.jpg)
Representative money is a term used historically by economic theorists and commentators for a financial instrument that documents, but is divorced from, existing value based on some underlying valuation system and that is used as money.
The underlying value may be a claim on a commodity[1], such as gold and silver, in which case gold certificates and silver certificates are examples of representative money.[2][3] John Maynard Keynes classified this as commodity money, and characterized representative money as consisting of fiat money and managed money.[4] Economist Robert A. Mundell contests this division stating it fails to recognize that there is a continuum between commodity money and token money.[1]
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.[5]
Representative money may also refer to credit money or fiat money. In 1895 economist Joseph Shield Nicholson wrote that credit expansion and contraction was in fact the expansion and contractions of representative money.[6] In 2009, an academic paper on cashless transactions stated that "The system of commodity money in many instances evolved into a system of representative (fiat) money."[7]
Historically, the use of representative money predates the invention of coinage.[1]
See also
References
- ^ a b c Robert A. Mundell, The Birth of Coinage, Discussion Paper #:0102-08, Department of Economics, Columbia University, February 2002.
- ^ Jon Hooks, Economics:fundamentals for financial services providers, p. 201 ISBN 0899824943, 9780899824949 Retrieved Sept-9-09
- ^ William Howard Steiner, Money and banking, p.30, H. Holt and company, 1941.
- ^ J. M. Keynes, Treatise on Money, 1930
- ^ William Stanley Jevons, Money and the Mechanism of Exchange, Chapter XVI, "Representative Money," Retrieved June-29-2009
- ^ Joseph Shield Nicholson, A treatise on money and essays on monetary problems], Chapter VI, Effects of Credit or "Representative Money" on prices, p. 72-74, A. and C. Black, 1895.
- ^ Jashim Khan, Margaret Craig-Lees, Cashless transactions: perceptions of money in mobile payments, International Business & Economics Review, vol.1, n.1, 2009, ISSN 1647-1989
This entry is from Wikipedia, the leading user-contributed encyclopedia. It may not have been reviewed by professional editors (see full disclaimer)
