Back in the city of Ur, as trade increased, exchanging different commodities was becoming difficult. Cows, goats and other animals could perish from unforeseen circumstances. When it came to implements like ploughs and axes and pots, it was difficult to agree how many pots were equal to one plough. And if you were exchanging ploughs and cows, things just too complicated.
So it happened that one day the chieftain called the people of Ur to discuss what should be done. After much discussion, it was decided that instead of exchanging goods, the people of Ur would give each other pieces of metals such as gold, silver, nickel and lead. One piece of gold could buy grain for as whole month; one piece of silver could buy two cows and 10 pieces of nickel could buy the 10 yards of beautiful damask.
There were many advantages of standard commodities like gold and silver. They did get tired; they could not die from sickness and they did not complain when they were taken over long distances. Also, they could be counted and so division and subtraction was possible. The people of Ur could now buy and sell, instead of exchanging goods.
However, there was one little problem....
One day Gamil, the local tradesman came to buy household utensils from Kumha, the potter. Kumha asked for 1 piece of silver and 2 pieces of nickel for it, and Gamil gave them.
The Old Man Monetary is copyright of Reserve Bank of India and is posted here in public interest and to spread banking awareness among kids.