Skip to main content

Money Basics


Money plays a central role in our lives, yet no one can be totally free of misconceptions about it.  This article deals with only a few basic ideas, but it should help to gain an overall understanding of what money is and how it works.

Two Kinds of Money
Money is a token that is widely accepted as a medium of exchange.  The token can be tangible like a coin or note, or intangible like a bank deposit.  If the token is convertible on demand into a valuable commodity like gold, the token is known as commodity money.  

The exchange value of commodity money varies, but is normally greater than its value as a commodity.  A precious metal coin is simply a token potentially convertible into the bullion that comprises it.
If the tokens are intrinsically worthless and inconvertible, the government must endow them with a special status to make them viable as money.  Such tokens are known as fiat money.  Except for collector’s items, all government-issued tokens today are fiat money.  One must therefore avoid thinking in terms of commodity money to understand modern money. 

In the era of commodity money, the issuer was constrained by the need to hold a sufficient supply of the underlying commodity.  There is no such constraint in the case of fiat money.  The value of fiat money therefore depends on the policies and actions of the issuer, normally the central bank of a country. 

Comments

Popular posts from this blog

A new Constantine: Will Trump become more religious ?

 On October 28, 312 AD, the battle of the Milvian bridge took place between Roman Emperors Constantine I and Maxentius. Rome was in the midst of a civil war . Constantine won the battle and started on the path that led him to become the sole ruler of the Roman empire. But something interesting happened before the battle, Constantine who was a pagan at the time claimed to have received a vision from God. On October 27 with the armies preparing for battle, Constantine claimed to had a vision which led him to fight under the protection of  the Christian God. According to the message of Eusebius of Ceasarea, around noon, Constantine saw a luminous cross in the sky and under it the inscription in Greek," in this sign thou shalt conquer. " Constantine also claimed to had a dream in which Christ commanded him to use the sign of the cross against his enemies. Constantine became the first emperor to convert to Christianity.  He ended the policy of persecuting Christians and in 313...

The difficulties of love

 Love is a beautiful thing. Love makes life worth living. Love is best thing in the universe because God is love 😍. We all want love, we all want to be loved and many of us want someone to love. Love is very precious indeed. We sing about love, we write about it and we make movies about it. And yet love is the most difficult thing to find in this earth. It is easier to find diamonds and gold than to find true love. Easier maybe to find the lost city of Atlantis than to find genuine love. Many people have simply given up on love. They see the idea of loving and having someone to love them as fables for unwise and inexperienced children. Love is rare indeed. Why is it so hard to love or find love 🤔? The easiest answer is because we are imperfect. Being imperfect means we are broken, unable to perform the function we were made to do. Come with me on a journey of the difficulties of love. Imagine you meet someone, a man, a woman, the " love of your life." The woman is beautiful...

Second Beast of Revelation Revealed part 1

And I beheld another beast coming up out of the earth; and he had two horns like a lamb, and he spake as a dragon. Revelation 13:11 This prophecy speaks about a nation rising at the end of time that will seem to represent Christ but will actually be against Him. In this small study, we will reveal that nation. Below are some symbolic terms in prophecy needed in order to follow this study. Beast : a political entity, a state or empire Earth : symbolizes a place that is not heavily populated, unlike the sea. The waters which thou sawest, where the whore sitteth, are peoples, and multitudes, and nations, and tongues."  Revelation 17:15 Horns : Horns represent kings and kingdoms, or governments. Daniel 8:21 Speak : is how a nation create laws, a nation speaks by its laws So now that we have these definitions, let us go and see which nation on earth that the Bible speaks of during the end of times. There is only one super power nation coming out from an...

Blogger

Blogger
Study

Modern Man

Modern Man
We all, like sheep, have gone astray, each of us has turned to our own way; and the LORD has laid on him the iniquity of us all. Isaiah 53:6