Money - What is Money? What "When it's a question of...

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Unformatted text preview: What is Money? What "When it's a question of money, everybody is of the same religion." Voltaire Functions of Money Functions Store of Value Medium of Exchange Unit of Account Various Types of Money Various Commodity Money Convertible Paper Fiat Money Demand Deposits Electronic Money Commodity Money Commodity A good that has an alternative use beside that of being money It is accepted because the holder knows he can exchange it later Commodity Money Commodity Useful Characteristics of Commodity Money • • • • • • Durable Divisible or Maleable Scarce Easily Standardized Easily Transported Widely Accepted Commodity Money Commodity Examples of Commodity Money • • • • • • • Precious Metals (gold, silver, etc.) Barley (ancient Mesopotamia) Salt () Tobacco leaves (Colonial Virginia) Cigarettes (prisons) Wheat Flour (rural USA) Large Stones (Isle of Yap) Babylonian Ring-money Babylonian Salt as Money Salt Pliny the Elder stated as an aside in his Natural History's discussion of sea water, that "[I]n Rome. . .the soldier's pay was originally salt and the word salary derives from it. . ." Plinius Naturalis Historia XXXI. Stone Coins from Yap Stone Commodity Money Commodity Uniform weights are a useful in dealing with commodity monies The names of many currencies and measures of value derive from weight measures Commodity Money Commodity • Talent – amount of weight a worker could be expected to carry on his back or about 60 lbs. • Lira ­ Unit of currency originally issued by Charlemagne and based on a pound (libra) of silver. • Pound Sterling ­ Saxon coin minted in 775 with 240 sterlings weighing a pound. Originally large payments were made in "pounds of sterling." Commodity Money - Coins Commodity Lydian electrum coins Commodity Money - Coins Commodity Spanish milled dollar “Pieces of Eight” Commodity Money - Coins Commodity Silver Thaler from St. Joachimsthal First produced in 1519 Commodity Money - Coins Commodity Silver “Liberty” Dollar, first US coin issued Convertible Paper Convertible Paper claim on some amount of a commodity money Can be converted on demand into gold or silver, for example More convenient for transport Indirect evidence of usage of “drafts” in Babylon, Egypt Greece & Rome. Convertible Paper Convertible Genoese bankers 12th & 13th centuries • The first [bills of exchange] for which definite evidence exists was a contract issued in Genoa in 1156 to enable two brothers who had borrowed 115 Genoese pounds to reimburse the bank’s agents in Constantinople by paying them 460 bezants one month after their arrival. Convertible Paper Convertible “1000 cash” bill from the Ming dynasty in China. Issued in 1374 by the Imperial Treasury. Convertible Paper Convertible 1720 English Exchequer Bill. These bills were interest­bearing, however they could be used to pay taxes and could be redeemed at the Bank of England. Endorsements on the back indicate that they circulated among the general public as money. Convertible Paper Convertible 1860 two­dollar note. Prior to 1914 most paper currency circulating in the US was issued by private banks Convertible Paper Convertible Convertible Paper Convertible 1935 one­dollar silver certificate. This note was issued by the US Treasury and was redeemable for a fixed amount of silver. Fiat Money Fiat Money that circulates “by command” It is not explicitly backed by any commodity. Fiat Money Fiat “Continentals” were issued by the Continental Congress to finance the Revolutionary War. They were redeemable for gold, but only at a future date. Fiat Money Fiat “Greenbacks” were issued by the US Treasury to finance the Civil War. They were not redeemable for gold. Fiat Money Fiat Greenbacks could be used by the US government to pay its debts, but the government would not accept them as payment. Fiat Money Fiat February 1923 100,000 mark note. Fiat Money Fiat Federal Reserve notes were first issued in 1914. Checkable Deposit Money Checkable Demand Deposit Accounts Other Checkable Deposits • NOW (Negotiable Order of Withdrawal) • Credit Union Share Drafts Checkable deposit usage expanded rapidly in the US after 1914 when it became illegal for US banks to issue private banknotes. Checkable Deposits Checkable 1665 request to pay £25 15s from an account held with Morris & Clayton, “Scriveners in Cornhill”. Other Monies Other Stored Value Cards • Smartcards (Hong Kong Octopus Card ­ 八 八 八 ) • T­Money Card “Some stores including Lotte World, Kyobo Book Centre, GS 25 and others accept T­money as cash.” Electronic Money (PayPal) ...
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This note was uploaded on 02/28/2012 for the course ECON 100 taught by Professor Kerkl.phillips during the Winter '10 term at BYU.

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