Where Does The Banks Money Come From
This is the get-go slice in Curious Kids, a new series aimed at children. The Conversation is request kids to transport in questions they'd like an expert to answer. All questions are welcome – serious, weird or wacky! Email your question to curiouskids@theconversation.edu.au
Where does money come up from? – Millie, aged five, Sydney.
If y'all look within your parents' wallets, yous'll run across some brightly coloured plastic sheets and some little plastic cards. These plastic notes and cards are "coin", which your parents apply to buy food, clothes, and beautiful toys.
When I was a child, I used to read The Adventures of Pinocchio. Pinocchio is a puppet who became a child. He believed that coin grew on copse. It took him a chip of time to understand that this isn't true.
Money doesn't grow on trees. Your parents have to work in a job to get it.
The plastic notes come from a place chosen the Federal Reserve Depository financial institution of Australia. You can call it "the RBA" for brusk.
The RBA is in Sydney. The people who work there operate a machine that prints and cuts the yellow, red, purple and blueish plastic notes that you have seen in your parents' wallets.
The adept people at the RBA can print pretty much as many of these notes as they desire. Only they know that if they print too many of these notes, then something not then nice will happen. This not then nice thing is called "inflation". Allow me explain what that means.
When there are too many notes going effectually, people offset to spend more than and more money. Because there is so much coin going around, the people in shops start charging more for things similar food and apparel and beautiful toys. Everything starts to go more expensive. That's aggrandizement.
So, when you hear your parents saying that "life is too expensive", yous can blame it on aggrandizement.
We haven't always had money like the coin you run across today. A few thousand years ago, people wouldn't buy things, they would swap. For example, you could bandy some vegetables from your garden with your friend to become some ham, for example.
That worked for a while, only humans eventually decided information technology was easier to brand pocket-sized notes and coins than to go around finding shells, vegetables or common salt to trade, and that's how the money system was born.
The plastic cards inside your parents' wallet are also money. The coloured plastic notes are cute, only you can lose them, and information technology'due south difficult to keep them all in your wallet if you demand a lot of them to purchase lots of things.
So, instead of going around with a lot of notes, people put their notes in a place called a "depository financial institution". The bank keeps the notes rubber for you and gives you lot a plastic card in return.
When your parents need to become some notes from the banking company, they use this plastic carte du jour. They put the menu into a machine, the machine reads the card and knows that the owner of that bill of fare has notes in the bank. Then your parents tell the auto how many of their notes they want dorsum and the machine gives them the notes.
Just there is ane more surprise: these plastic cards can exist used to buy things today and pay next month!
Your parents do not even need to go to the shop with newspaper money. They tin can go to the store with their plastic carte du jour and show it to the shop owner. The shop owner volition tell the bank that they have purchased some things. Next calendar month, the bank will enquire your parents to pay for those things using their newspaper notes.
That's why the plastic cards are basically the same as plastic money.
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Source: https://theconversation.com/curious-kids-where-does-money-come-from-73598
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