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NON Commodity Moneys: Paper Versus Value

Non-commodity moneys refer to currencies that are not backed by gold, silver, or other commodities. They derive their value solely from being declared legal tender and their ability to purchase goods and services. Convertible currencies can be redeemed for gold or silver. Paper currencies include utopian standards with no intrinsic or redemption value, involuntary standards issued during emergencies, and managed standards where a central bank controls the money supply but it is not redeemable for commodities. Principles of managed currency systems include abandoning gold backing and using monetary policy tools like interest rates to influence prices and exchange rates. Signs of over-issuing paper money include premiums on precious metals, currency depreciation

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Marie Sachie Mitsui Padillo Turiano
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124 views8 pages

NON Commodity Moneys: Paper Versus Value

Non-commodity moneys refer to currencies that are not backed by gold, silver, or other commodities. They derive their value solely from being declared legal tender and their ability to purchase goods and services. Convertible currencies can be redeemed for gold or silver. Paper currencies include utopian standards with no intrinsic or redemption value, involuntary standards issued during emergencies, and managed standards where a central bank controls the money supply but it is not redeemable for commodities. Principles of managed currency systems include abandoning gold backing and using monetary policy tools like interest rates to influence prices and exchange rates. Signs of over-issuing paper money include premiums on precious metals, currency depreciation

Uploaded by

Marie Sachie Mitsui Padillo Turiano
Copyright
© Attribution Non-Commercial (BY-NC)
We take content rights seriously. If you suspect this is your content, claim it here.
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Download as PPTX, PDF, TXT or read online on Scribd
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NON

COMMODITY
MONEYS
Paper versus Value
Non-commodity Money

All moneys whose stated face value as


money, has bear no relation to the
commodity market values of the materials
of which they are made.
Usually made of paper or some valueless
material, and their values as money depend
solely on their stated face values and their
power to command goods and services in
exchange for themselves as monetary
units, in the country of issue or in foreign
markets.
Convertible Moneys

• Moneys redeemed upon demand of


the holder thereof in gold or silver, or
other standard money of equivalent
values
• Belong to the countries issuing them
which are of convertible standard.
Paper Moneys

1. Utopian paper Standard


– The ideal monetary standard.
– Has no intrinsic value and no redemption value.

2. Involuntary paper Standard


– Happens when some countries are confronted by
emergency expenditures.

3. Managed paper Currency Standard


– Involves the use of paper as currency with no direct
provision for redeemability.
Principles Governing the Managed
Currency System
1. The gold standard is abandoned.
2. The remaining monetary function of gold would be
limited to its being used as a store of value and to
settle adverse balance of payments with nations
desiring gold.
3. Gold reserves would no longer be used to correct
fluctuations in the rate of exchange with other
moneys still based on gold.
4. Fluctuations of prices of G & S from the normal
level would be corrected by appropriate credit
policy, effected by or through changes in the
discount rate of the Central Bank, and through
change sin the price of gold in the appropriate
cases.
Principles Governing the Managed
Currency System

5. A managed currency is generally associated with


the paper standard, the paper currency being
inconvertible for domestic purposes.
6. Moreover, even the gold standard can be
converted into managed gold standard.
7. A nation with a monetary system based on gold,
which utilizes Central Bank procedures for
managing the money supply to control prices,
uses the managed gold standard.
Signs of the Over Issuance of Paper Money

1. Some people sets a premium on gold or silver as


against paper money
2. There is a rise in the rate of exchange between
gold based money and paper money, for
international payments
3. There is a flight of metallic money from circulation
4. Rise in the general price level, if payment is made
in paper money.
5. Double set of prices
THANK
YOU!

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