ACC 212
Financial
Markets
WEEK 2
Essential Terms Money
• Money. This is a term used as “any item or commodity that is generally accepted as a means of payment for goods and services
for repayment of debt, and that serves as an asset to its holder” (Cabrera, 2020).
• Mint. This term refers to create, produce (in terms of money)
• Warden. This term refers to a high-ranking position, responsible for.
• Rate of interest. This term refers to “the price paid in the money market for the use of money (or loans). The rate is a percentage
of the amount borrowed.” (Cabrera, 2020).
Role of Money in the
Economy
• Money is composed of bills and coins that were printed by the national government. It
could also include those that are stored electronically such as in checking or savings
account. Nowadays, money is just a paper printed or metals molded by the national
government which does not equate to its value. Hence, financial market works on a
fiduciary basis.
• Money makes the world turning. As a medium of exchange, money gives a measured
value for goods and services. Thereby, letting the flow of transactions in an economy.
Characteristics and Key Function of
Money
Money’s characteristics are durable, portable, uniform, divisible, have value, in limited supply and can be
used as a means of exchange. Behind these characteristics is trust. Trust that if you will receive any
kind of money, you are confident enough that it can be used to pay for goods and services.
• Store of value. Money can be accumulated and be exchanged in a later time.
• Item of worth. The money per se has its own value.
• Means of exchange. Money can be exchanged with goods or services. It is important that it is
divisible to other denominations.
• Unit of account. Money can convert tangible assets into a measurable account.
• Standard of deferred payment. Money has the ability to serve as standard of deferred payment.
The Evolution of Money
Before humankind use money on their daily transactions, people exchange
goods and services through bartering. Many could argue the value of the goods one
could barter. Thus, the solution of creating money has arose and solved problems
involving barter. Over the years, money has changed its forms and shape.
Barter (10,000 – 3,000
BCE)
• Trading long ago used barter to exchange goods or services. As long as someone
agrees to exchange his/her specific item to other parties’ goods or services. Adam Smith
cited this form of trading as antecedent to the use of money in his book “Wealth of
Nations”.
• Advantages of barter are building trade relationship and there are physical goods
being exchange. Disadvantages of barter are there must be a mutual agreement between
two parties of the goods that are exchange, it is difficult to establish value of items, goods
might not be divisible, transaction in larger fora can be burdensome.
Evidence of
trade
records
(7000 BCE)
In this time, trades were
established and documented.
Coinage (600
BCE-1,100 CE)
The use of
precious metals
mold into coins was
introduced and
established in this
era
Bank notes (1,100-
2,000)
This time
countries began to use
bank notes, issuing
paper IOUs that were
traded as currency
and could be
exchanged for coins at
any time.
Digital money
(2,000 onward)
Money can now exist “virtually”,
on computers and large
transactions can take place
without any physical cash
changing hands.
THE ECONOMICS OF
MONEY
• Potosi inflation (1540-1640 ) – The Spaniards discovered silver at Potosi, Bolivia, and shipped
350 tons annually to Europe causing century of inflation.
• The grate debasement (1542-1551) – This time inflation increased due to Henry VII of England
that made the silver penny debased into three quarters copper which drive lose the trust from
people.
• Early joint-stock companies (1553) – Companies with stocks were introduced in England
• Bank of England (1694) – The Bank of England was established which could generate funds at a
minimal interest rate and mange national debt.
• The Royal Mint – The first warden, Sir Isaac Newton, recalled all the coins and minted a new
silver one.
THE ECONOMICS OF
MONEY
• US dollar (1775) – US dollar was first released.
• Gold Standard (from 1844) – The British pound was bound to an equivalent amount of
gold standard. Other countries followed.
• Credit cards (1970s) – Credit cards were created which made increased in potential
personal debt.
• Digital money (1990s) – the use of internet for a has widely increased causing a surge
of transfer funds and electronic payments.
• Euro (1999) – European countries joined and use a singular currency called Euro.
• Bitcoin (2008) - Bitcoin, a digital money that exist as encrypted data on servers.
HIGHLIGHTS IN THE
HISTORY OF MONEY IN
THE PHILIPPINES
Pre-Spanish Regime
• Before the Spaniards came here in the Philippines, our ancestor already traded to other countries such as
Macau, China and Malaysia. In the 8th century, the medium of exchange was barter and some commodity
were used as money. These commodities were coffee, sugar, rice, spices, carabao, gold, gold dust and
silver wires.
Spanish Regime
The Spaniards introduced coins to Philippines in 1521. The use of coins
minted from Mexico were prevalent.
American Regime
• The Philippine Peso was introduced replacing the Spanish-Filipino peso in 1898. The Philippine National
Bank was authorized to issue Philippine Bank Notes.
Japanese Regime
During World War II, when Japan
invaded and ruled the
Philippines, they issued a
Japanese War Notes also called
as “mickey mouse money”
because it did not have a
reserved value.
Post-war Period
The defeat of Japanese Imperial Army gave rise to the Philippine Commonwealth in 1944. All Japanese currencies and bank
notes from the Philippine National Bank were considered illegal and withdrawn from circulation. All banks were closed.
Victory money, new treasury certificate, were printed and established by the Central Bank. In 1949, a new currency called
“Central Bank Notes” were issued.
In 2010, the Central Bank launched created new currency which features iconic land marks and events in the Philippine
history. In 2018, new generation of coins were circulated.
