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{{short description|Any type of money that has face value greater than its value as material substance}} |
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[[File:Money (reais).jpg|thumb|right|200px|Coins and banknotes, two of the most common physical forms of money.]] |
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[[File:Goldcertificate front.jpg|thumb|right|U.S. $50 gold certificate]] |
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'''Representative money''' refers to [[money]] that consists of a token or certificate that can be exchanged for a fixed quantity of a [[commodity]] such as [[gold]], [[silver]], water, oil, food etc. Representative money is different than [[commodity money]] which is actually made of some real physical commodity. |
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'''Representative money''' or '''receipt money''' is any [[medium of exchange]], printed or digital, that represents something of [[Value (economics)|value]], but has little or no value of its own ([[intrinsic value (finance)|intrinsic value]]). Unlike some forms of [[fiat money]] (which may have no [[commodity]] backing), genuine representative money must have something of intrinsic value supporting the [[face value]].<ref name=mundell/> |
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The system of [[commodity money]] eventually evolved into a system of representative money. This occurred because gold and silver merchants or banks would issue receipts to their depositors – redeemable for the [[commodity money]] deposited. Eventually, these receipts became generally accepted as a means of payment and were used as money. Paper money or [[banknotes]] were first used in China during the Song Dynasty. These banknotes, known as "[[Jiaozi (currency)|jiaozi]]" evolved from [[promissory notes]] that had been used since the 7th century. However, they did not displace commodity money, and were used alongside coins. Banknotes were first issued in Europe by [[Stockholms Banco]] in 1661, and were again also used alongside coins. |
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The [[gold standard]], a monetary system where the medium of exchange are paper notes that are convertible into pre-set, fixed quantities of gold, replaced the use of gold coins as currency in the 17th-19th centuries in Europe. These gold standard notes were made [[legal tender]], and redemption into gold coins was discouraged. By the beginning of the 20th century almost all countries had adopted the gold standard, backing their legal tender notes with fixed amounts of gold. |
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More specifically, the term ''representative money'' has been used variously to mean: |
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Some reasons for the Use of Representative Money according to [[William Stanley Jevons]], in his ''Money and the Mechanism of Exchange'' book in chapter XVI.10 |
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* A claim on a commodity, for example [[gold certificate|gold]] and [[silver certificate]]s.<ref name="mundell">Robert A. Mundell, [http://academiccommons.columbia.edu/download/fedora_content/download/ac:114139/CONTENT/econ_0102_08.pdf The Birth of Coinage], Discussion Paper #:0102-08, Department of Economics, [[Columbia University]], February 2002.</ref><ref>Jon Hooks, ''Economics:fundamentals for financial services providers'', [https://books.google.com/books?id=wfbfki5YB0UC&dq=Money+representative&pg=PA201 p. 201] {{ISBN|0-89982-494-3}}, {{ISBN|978-0-89982-494-9}} Retrieved September 9, 2009</ref><ref name="p.30">William Howard Steiner, ''Money and banking'', [https://books.google.com/books?id=gq6CAAAAIAAJ&q=representative+money p. 30], H. Holt and company, 1941.</ref> In this sense it may be called "[[Monetary system#Commodity-backed money|commodity-backed money]]". |
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* Any type of [[money]] that has face value greater than its value as material substance. Used in this sense, most types of [[fiat money]] are a type of representative money.<ref>{{cite book |
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|title=A Treatise on Money |
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|author=John Maynard Keynes |
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|volume=1 |
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|page=7 |
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|chapter=1. The Classification of Money |
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|orig-year=1930 |
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|year=1965 |
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|quote=Fiat Money is Representative (or token) Money (i.e something the intrinsic value of the material substance of which is divorced from its monetary face value) |
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|publisher=Macmillan & Co Ltd}}</ref> |
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There is no concrete evidence that the clay tokens used as an accounting tool to keep track of warehouse stores in ancient Mesopotamia were also used as representative money. |
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....'It is well to analyse and state exactly the reasons which may be given for the introduction of pieces of representative money. Several motives may be detected, and they have been of different weight in different cases. The origin of the European system of bank-notes is to be found in the deposit banks established in Italy from four to seven centuries ago. In those days the circulating medium consisted of a mixture of [[coins]] of many denominations, variously clipped or depreciated. In receiving money, the merchant had to weigh and estimate the fineness of each coin, and much trouble, loss of time, and risk of fraud thus arose. It became, therefore, the custom in the [[mercantile]] republics of Italy to deposit such money in a bank, where its value was accurately estimated, once for all, and placed to the credit of the depositor'<ref>http://www.econlib.org/library/YPDBooks/Jevons/jvnMME16.html Retrieved September-4-09</ref> |
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<ref name="Schmandt-Besserat">[https://sites.utexas.edu/dsb/ Denise Schmandt-Besserat], [https://sites.utexas.edu/dsb/tokens/tokens/ Tokens: their Significance for the Origin of Counting and Writing]</ref><ref>Keynes, J.M. (1930). ''A Treatise on Money''. Volume I, p. 13</ref> However, the idea has been suggested.<ref name=mundell/> |
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In 1895 economist [[Joseph Shield Nicholson]] wrote that credit expansion and contraction was in fact the expansion and contraction of representative money.<ref>[[Joseph Shield Nicholson]], ''A treatise on money and essays on monetary problems''], Chapter VI, Effects of Credit or "Representative Money" on prices, [https://archive.org/details/treatiseonmoney00nichiala/page/72 <!-- quote="representative money". --> pp. 72–74], A. and C. Black, 1895.</ref> |
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==Historic use of representative money== |
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In 1934 economist William Howard Steiner wrote that the term was used "at one time to signify that a certain amount of bullion was stored in the Treasury while the equivalent paper in circulation" represented the bullion.<ref name="p.30"/> |
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Representative money is widely believed{{who|date=September 2009}} to have originated in ancient [[Sumeria]] where small baked clay [[tokens]] in the shape of sheep or goats were used to replace bartering actual items in trade.{{fact|date=September 2009}}. The earliest known writing for record keeping evolved from a system of counting using small clay tokens that began in Sumer about 8000 BC.<ref> Strings of Tokens and Envelopes, Besserat (1996) pages 39-54.</ref><ref>http://www.sumerian.org/tokens.htm Retrieved September-14-09</ref> |
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Around the 4th millennium BC, the complexity of trade and administration outgrew the power of memory, and writing became a more dependable method of recording and presenting transactions in a permanent form.<ref>(Robinson, 2003, p. 36)</ref>[[Sumer]] developed the first [[economy]], and developed the earliest system of written [[economic]] codes or laws, which was comparable to modern [[post-Keynesian economics]], but with a more "anything goes" approach.<ref name=Sheila>Sheila C. Dow (2005), "Axioms and Babylonian thought: a reply", ''Journal of Post Keynesian Economics'' '''27''' (3), p. 385–391.</ref> |
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*[[Gold standard]] |
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In ''Money and the Mechanism of Exchange'''s chapter XVI, "Representative Money," [[William Stanley Jevons]] wrote in 1875: |
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*[[Silver standard]] |
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... ''although we now distinguish money according as it is metallic or paper money, because paper has in recent times been universally adopted as the material for representative money, yet it is well to remember that various other substances have been used for the purpose. We may pass, in fact, by gradual steps from the perfect standard [[coins]], whose nominal value is coincident with their metallic value, to worthless bits of paper, which are yet allowed to stand for thousands, or even millions of pounds sterling.''<ref>[[William Stanley Jevons]], [http://www.econlib.org/library/YPDBooks/Jevons/jvnMME16.html ''Money and the Mechanism of Exchange''], Chapter XVI, "Representative Money," Retrieved June-29-2009</ref> |
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*[[Store of value]] |
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==Traditional representative money== |
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The [[gold standard]], based on paper notes that are normally freely convertible into fixed quantities of gold, was the most common form of representative money. It was adopted by most of the industrialized countries during the 18th and 19th centuries. By the late 19th and early 20th century most currencies were based on the gold standard, and in theory the notes could be exchanged for a fixed amount of gold. In practice however, in most countries, such exchange was discouraged, difficult and likely almost impossible except for a few with access to the [[commodity markets]] in major [[Capital (political)|capital]] cities, or in some cases, any but those in [[government]] or with proven [[Foreign exchange market|foreign exchange]] needs that were supported by the government.<ref name="Gold Standard ">{{cite journal|last=Michaels |first=Walter Benn |title=The Gold Standard and the Logic of Naturalism|journal=Representations |publisher=University of California Press |issue=9 |pages=105-132 |url=http://www.jstor.org/stable/3043767 |accessdate=2009-06-18 }}</ref> |
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Most nations of the world shifted entirely to [[fiat money]] by 1976. Often, this shift occurred in stages. For example, the [[United States]] economy functioned on both fiat money and several types of metal-backed representative money, from 1862 to 1971. In 1862, during the U.S. [[Civil War]], fiat money "greenbacks," backed only by government credit, were first issued. In 1971, the international [[gold standard]] ([[Bretton Woods system]]) was officially abandoned by the U.S., in an act termed the [[Nixon shock]]. However, U.S. citizens were barred from trading directly in gold after 1933, and had not been able to redeem their dollars for gold. Until 1964, U.S. [[silver certificate]] dollars (a type of representative money) were redeemable for silver dollars (at that time, the only silver U.S. coin), under a [[silver standard]]. After this time, however, U.S. dollars (as [[Federal Reserve Notes]]) were not redeemable in any quantity of any precious metal, and thus were no longer a representative money, but entirely a fiat money. Such legal changes in money types are typical, and characterize the long shift from [[commodity money]] to representative money to (in the modern day) fiat money.<ref>"fiat money." The Columbia Encyclopedia, Sixth Edition. 2008. Encyclopedia.com. http://www.encyclopedia.com/topic/fiat_money.aspx Retrieved Sept-5-09</ref> |
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{{portal|Numismatics|United_States_penny,_obverse,_2002.png}} |
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{{div col}} |
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* [[Economics]] |
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* [[History of economic thought]] |
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* [[History of economic thought]] |
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{{div col end}} |
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==References== |
==References== |
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{{Reflist}} |
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{{Means of Exchange}} |
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{{DEFAULTSORT:Representative Money}} |
{{DEFAULTSORT:Representative Money or Receipt Money}} |
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[[Category:Currency]] |
[[Category:Currency]] |
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[[ko:대안화폐]] |
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Latest revision as of 05:10, 30 January 2024
Representative money or receipt money is any medium of exchange, printed or digital, that represents something of value, but has little or no value of its own (intrinsic value). Unlike some forms of fiat money (which may have no commodity backing), genuine representative money must have something of intrinsic value supporting the face value.[1]
More specifically, the term representative money has been used variously to mean:
- A claim on a commodity, for example gold and silver certificates.[1][2][3] In this sense it may be called "commodity-backed money".
- Any type of money that has face value greater than its value as material substance. Used in this sense, most types of fiat money are a type of representative money.[4]
There is no concrete evidence that the clay tokens used as an accounting tool to keep track of warehouse stores in ancient Mesopotamia were also used as representative money. [5][6] However, the idea has been suggested.[1]
In 1895 economist Joseph Shield Nicholson wrote that credit expansion and contraction was in fact the expansion and contraction of representative money.[7]
In 1934 economist William Howard Steiner wrote that the term was used "at one time to signify that a certain amount of bullion was stored in the Treasury while the equivalent paper in circulation" represented the bullion.[3]
See also[edit]
References[edit]
- ^ a b c Robert A. Mundell, The Birth of Coinage, Discussion Paper #:0102-08, Department of Economics, Columbia University, February 2002.
- ^ Jon Hooks, Economics:fundamentals for financial services providers, p. 201 ISBN 0-89982-494-3, ISBN 978-0-89982-494-9 Retrieved September 9, 2009
- ^ a b William Howard Steiner, Money and banking, p. 30, H. Holt and company, 1941.
- ^ John Maynard Keynes (1965) [1930]. "1. The Classification of Money". A Treatise on Money. Vol. 1. Macmillan & Co Ltd. p. 7.
Fiat Money is Representative (or token) Money (i.e something the intrinsic value of the material substance of which is divorced from its monetary face value)
- ^ Denise Schmandt-Besserat, Tokens: their Significance for the Origin of Counting and Writing
- ^ Keynes, J.M. (1930). A Treatise on Money. Volume I, p. 13
- ^ Joseph Shield Nicholson, A treatise on money and essays on monetary problems], Chapter VI, Effects of Credit or "Representative Money" on prices, pp. 72–74, A. and C. Black, 1895.
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