See also: Currency (homonymy)
One of the definitions of the currency consists in saying that it is an economic good which has three functions:
- the function of intermediary in the exchanges.
- the function of measurement of the values.
- the function of store of value (stored in Species, deposit or saving).
The particular currency of a country is called currency.
The currency materializes for its holder the belief in an exchange value, a Crédit supposed and thus n the other hand, the potential Dette somebody or someone else (credit means confidence). The currency received at the time of an economic or commercial operation is worth only by the possibility of being accepted by a great number of users. The noble metals, the Gold, the money but also the Cuivre were used as currency for civilizations of the Antiquité. The ancient tyrants gradually seized right Battre currency - to their effigy -, and imposed them like obligatory commercial instruments dispossessing their subjects of the privilege of confidence and concentrating it between their hands.
But to be credible a currency was to have a certain exchange value or to be “guaranteed” (exactly like a guarantor or a guarantee for a loan).
That was compromised by many embezzlements (metals noninvaluable additions with gold and the money) reducing the value of the currency finally and producing Inflation. The currency then loses its value and those which hold it are ruined.
Tickets were issued which represented a gold counterpart. Because so to speak everywhere gold could be received in exchange. Only the banks (after the human cities, lords, guilds and other groups) accepted the privilege to issue tickets. Singularly, the Central bank as from the XVIIIe century in Great Britain and the Banque S in France under Napoleon were to have for each issued ticket the guarantee gold. The increase in the money supply thus allowed facilitated the economic growth. But such a monopoly government guaranteed was going to make it possible to do without the guarantee gold. Undergoing an economic crisis it was decided “to release” the currency of its guarantee gold. That made it possible the Western States to emit more currency than there did not exist of physical counterpart to this one. They mitigated the economic crisis thus by involving in debt the citizens.
In general, each Pays gives a Monopole to only one currency, controlled by a Central bank of State, although there exist exceptions. Several countries can use the same name, each one for its own currency (for example frankly French, Belgian, Swiss, CFA), several countries can use the same currency (for example the Euro) or a country can declare that the currency of another country has legal course (often the dollar). CFA franc has this of private individual whom his value is indexed on that of the French franc. Thus, 1 French franc is worth 100 CFA francs, or, being given the parity French franc - euro, 1 euro = 655,96 CFA francs.
The major monetary unit is usually subdivided in minor units. Very often, the monetary unit of subdivision has a value equal to 1/100 of the basic unit. However, certain countries have a subdivision being worth 1/10, 1/20 or even 1/1000 of the basic unit, whereas some, like the Italy before the euro or the Japan, do not have any because the value of the basic unit of their currency is too low.
To define the value of a currency (quotations)
Without speaking about the facial value of a currency, the question that everyone is posed when it finds one of our old currencies is, in 80% of the cases: " how much does that cost? "
It should be known that several elements enter in account:
the type. For example: 20 Cérès francs, 20 francs gold Charles X, etc It is quite simply the name of the currency.
- Its state of conservation . The states of conservation are done in 90% of the cases with the following abbreviations and are generally accompanied by a + or a - to polish quotation: B for good, TB, TTB, SUP for superb, SPL for splendid (although that is a state more commercial than official…), FDC for Fleur of corner.
- the date : it is almost always in the legend. For the Roman currencies, the emperor generally defines the date.
- the workshop : generally, it is a letter or a symbol present under the bust (ex: With = Paris)
- striking . Two types of strike exist: strike currency and striking medal. To help you, make swivel a currency between your fingers. If the two faces are presented vis-a-vis you in the good sense, it is a striking medal.
EtymologyThe term currency comes from the Latin verb monere , which means “to inform”.
Indeed the Roman Monnaie was initially struck in a monetary Atelier close to the temple of Junon '' Moneta '' - Junon “which informs” - the Capitole. This temple had received this nickname following the episode of geese of Capitole.
Various types of currencyIf we are now accustomed to counting and paying in the same currency, it always was not thus. One could even regard this conjunction between the money of account and the currency of exchange as exceptional.
In fact, for all the great period when gold (and money) were practically universal currencies, each country even each area of a kingdom had its own money of account (sometimes based on gold, as delivers it, sometimes based on the money, like the mark), but the payments out of gold (or silver) of any source were often accepted (generally with a rebate compared to the local currency, with identical noble metal weight, and sometimes while ignoring interdicts imposed by the local lord).
Thus and for example, France of the Old Mode counted its species of books tournaments (i.e. of the area of Turns), but one paid there -- as in all Europe -- with Venetian Ducat S , French ecus, guilders (of Florence), Doubled bloom S Spanish, etc
It is only with the generalization of the fiduciary Monnaie that the money of account was essential for the other uses, since the tickets were made out directly in this money of account.
Origin of the value of the currency
Historically (since Aristote, which, the first, gives a definition of the currency), two practices followed one another:
the first implies that the currency used has an intrinsic value ( commodity money ). In fact, the Achat with currency is then regarded only as one particular barter. Many supports were used as currency, then on the wire of the centuries of the Métaux such as the money and the Or imposed themselves, indeed they answer perfectly the criteria of Durabilité, relative scarcity and divisibility; substitutes Papier with this currency can also have course ( representative money ).
the second, which is that of the modern era (abandonment of the Gold Standard during the 20th century) but which appears very early, regards the currency as a social convention: it does not matter that it does not have any intrinsic value (the paper money is not that paper, practically unusable for another use that of currency) since everyone accepts it like currency (liking or of force…). One then speaks about fiduciary Monnaie (of fides: faith, the confidence) or of currency issued ( FIAT money ).
Paradoxically, the nature even of the currency is a question little studied by the economists, with some famous exceptions near: according to Karl Marx for example, it represents only one exchange value distinct from the value of the work which was necessary to produce a good (the difference being monopolized by the owner of the means of production). Marx devoted chapter 3 of its work the Capital to this question.
Two economists, Michel Aglietta and André Orléan, analyze them in “the violence of the currency” (1982-84) three “historical” phases in the constitution of a currency:
- evolution of a product usually used during exchanges in “universal goods”, being used to measure the values of two objects in barter.
- the accumulation of this currency by some, which then enables them to buy the work of other people.
- the constitution of sufficient fortunes to allow the investment (to lend money to interest for an economic activity).
In fact, One can consider that the currency has an exchange value as any goods which circulate in the economic system. Best the proof being than it is subjected to the law of supply and (ex: attempts to control inflation while exploiting the interest rate of the appropriations). However, to maintain a " demande" of currency, indispensable condition of its value, it is necessary to maintain its scarcity. Indeed, in a system governed by the law of supply and demand, one sees well who if the offer increases too much, the request will decrease, being satisfied, as well as the value of the money. One can thus without fear be mistaken to say that it is necessary that there is not " not assez" of money, because if nobody asks of it, it does not have a value, in other words, it is necessary that there be poverty, which is simply taken here as equivalent of " demande" (see Friedmann).
Functions of the currency
Historically, the currency knew three functions, that here:
Unit of AccountThe currency makes it possible to assign an absolute value to a good or a service. The function of Unit of Account is often disjoined of that of means of payment. Today still, about many French speak in franc whereas the recognized means of payment are the euro. Well after the Second world war in the stores of British luxury, the prices were expressed in Guinea. This one not having any material representation, the prices thus had to be converted delivers some to be able to carry out a payment. In short, the function Unit of Account does not characterize with it only the currency.
Reserve valueBy store of value, one understands the capacity which has a financial or real instrument to transfer from the purchasing power in time. Thus, a real estate constitutes a store of value since it can be bought today and resold in the future while getting purchasing power to its holder. One calls that a reel credit in opposition to the concept of financial credits or titles, of which the actions and the obligations form part.
It is necessary to make a distinction between the currency and the other credits. Those are subjected to the risk of loss of capital or the new issue appropriateness of capital. On the contrary, the currency has a constant value in the sense that a ticket of 20 euros will be worth 20 Euro S in one year. On the other hand, the currency is not with the shelter of the losses related to inflation: a ticket of 20 € will keep the same value but its purchasing power could be modified.
Means of payment
The means of payment are undoubtedly the function which characterizes really the currency since, in this role, the currency has a monopoly. Legally, a debt can be extinct only by one transfer of currency. It is certainly true that other means of payment are possible, for example in kind. One still finds contracts of this type in the beams of tenant farming, however the generalization of the currency as means of payment did not make disappear the exchange from the goods the ones against the others. In fact, the currency supplanted barter for primarily technical reasons. For a total scale so that barter can function it is necessary to meet two conditions:
- an agent will not accept one although if there is a request for this good there,
- an agent will not agree to receive a good in quantity higher than the quantity than it asks, so promptly no agent will not provide a good in quantity higher than that which he offers. These two met conditions are called the double coincidence of the desires.
Emission of currency
By individualsWhen the currency consists of goods whose value is recognized without a particular authority imposing it, it can be emitted by no matter whom. It was probably the case in the first time, that is still in certain circumstances (Gold rush).
But the possibilities that the capacity gives “to beat currency”, in particular handling of value and implicit taxation that represents, quickly led the political authorities to reserve the monetary emission and to fight against the Faux-monnayage.
By the financial authorities and the banks
See also: monetary Creation
The Central banks emit the fiduciary Monnaie and control the currency created by the Banque S deprived in the form of Crédit. For that, they fix to them directing Taux on a sufficiently high to limit the Inflation and sufficiently low level to encourage the Investissement and the liquidity within the economy.
Role of the monetary authorities
See also: Monetary authorities
See also: History of the currency
Since prehistoric times, the men counted their goods. Quickly, a standard is essential in each human group: shell, minerals invaluable or useful like salt, small metal ingots (iron, then money or gold), etc
Whereas the currency represents already a certain quantity of goods, that one could not handle also easily, the following stage is the installation of a currency of second level, which itself represents a great quantity of coin left in deposit in sure place. Thus the currency paper appears (the banknote, known in China as of the 8th century), which represents originally only one payable debt at sight in the form of Métal or other goods.
One can distinguish several stages in the historical evolution who led coin to the fiduciary currency that us let us know today:
the bi-metallic system (until the XIXe century): all the currencies are defined at the same time compared to gold and the money (metal). Each State, according to its metal availabilities, uses one preferentially or other metal, and makes use of the other like supplement. The money and gold coins in particular, from their intrinsic value, frequently circulate apart from their country of origin. The mining discoveries and the financial evolutions in an economy largely mondialized at the time make fluctuate the proportions between two metals, and the development of the currency paper and the credit make it possible to limit the needs for metal, and to remove money-metal like standard.
- the “traditional” Gold Standard (until in 1914): all the currencies are defined compared to gold. Currency-paper is a substitute with gold (one ounce of gold is equivalent to 20 British dollars, 4 books, etc). The convertion rates of each currency into gold, and thus between them, are fixed. That ensures the stability of the currency and prevents a Inflation caused artificially by an increase in the money supply (proceeded to which the States will have recourse constantly thereafter).
- In 1865, is created the Latin Monetary Union , a monetary convention between Belgium, France, Italy and Switzerland, convention to which adheres Greece in 1868. This convention remained into force, with the help of several installations, until January 1st, 1927. The purpose of it was to harmonize the currencies of these countries (module, title, weight) which had a transborder circulation thus.
- the gold exchange standard (1914 - 1971): it is about an analog and digital system by which certain countries want to preserve the advantages of the Gold Standard, whereas others want to take care the latitude (via the “board with tickets”) not to have variable foreign exchange rates. This system will become null and void in a few decades:
- First World War: because of the cost of the war all the European currencies are strongly devaluated compared to gold.
- 1922 : conference of Genoa. A new monetary order is set up where only the the United States preserve the traditional Gold Standard. The dollar rests on gold, delivers it British on the dollar, and the other European currencies on the British book.
- 1931 : the the United Kingdom, led to increase its money supply, gives up the system of gold exchange.
- 1934 : the dollar is defined like 1/35 of ounce of gold. The citizens states-uniens do not have the right to have gold.
- 1944 : agreements of Bretton Woods: the monetary system rests on the dollar, only currency still anchored to gold.
- 1971 : under Nixon, the United States, not being able more to maintain the ransom price to 35 dollars the ounce nor to avoid a devaluation of the dollar, gives up the Gold Standard.
- the mode of the floating exchanges (as from March 1973): after the abandonment of the agreements of Bretton Woods, the currencies vary between them freely, according to supply and demand, and thus in theory according to the quantity of credit emitted by each country (a monetary policy laxist “is punished” by a fall of the value of the local currency compared to the other currencies). There is no more metal counterpart with the emitted currency, only of the debt .
Currency of needAt the time of great economic difficulties (wars, seats, economic crisis) the currency of country, particularly the divisional coins, can disappear quickly, to allow nevertheless the exchanges, public agencies or private are brought to emit a temporary and local currency, the Monnaie of need. This phenomenon occurred with a considerable width in France between 1914 and 1926.
Melting currencyThe value of the currency is variable, and relatively uncontrolled. But, in certain economic circumstances, one of principal qualities of the currency (its capacity with being stored) becomes a serious defect: in period of Deflation, it is more advantageous to store the cash than to make use of it, because the price of the goods drops. The generalization of such a behavior leads to an economic serious attack, the local production becomes an activity with increasing loss until the bankruptcy, whereas the imports can continue.
A solution (already employed) consists in fighting against the feeling of stability of the currency by the use of “melting” currency, by various means which organize a kind of Inflation forced:
- each ticket is dated, and its lifespan is limited; at the end of its short life it will be exchanged against a weaker cut.
- each ticket is provided with a coupon of which one detaches each day a piece, which makes him lose part of its value
Currency with special rightsWhen a currency is destabilized too much, it happens that one replaces it by a news. So that the operation is done, is needed that the new currency has an advantage, a saving in costs, for the users, which often implies the attribution of specific advantages:
- priority access, even exclusive access, for the purchase of goods which the State will alienate (as with the Assignat S of the French revolution, guaranteed on the “national goods”)
- tax reduction for the payments in this new currency
Restricted currenciesIt is frequent to set up specialized currencies, which make it possible to buy only certain types of goods.
- check restoring
- token of village fair or fun fair
- currency of SALT (cf will infra)
Currency of System of local exchanges
See also: private Currency
The private currency is a type of Monnaie of which the emission and the guarantee rest on a private agent, in opposition to the usual currencies, subjected to a Monopole of emission and guarantee by a State or a treaty between States.
Although there were historical examples of private currencies, the private currency currently constitutes a negligible share of the money supply. The concept of private currency is primarily proposed by some liberal, like Friedrich Hayek or David Friedman, as a means to decrease the capacity of the State to handle the economy with its own advantage.
Quotations and proverbs
- “ Money has no smell ” (allotted to the emperor Vespasien)
- “ the money does not make the Bonheur but it contributes to it ”
- “ the love of the money is the source of all the evils ” (the Bible)
- “ That one grants to me the control of the currency of a nation and I card-index myself who make his laws ” (allotted to the Baron de Rotschild in the edifying fable " The Island of the naufragés" of Louis Even http://www.michaeljournal.org/ilenauf.htm)
- “ Être paid in Monnaie of monkey ”
- “ the currency it is struck freedom”
- “ the currency establishes a bond between the past and the future” (allotted to Keynes)
- Sections perforated of stones , in the islands Yap, still of use today. These stones were transported during 400 km per sea of the islands Palau until Yap, because là-même it did not have there a stone quarry. The stones had up to 4 m in diameter. In the year a 1880 beautiful pig cost a stone of diameter equal to 2 widths of hand. One could obtain a canoe for a stone 1,8 m in diameter. The more one owner of hut had stones and the more grosses were the stones, the more rich person and respected it was. * The women had their own currency. It consisted of shells of pearl-bearing oysters . These shells were bored and threaded.
- In the highlands of New Guinea one used also pearl-bearing oysters as a currency: the " Kina ", a hull of a polished pearl-bearing oyster species in the shape of sometimes painted half-moon. She played a part in the purchase of pigs or when the price of promised was to be paid. Kina gave like current value to New Guinea its name and is represented on banknotes of the country.
- Teeth of dog
- Teeth of Morse
- Fur of beaver
- Teeth of cachalot
- Teeth of dolphin
- Teeth of pig
- Teeth of wapiti
- Collars of shells
- Fringes of tail of elephant
- Tobacco , in Virginia
- Brick of the , in China
- Shells kauris (or Cauri be), in China of 1100 av. JC with 1578 a. JC; employment extended to Ve century a. JC in India; also in all the Pacifique extended; beginning of XIVe century with the Maldives; Arab tradesmen exported them on their premises towards the Africa; east coast of Africa they pass by the Sudan until in Guinea, then towards the Mauritania and until the Berbères in the Atlas. Until in the XIXe century the values-kauri extended above all in East Africa, particularly with Zanzibar and in Ethiopia. Only after 1900 the governments of the colonies sought to prohibit the kauris as a currency. But the men were accustomed there and always used them like " small monnaie". It is only into 1955 that the values-kauri became almost completely out of use.
- Poisson dried , in Iceland
- Almonds , in India
- Broad beans of cocoa , with the Old man Mexico (News-Spain) *…
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