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Commodity money is to be distinguished from representative money, which is a certificate or token which can be exchanged for the underlying commodity, but only by a formal process. A key feature of commodity money is that the value is directly perceived by its users, who recognize the utility or beauty of the tokens as goods in themselves.
The alternative to a commodity money system is fiat money which is defined by a central bank and government law as legal tender even if it has no intrinsic value. Originally fiat money was paper currency or base metal coinage, but in modern economies it mainly exists as data such as bank balances and records of credit or debit card purchases, [3] and the fraction that exists as notes and coins ...
From this main theory springs the sub-theory that the value of credit or money does not depend on the value of any metal or metals, but on the right which the creditor acquires to "payment," that is to say, to satisfaction for the credit, and on the obligation of the debtor to "pay" his debt and conversely on the right of the debtor to release ...
Under Gresham's law, "good money" is money that shows little difference between its nominal value (the face value of the coin) and its commodity value (the value of the metal of which it is made, often precious metals, such as gold or silver). [4] The price spread between face value and commodity value when it is minted is called seigniorage.
Fiat currencies function as money with "no intrinsic value" [1] but rather exchange values which facilitate a measurable value of exchange. The market measures or sets the real value of various goods and services using the medium of exchange as a unit of measure i.e., standard or the yard stick of measurement of wealth. [22]
Metallism is the economic principle that the value of money derives from the purchasing power of the commodity upon which it is based. The currency in a metallist monetary system may be made from the commodity itself ( commodity money ) or it may use tokens (such as national banknotes ) redeemable in that commodity.
Here are the differences between market orders and limit orders, and when to use each one. Market order vs. limit order. The distinction between a market order and a limit order is fairly ...
Money is well-suited to storing value because of its purchasing power. [4] It is also useful because of its durability. [5] Because of its function as a store of value, large quantities of money are hoarded. [6] Money's usefulness as a store of value declines if there are significant changes in the general level of prices. [7]