Tuesday 811

 

Mostly summarized from Gregory Mankiw’s Principles of Economics, 5th Ed.
PART 10 Money and Prices in the Long Run
Chapter 29 of 36 The Monetary System
Section 5 of 22
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Commodity money is money with intrinsic value.
Intrinsic value means the item has value besides as money.
Gold is an example of commodity money.
Gold has intrinsic value because it is used in industry and making jewelry.
Today we no longer use gold as money.
In the past gold was a common form of money because it is easy to carry, measure, and verify purity.
When an economy uses gold as money or uses paper money that is convertible into gold on demand the economy is said to be operating on a gold standard.
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Cigarettes is another example of commodity money.
In prisoner-of-war camps during World War II prisoners traded goods and services using cigarettes as money.
Even nonsmokers accepted cigarettes as money, knowing they could use cigarettes to buy goods.
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Fiat money is money without intrinsic value.
Fiat money is created as money by government decree.
Compare the paper dollars printed by the U.S. government and Monopoly game paper dollars.
Why can you use the first to pay your restaurant bill but not the second?
The answer is the U.S. government has decreed its dollars to be valid money.
On each paper dollar in your wallet is printed: "This note is legal tender for all debts, public and private."
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Federal government is central to establishing and regulating a system of fiat money.
But other factors are required for a successful fiat money monetary system.
The acceptance of fiat money depends as much on expectations and social convention as on government decree.
As the Soviet Union was breaking up in the late 1980s cigarettes began replacing the ruble as the preferred currency in Moscow.
The Soviet government continued with the ruble as the official currency yet the people of Moscow preferred to use cigarettes in exchange for goods.
This was because they were more confident this alternative money would be accepted by others than the ruble.
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cigarettes were used as money
tabako ga okane to shite tsukawareta
タバコがお金として使われた
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Commodity money usage in the Roman Empire. CGPT:
In the Roman Empire, money was largely a form of commodity money because coins were made from metals that had value in themselves.
The main coins included the gold aureus, silver denarius, and lower-value bronze or copper coins such as the sestertius and dupondius.
Their purchasing power depended partly on the amount and purity of precious metal they contained, although imperial authority and public confidence also mattered.
Roman emperors sometimes debased the currency by reducing the silver or gold content while keeping the same nominal denomination.
This became especially serious during the third-century crisis and contributed to inflation and loss of confidence.
Alongside coins, taxes, rents, wages, and military supplies could sometimes be paid in kind with grain, livestock, wine, oil, or other goods, especially where coin was scarce.
Thus Roman money was not purely modern-style fiat money: it combined valuable metal, government authority, and widespread acceptance in trade.