What is Money? "When it's a question of money, everybody is of the same religion." Voltaire.

What is Money?What is Money?

"When it's a question of "When it's a question of money, everybody is of the money, everybody is of the

same religion."same religion." Voltaire Voltaire

Functions of MoneyFunctions of Money

Store of ValueStore of Value Medium of ExchangeMedium of Exchange Unit of AccountUnit of Account

Various Types of MoneyVarious Types of Money

Commodity MoneyCommodity Money Convertible PaperConvertible Paper Fiat MoneyFiat Money Demand DepositsDemand Deposits Electronic MoneyElectronic Money

Commodity MoneyCommodity Money

A good that has an alternative use A good that has an alternative use beside that of being moneybeside that of being money

It is accepted because the holder It is accepted because the holder knows he can exchange it laterknows he can exchange it later


Useful Characteristics of Commodity Useful Characteristics of Commodity MoneyMoney• DurableDurable• Divisible or MaleableDivisible or Maleable• ScarceScarce• Easily StandardizedEasily Standardized• Easily TransportedEasily Transported• Widely AcceptedWidely Accepted


Examples of Commodity MoneyExamples of Commodity Money• Precious Metals (gold, silver, etc.)Precious Metals (gold, silver, etc.)• Barley (ancient Mesopotamia)Barley (ancient Mesopotamia)• Salt ()Salt ()• Tobacco leaves (Colonial Virginia)Tobacco leaves (Colonial Virginia)• Cigarettes (prisons)Cigarettes (prisons)• Wheat Flour (rural USA)Wheat Flour (rural USA)• Large Stones (Isle of Yap)Large Stones (Isle of Yap)

Babylonian Ring-moneyBabylonian Ring-money

Salt as MoneySalt as Money

Pliny the Elder stated as an aside in his Natural Pliny the Elder stated as an aside in his Natural History's discussion of sea water, that History's discussion of sea water, that "[I]n "[I]n Rome. . .the soldier's pay was originally salt Rome. . .the soldier's pay was originally salt and the word salary derives from it. . .and the word salary derives from it. . ." " Plinius Naturalis Historia XXXI.Plinius Naturalis Historia XXXI.

Stone Coins from YapStone Coins from Yap


Uniform weights are a useful in Uniform weights are a useful in dealing with commodity moniesdealing with commodity monies

The names of many currencies and The names of many currencies and measures of value derive from measures of value derive from weight measuresweight measures


• Talent – amount of weight a worker Talent – amount of weight a worker could be expected to carry on his back could be expected to carry on his back or about 60 lbs.or about 60 lbs.

• Lira - Lira - Unit of currency originally issued Unit of currency originally issued by Charlemagne and based on a pound by Charlemagne and based on a pound (libra) of silver.(libra) of silver.

• Pound Sterling - Saxon coin minted in Pound Sterling - Saxon coin minted in 775 with 240 sterlings weighing a 775 with 240 sterlings weighing a pound. Originally large payments were pound. Originally large payments were made in "pounds of sterling."made in "pounds of sterling."

Commodity Money - CoinsCommodity Money - Coins

Lydian electrum coinsLydian electrum coins


Spanish milled dollarSpanish milled dollar

““Pieces of Eight”Pieces of Eight”


Silver Thaler fromSilver Thaler fromSt. JoachimsthalSt. JoachimsthalFirst produced in 1519First produced in 1519


Silver “Liberty” Dollar, Silver “Liberty” Dollar, first US coin issuedfirst US coin issued

Convertible PaperConvertible Paper

Paper claim on some amount of a Paper claim on some amount of a commodity moneycommodity money

Can be converted on demand into Can be converted on demand into gold or silver, for examplegold or silver, for example

More convenient for transportMore convenient for transport Indirect evidence of usage of “drafts” Indirect evidence of usage of “drafts”

in Babylon, Egypt Greece & Rome.in Babylon, Egypt Greece & Rome.


Genoese bankers 12Genoese bankers 12thth & 13 & 13thth centuriescenturies• The first [bills of exchange] for which The first [bills of exchange] for which

definite evidence exists was a contract definite evidence exists was a contract issued in Genoa in 1156 to enable two issued in Genoa in 1156 to enable two brothers who had borrowed 115 brothers who had borrowed 115 Genoese pounds to reimburse the Genoese pounds to reimburse the bank’s agents in Constantinople by bank’s agents in Constantinople by paying them 460 bezants one month paying them 460 bezants one month after their arrival. after their arrival.


““1000 cash” bill from 1000 cash” bill from the Ming dynasty the Ming dynasty

in China.in China.

Issued in 1374 by the Issued in 1374 by the Imperial Treasury.Imperial Treasury.


1720 English Exchequer Bill. These bills were interest-bearing, 1720 English Exchequer Bill. These bills were interest-bearing, however they could be used to pay taxes and could be redeemed however they could be used to pay taxes and could be redeemed at the Bank of England. Endorsements on the back indicate that at the Bank of England. Endorsements on the back indicate that they circulated among the general public as money.they circulated among the general public as money.


1860 two-dollar note. Prior to 1914 most paper 1860 two-dollar note. Prior to 1914 most paper currency circulating in the US was issued by currency circulating in the US was issued by private banksprivate banks



1935 one-dollar silver certificate. This note was 1935 one-dollar silver certificate. This note was issued by the US Treasury and was redeemable issued by the US Treasury and was redeemable for a fixed amount of silver.for a fixed amount of silver.

Fiat MoneyFiat Money

Money that circulates “by command”Money that circulates “by command” It is It is notnot explicitly backed by any explicitly backed by any

commodity.commodity.


““Continentals” were issued by the Continental Congress to Continentals” were issued by the Continental Congress to finance the Revolutionary War. They were redeemable for finance the Revolutionary War. They were redeemable for gold, but only at a future date.gold, but only at a future date.


““Greenbacks” were issued by the US Treasury to finance the Greenbacks” were issued by the US Treasury to finance the Civil War. They were not redeemable for gold.Civil War. They were not redeemable for gold.


Greenbacks could be used by the US government to pay its Greenbacks could be used by the US government to pay its debts, but the government would not accept them as debts, but the government would not accept them as payment.payment.


February 1923 100,000 mark note.February 1923 100,000 mark note.


Federal Reserve notes were first issued in 1914.Federal Reserve notes were first issued in 1914.

Checkable Deposit MoneyCheckable Deposit Money

Demand Deposit AccountsDemand Deposit Accounts Other Checkable DepositsOther Checkable Deposits

• NOW (Negotiable Order of Withdrawal)NOW (Negotiable Order of Withdrawal)• Credit Union Share DraftsCredit Union Share Drafts

Checkable deposit usage expanded Checkable deposit usage expanded rapidly in the US after 1914 when it rapidly in the US after 1914 when it became illegal for US banks to issue became illegal for US banks to issue private banknotes.private banknotes.

Checkable DepositsCheckable Deposits

1665 request to pay £25 15s from an account held with Morris 1665 request to pay £25 15s from an account held with Morris & Clayton, “Scriveners in Cornhill”.& Clayton, “Scriveners in Cornhill”.

Other MoniesOther Monies Stored Value CardsStored Value Cards

• Smartcards (Hong Kong Smartcards (Hong Kong Octopus Card - Octopus Card - 八八達達通通 ))

• T-Money CardT-Money Card“Some stores including “Some stores including Lotte World, Kyobo Book Lotte World, Kyobo Book Centre, GS 25 and Centre, GS 25 and others accept T-money others accept T-money as cash.”as cash.”

Electronic Money Electronic Money (PayPal)(PayPal)

What is Money? "When it's a question of money, everybody is of the same religion." Voltaire.

Documents

fiat money money

commodity money talent

command money

money pliny

question of money

commodity money paper

babylonian ringmoney

convertible paper slide