damage or destruction. For example, the U.S. government will replace mutilated Federal Reserve notes (U.S. fiat money) if at least half of the physical note can be reconstructed, or if it can be otherwise proven to have been destroyed. By contrast, commodity money which has been lost or destroyed cannot be recovered.
Credit money
Credit money is any claim against a physical or legal person that can be used for the purchase of goods and services. Credit money differs from commodity and fiat money in two ways: It is not payable on demand (although in the case of fiat money, "demand payment" is a purely symbolic act since all that can be demanded is other types of fiat currency) and there is some element of risk that the real value upon fulfillment of the claim will not be equal to real value expected at the time of purchase.
This risk comes about in two ways and affects both buyer and seller. First it is a claim and the claimant may default (not pay). High levels of default have destructive supply side effects. If manufacturers and service providers do not receive payment for the goods they produce, they will not have the resources to buy the labor and materials needed to produce new goods and services. This reduces supply, increases prices and raises unemployment, possibly triggering a period of stagflation. In extreme cases, widespread defaults can cause a lack of confidence in lending institutions and lead to economic depression. For example, abuse of credit arrangements is considered one of the significant causes of the Great Depression of the 1930s.
The second source of risk is time. Credit money is a promise of future payment. If the interest rate on the claim fails to compensate for the combined impact of the inflation (or deflation) rate and the time value of money, the seller will receive less real value than anticipated. If the interest rate on the claim overcompensates, the buyer will pay more than expected. The process of fractional-reserve banking has a cumulative effect of money creation by banks.
Representative money
In 1875 economist William Stanley Jevons described what he called "representative money," i.e., money that consists of token coins, or other physical tokens such as certificates, that can be reliably exchanged for a fixed quantity of a commodity such as gold or silver. The value of representative money stands in direct and fixed relation to the commodity that backs it, while not itself being composed of that commodity.
Monetary policy
When gold and silver are used as money, the money supply can grow only if the supply of these metals is increased by mining. This rate of increase will accelerate during periods of gold rushes and discoveries, such as when Columbus discovered the new world and brought back gold and silver to Spain, or when gold was discovered in California in 1848. This causes inflation, as the value of gold goes down. However, if the rate of gold mining cannot keep up with the growth of the economy, gold becomes relatively more valuable, and prices (denominated in gold) will drop, causing deflation. Deflation was the more typical situation for over a century when gold and paper money backed by gold were used as money in the 18th and 19th centuries.
Modern day monetary systems are based on fiat money and are no longer tied to the value of gold. The control of the amount of money in the economy is known as monetary policy. Monetary policy is the process by which a government, central bank, or monetary authority manages the money supply to achieve specific goals. Usually the goal of monetary policy is to accommodate economic growth in an environment of stable prices. For example, it is clearly stated in the Federal Reserve Act that the Board of Governors and the Federal Open Market Committee should seek “to promote effectively the goals of maximum employment, stable prices, and moderate long-term interest rates.”
A failed monetary policy can have significant detrimental effects on an economy and the society that depends on it. These include hyperinflation, stagflation, recession, high unemployment, shortages of imported goods, inability to export goods, and even total monetary collapse and the adoption of a much less efficient barter economy. This happened in Russia, for instance, after the fall of the Soviet Union.
Governments and central banks have taken both regulatory and free market approaches to monetary policy. Some of the tools used to control the money supply include:
. changing the interest rate at which the government loans or borrows money
. currency purchases or sales
. increasing or lowering government borrowing
. increasing or lowering government spending
. manipulation of exchange rates
. raising or lowering bank reserve requirements
. regulation or prohibition of private currencies
. taxation or tax breaks on imports or exports of capital into a country
In the US, the Federal Reserve is responsible for controlling the money supply, while in the Euro area the respective institution is the European Central Bank. Other central banks with significant impact on global finances are the Bank of Japan, People's Bank of China and the Bank of England.
For many years much of monetary policy was influenced by an economic theory known as monetarism. Monetarism is an economic theory which argues that management of the money supply should be the primary means of regulating economic activity. The stability of the demand for money prior to the 1980s was a key finding of Milton Friedman and Anna Schwartz supported by the work of David Laidler, and many others. The nature of the demand for money changed during the 1980s owing to technical, institutional, and legal factors and the influence of monetarism has since decreased.
Money originated as commodity money, but nearly all contemporary money systems at the national level are fiat money systems. Fiat money is without value as a physical commodity, and derives its value by being declared by a government to be legal tender; that is, it must be accepted as a form of payment within the national boundaries of the country, for "all debts, public and private". By law, the refusal of a legal tender (offering) extinguishes the debt in the same way acceptance does. Some bullion coins such as the Australian Gold Nugget and American Eagle are legal tender, however, they trade based on the market price of the metal content as a commodity, rather than their legal tender face value (which is usually only a small fraction of their bullion value).
The money supply of a country is usually held to consist of currency (banknotes and coins) and demand deposits or 'bank money' (the balance held in checking accounts and savings accounts). These demand deposits usually account for a much larger part of the money supply than currency. Bank money is intangible and exists only in the form of various bank records. Despite being intangible, bank money still performs the basic functions of money, as checks are generally accepted as a form of payment and as a means of transferring ownership of deposit money.
More generally, the term "price system" is sometimes used to refer to methods using commodity valuation or money accounting systems.
History of money
The use of barter-like methods may date back to at least 100,000 years ago, though there is no evidence of a society or economy that relied primarily on barter. Instead, non-monetary societies operated largely along the principles of gift economics. When barter did occur, it was usually between either complete strangers or potential enemies.
Many cultures around the world eventually developed the use of commodity money. The shekel was an ancient unit of weight and currency. The first usage of the term came from Mesopotamia circa 3000 BC. and referred to a specific mass of barley which related other values in a metric such as silver, bronze, copper etc. A barley/shekel was originally both a unit of currency and a unit of weight. Societies in the Americas, Asia, Africa and Australia used shell money – usually, the shell of the money cowry (Cypraea moneta) were used. According to Herodotus, and most modern scholars, the Lydians were the first people to introduce the use of gold and silver coin. It is thought that these first stamped coins were minted around 650–600 BC.
The system of commodity money eventually evolved into a system of representative money. This occurred because gold and silver merchants or banks would issue receipts to their depositors – redeemable for the commodity money deposited. Eventually, these receipts became generally accepted as a means of payment and were used as money. Paper money or banknotes were first used in China during the Song Dynasty. These banknotes, known as "jiaozi" evolved from promissory notes that had been used since the 7th century. However, they did not displace commodity money, and were used alongside coins. Banknotes were first issued in Europe by Stockholms Banco in 1661, and were again also used alongside coins. The gold standard, a monetary system where the medium of exchange are paper notes that are convertible into pre-set, fixed quantities of gold, replaced the use of gold coins as currency in the 17th-19th centuries in Europe. These gold standard notes were made legal tender, and redemption into gold coins was discouraged. By the beginning of the 20th century almost all countries had adopted the gold standard, backing their legal tender notes with fixed amounts of gold.
After World War II, at the Bretton Woods Conference, most countries adopted fiat currencies that were fixed to the US dollar. The US dollar was in turn fixed to gold. In 1971 the US government suspended the covertability of the US dollar to gold. After this many countries de-pegged their currencies from the US dollar, and most of the world's currencies became unbacked by anything except the governments' fiat of legal tender.
Etymology
The word "money" is believed to originate from a temple of Hera, located on Capitoline, one of Rome's seven hills. In the ancient world Hera was often associated with money. The temple of Juno Moneta at Rome was the place where the mint of Ancient Rome was located. The name "Juno" may derive from the Etruscan goddess Uni (which means "the one", "unique", "unit", "union", "united") and "Moneta" either from the Latin word "monere" (remind, warn, or instruct) or the Greek word "moneres" (alone, unique).
In the Western world, a prevalent term for coin-money has been specie, stemming from Latin in specie, meaning 'in kind'.
Functions
In the past, money was generally considered to have the following four main functions, which are summed up in a rhyme found in older economics textbooks: "Money is a matter of functions four, a medium, a measure, a standard, a store." That is, money functions as a medium of exchange, a unit of account, a standard of deferred payment, and a store of value. However, most modern textbooks now list only three functions, that of medium of exchange, unit of account, and store of value, not considering a standard of deferred payment as a distinguished function, but rather subsuming it in the others.
There have been many historical disputes regarding the combination of money's functions, some arguing that they need more separation and that a single unit is insufficient to deal with them all. One of these arguments is that the role of money as a medium of exchange is in conflict with its role as a store of value: its role as a store of value requires holding it without spending, whereas its role as a medium of exchange requires it to circulate. Others argue that storing of value is just deferral of the exchange, but does not diminish the fact that money is a medium of exchange that can be transported both across space and time. The term 'financial capital' is a more general and inclusive term for all liquid instruments, whether or not they are a uniformly recognized tender.
Medium of exchange
When money is used to intermediate the exchange of goods and services, it is performing a function as a medium of exchange. It thereby avoids the inefficiencies of a barter system, such as the 'double coincidence of wants' problem.
Unit of account
A unit of account is a standard numerical unit of measurement of the market value of goods, services, and other transactions. Also known as a "measure" or "standard" of relative worth and deferred payment, a unit of account is a necessary prerequisite for the formulation of commercial agreements that involve debt. To function as a 'unit of account', whatever is being used as money must be:
. Divisible into smaller units without loss of value; precious metals can be coined
from bars, or melted down into bars again.
. Fungible: that is, one unit or piece must be perceived as equivalent to any other, which is why diamonds, works of art or real estate are not suitable as money
. A specific weight, or measure, or size to be verifiably countable. For instance, coins are often made with ridges around the edges, so that any removal of material from the coin (lowering its commodity value) will be easy to detect.
Store of value
To act as a store of value, a commodity, a form of money, or financial capital must be able to be reliably saved, stored, and retrieved — and be predictably useful when it is so retrieved. Fiat currency like paper or electronic money no longer backed by gold in most countries is not considered by some economists to be a store of value.
Standard of deferred payment
While standard of deferred payment is distinguished by some texts, particularly older ones, other texts subsume this under other functions. A "standard of deferred payment" is an accepted way to settle a debt – a unit in which debts are denominated, and the status of money as legal tender, in those jurisdictions which have this concept, states that it may function for the discharge of debts. When debts are denominated in money, the real value of debts may change due to inflation and deflation, and for sovereign and international debts via debasement and devaluation.
Money supply
In economics, money is a broad term that refers to any financial instrument that can fulfill the functions of money (detailed above). These financial instruments together are collectively referred to as the money supply of an economy. Since the money supply consists of various financial instruments (usually currency, demand deposits and various other types of deposits), the amount of money in an economy is measured by adding together these financial instruments creating a monetary aggregate. Modern monetary theory distinguishes among different types of monetary aggregates, using a categorization system that focuses on the liquidity of the financial instrument used as money.
Market liquidity
Market liquidity describes how easily an item can be traded for another item, or into the common currency within an economy. Money is the most liquid asset because it is universally recognised and accepted as the common currency. In this way, money gives consumers the freedom to trade goods and services easily without having to barter.
Liquid financial instruments are easily tradable and have low transaction costs. There should be no (or minimal) spread between the prices to buy and sell the instrument being used as money.
Measures of money
The money supply is the amount of financial instruments within a specific economy available for purchasing goods or services. The money supply is usually measured as three escalating categories M1, M2 and M3. The categories grow in size with M1 being currency (coins and bills) and checking account deposits. M2 is currency, checking account deposits and savings account deposits, and M3 is M2 plus time deposits. M1 includes only the most liquid financial instruments, and M3 relatively illiquid instruments.
Another measure of money, M0, is also used, although unlike the other measures, it does not represent actual purchasing power by firms and households in the economy. M0 is base money, or the amount of money actually issued by the central bank of a country. It is measured as currency plus deposits of banks and other institutions at the central bank. M0 is also the only money that can satisfy the reserve requirements of commercial banks.
Types of money
Currently, most modern monetary systems are based on fiat money. However, for most of history, almost all money was commodity money, such as gold and silver coins. As economies developed, commodity money was eventually replaced by representative money, such as the gold standard, as traders found the physical transportation of gold and silver burdensome. Fiat currencies gradually took over in the last hundred years, especially since the breakup of the Bretton Woods system in the early 1970s.
Commodity money
Many items have been used as commodity money such as naturally scarce precious metals, conch shells, barley, beads etc., as well as many other things that are thought of as having value. Commodity money value comes from the commodity out of which it is made. The commodity itself constitutes the money, and the money is the commodity. Examples of commodities that have been used as mediums of exchange include gold, silver, copper, rice, salt, peppercorns, large stones, decorated belts, shells, alcohol, cigarettes, cannabis, candy, etc. These items were sometimes used in a metric of perceived value in conjunction to one another, in various commodity valuation or Price System economies. Use of commodity money is similar to barter, but a commodity money provides a simple and automatic unit of account for the commodity which is being used as money. Although some gold coins such as the Krugerrand are considered legal tender, there is no record of their face value on either side of the coin. The rationale for this is that emphasis is laid on their direct link to the prevailing value of their fine gold content. American Eagles are imprinted with their gold content and legal tender face value. South Africa ranks among the very few countries where gold coins have been minted as negotiable currency and still remain available for general purchase The ISO currency code of gold bullion is XAU. ISO 4217 includes codes not only for currencies, but also for precious metals (gold, silver, palladium and platinum; by definition expressed per one troy ounce, as compared to "1 USD") and certain other entities used in international finance, e.g. Special Drawing Rights.
Fiat money
Fiat money or fiat currency is money whose value is not derived from any intrinsic value or guarantee that it can be converted into a valuable commodity (such as gold). Instead, it has value only by government order (fiat). Usually, the government declares the fiat currency (typically notes and coins from a central bank, such as the Federal Reserve System in the U.S.) to be legal tender, making it unlawful to not accept the fiat currency as a means of repayment for all debts, public and private.
Fiat money, if physically represented in the form of currency (paper or coins) can be accidentally damaged or destroyed. However, fiat money has an advantage over representative or commodity money, in that the same laws that created the money can also define rules for its replacement in case of damage or destruction. For example, the U.S. government will replace mutilated Federal Reserve notes (U.S. fiat money) if at least half of the physical note can be reconstructed, or if it can be otherwise proven to have been destroyed. By contrast, commodity money which has been lost or destroyed cannot be recovered.
Credit money
Credit money is any claim against a physical or legal person that can be used for the purchase of goods and services. Credit money differs from commodity and fiat money in two ways: It is not payable on demand (although in the case of fiat money, "demand payment" is a purely symbolic act since all that can be demanded is other types of fiat currency) and there is some element of risk that the real value upon fulfillment of the claim will not be equal to real value expected at the time of purchase.
This risk comes about in two ways and affects both buyer and seller. First it is a claim and the claimant may default (not pay). High levels of default have destructive supply side effects. If manufacturers and service providers do not receive payment for the goods they produce, they will not have the resources to buy the labor and materials needed to produce new goods and services. This reduces supply, increases prices and raises unemployment, possibly triggering a period of stagflation. In extreme cases, widespread defaults can cause a lack of confidence in lending institutions and lead to economic depression. For example, abuse of credit arrangements is considered one of the significant causes of the Great Depression of the 1930s.
The second source of risk is time. Credit money is a promise of future payment. If the interest rate on the claim fails to compensate for the combined impact of the inflation (or deflation) rate and the time value of money, the seller will receive less real value than anticipated. If the interest rate on the claim overcompensates, the buyer will pay more than expected. The process of fractional-reserve banking has a cumulative effect of money creation by banks.
Representative money
In 1875 economist William Stanley Jevons described what he called "representative money," i.e., money that consists of token coins, or other physical tokens such as certificates, that can be reliably exchanged for a fixed quantity of a commodity such as gold or silver. The value of representative money stands in direct and fixed relation to the commodity that backs it, while not itself being composed of that commodity.
Monetary policy
When gold and silver are used as money, the money supply can grow only if the supply of these metals is increased by mining. This rate of increase will accelerate during periods of gold rushes and discoveries, such as when Columbus discovered the new world and brought back gold and silver to Spain, or when gold was discovered in California in 1848. This causes inflation, as the value of gold goes down. However, if the rate of gold mining cannot keep up with the growth of the economy, gold becomes relatively more valuable, and prices (denominated in gold) will drop, causing deflation. Deflation was the more typical situation for over a century when gold and paper money backed by gold were used as money in the 18th and 19th centuries.
Modern day monetary systems are based on fiat money and are no longer tied to the value of gold. The control of the amount of money in the economy is known as monetary policy. Monetary policy is the process by which a government, central bank, or monetary authority manages the money supply to achieve specific goals. Usually the goal of monetary policy is to accommodate economic growth in an environment of stable prices. For example, it is clearly stated in the Federal Reserve Act that the Board of Governors and the Federal Open Market Committee should seek “to promote effectively the goals of maximum employment, stable prices, and moderate long-term interest rates.”
A failed monetary policy can have significant detrimental effects on an economy and the society that depends on it. These include hyperinflation, stagflation, recession, high unemployment, shortages of imported goods, inability to export goods, and even total monetary collapse and the adoption of a much less efficient barter economy. This happened in Russia, for instance, after the fall of the Soviet Union.
Governments and central banks have taken both regulatory and free market approaches to monetary policy. Some of the tools used to control the money supply include:
. changing the interest rate at which the government loans or borrows money
. currency purchases or sales
. increasing or lowering government borrowing
. increasing or lowering government spending
. manipulation of exchange rates
. raising or lowering bank reserve requirements
. regulation or prohibition of private currencies
. taxation or tax breaks on imports or exports of capital into a country
In the US, the Federal Reserve is responsible for controlling the money supply, while in the Euro area the respective institution is the European Central Bank. Other central banks with significant impact on global finances are the Bank of Japan, People's Bank of China and the Bank of England.
For many years much of monetary policy was influenced by an economic theory known as monetarism. Monetarism is an economic theory which argues that management of the money supply should be the primary means of regulating economic activity. The stability of the demand for money prior to the 1980s was a key finding of Milton Friedman and Anna Schwartz supported by the work of David Laidler, and many others. The nature of the demand for money changed during the 1980s owing to technical, institutional, and legal factors and the influence of monetarism has since decreased.
Thursday, September 3, 2009
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