Representative money
Encyclopedia
The term representative money has been used variously to mean:
Historically, the use of representative money predates the invention of coin
age. In the ancient empires of Egypt, Babylon, India and China, the temples and palaces often had commodity warehouses which issued certificates of deposit as evidence of debt, a form of "representative money."
According to economist William Stanley Jevons
(1875), representative money arose because metal coins often were "variously clipped or depreciated" during use, but using representations for the value stored in banks ensured its worth. He noted that paper and other materials have been used as representative money.
In 1895 economist Joseph Shield Nicholson
wrote that credit expansion and contraction was in fact the expansion and contractions of representative money.
In 1930 economist William Howard Steiner wrote that the term was used "at one time to signify that a certain amount of bullion was stored in the Treasury while the equivalent paper in circulation" represented the bullion.
- a claim on a commodity, for example gold certificateGold certificateA gold certificate in general is a certificate of ownership that gold owners hold instead of storing the actual gold. It has both a historic meaning as a US paper currency and a current meaning as a way to invest in gold....
s or silver certificateSilver CertificateSilver Certificates are a type of representative money printed from 1878 to 1964 in the United States as part of its circulation of paper currency. They were produced in response to silver agitation by citizens who were angered by the Fourth Coinage Act, which had effectively placed the United...
s. In this sense it may be called 'commodity-backed money'. - any type of moneyMoneyMoney is any object or record that is generally accepted as payment for goods and services and repayment of debts in a given country or socio-economic context. The main functions of money are distinguished as: a medium of exchange; a unit of account; a store of value; and, occasionally in the past,...
that has face value greater than its value as material substance. Used in this sense, fiat moneyFiat moneyFiat money is money that has value only because of government regulation or law. The term derives from the Latin fiat, meaning "let it be done", as such money is established by government decree. Where fiat money is used as currency, the term fiat currency is used.Fiat money originated in 11th...
is a type of representative money.
Historically, the use of representative money predates the invention of coin
Coin
A coin is a piece of hard material that is standardized in weight, is produced in large quantities in order to facilitate trade, and primarily can be used as a legal tender token for commerce in the designated country, region, or territory....
age. In the ancient empires of Egypt, Babylon, India and China, the temples and palaces often had commodity warehouses which issued certificates of deposit as evidence of debt, a form of "representative money."
According to economist William Stanley Jevons
William Stanley Jevons
William Stanley Jevons was a British economist and logician.Irving Fisher described his book The Theory of Political Economy as beginning the mathematical method in economics. It made the case that economics as a science concerned with quantities is necessarily mathematical...
(1875), representative money arose because metal coins often were "variously clipped or depreciated" during use, but using representations for the value stored in banks ensured its worth. He noted that paper and other materials have been used as representative money.
In 1895 economist Joseph Shield Nicholson
Joseph Shield Nicholson
Joseph Shield Nicholson was an English economist, born at Wrawby, Lincolnshire.He was educated at King's College London, Edinburgh, Cambridge, and Heidelberg. He was private tutor at Cambridge and became professor of political economy at Edinburgh in 1880...
wrote that credit expansion and contraction was in fact the expansion and contractions of representative money.
In 1930 economist William Howard Steiner wrote that the term was used "at one time to signify that a certain amount of bullion was stored in the Treasury while the equivalent paper in circulation" represented the bullion.
See also
- Commodity moneyCommodity moneyCommodity money is money whose value comes from a commodity out of which it is made. It is objects that have value in themselves as well as for use as money....
- Gold standardGold standardThe gold standard is a monetary system in which the standard economic unit of account is a fixed mass of gold. There are distinct kinds of gold standard...
- Hard currencyHard currencyHard currency , in economics, refers to a globally traded currency that is expected to serve as a reliable and stable store of value...
- Silver standardSilver standardThe silver standard is a monetary system in which the standard economic unit of account is a fixed weight of silver. The silver specie standard was widespread from the fall of the Byzantine Empire until the 19th century...
- Store of valueStore of valueA recognized form of exchange can be a form of money or currency, a commodity like gold, or financial capital. To act as a store of value, these forms must be able to be saved and retrieved at a later time, and be predictably useful when retrieved....