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

Functions of Money Store of Value Store of Value Medium of Exchange Medium of Exchange Unit of Account Unit of Account

Various Types of Money Commodity Money Commodity Money Convertible Paper Convertible Paper Fiat Money Fiat Money Demand Deposits Demand Deposits Electronic Money Electronic Money

Commodity Money A good that has an alternative use beside that of being money A good that has an alternative use beside that of being money It is accepted because the holder knows he can exchange it later It is accepted because the holder knows he can exchange it later

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

Commodity Money Examples of Commodity Money Examples 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-money

Salt as Money 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. 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

Commodity Money Uniform weights are a useful in dealing with commodity monies Uniform weights are a useful in dealing with commodity monies The names of many currencies and measures of value derive from weight measures The names of many currencies and measures of value derive from weight measures

Commodity Money Talent – amount of weight a worker could be expected to carry on his back or about 60 lbs.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.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."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 Lydian electrum coins

Commodity Money - Coins Spanish milled dollar Pieces of Eight

Commodity Money - Coins Silver Thaler from St. Joachimsthal First produced in 1519

Commodity Money - Coins Silver Liberty Dollar, first US coin issued

Convertible Paper Paper claim on some amount of a commodity money Paper claim on some amount of a commodity money Can be converted on demand into gold or silver, for example Can be converted on demand into gold or silver, for example More convenient for transport More convenient for transport Indirect evidence of usage of drafts in Babylon, Egypt Greece & Rome. Indirect evidence of usage of drafts in Babylon, Egypt Greece & Rome.

Convertible Paper Genoese bankers 12 th & 13 th centuries Genoese bankers 12 th & 13 th 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 banks agents in Constantinople by paying them 460 bezants one month after their arrival.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 banks agents in Constantinople by paying them 460 bezants one month after their arrival.

Convertible Paper 1000 cash bill from the Ming dynasty in China. Issued in 1374 by the Imperial Treasury.

Convertible Paper 1720 English Exchequer Bill. These bills were interest-bearing, 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 1860 two-dollar note. Prior to 1914 most paper currency circulating in the US was issued by private banks

Convertible Paper

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

Fiat Money Money that circulates by command Money that circulates by command It is not explicitly backed by any commodity. It is not explicitly backed by any commodity.

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

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

Fiat Money February ,000 mark note.

Fiat Money Federal Reserve notes were first issued in 1914.

Checkable Deposit Money Demand Deposit Accounts Demand Deposit Accounts Other Checkable Deposits Other Checkable Deposits NOW (Negotiable Order of Withdrawal)NOW (Negotiable Order of Withdrawal) Credit Union Share DraftsCredit 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 deposit usage expanded rapidly in the US after 1914 when it became illegal for US banks to issue private banknotes.

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

Other Monies Stored Value Cards Stored Value Cards Smartcards (Hong Kong Octopus Card - )Smartcards (Hong Kong Octopus Card - ) T-Money Card Some stores including Lotte World, Kyobo Book Centre, GS 25 and others accept T-money as cash.T-Money Card Some stores including Lotte World, Kyobo Book Centre, GS 25 and others accept T-money as cash. Electronic Money (PayPal) Electronic Money (PayPal)