A currency[a] is a normalization of money in any form used or in circulation as a medium of exchange, such as banknotes and coins. [1] [2] A more general definition is that a currency is a monetary system that is commonly used over time in a particular environment, especially for people in a nation-state. [3] According to this definition, US dollars (US$), euros (€), Japanese yen (¥) and pound sterling (¥) are examples of fiat currencies. Currencies can serve as stores of value and can be traded between countries in foreign exchange markets that determine the relative values of different currencies. [4] Currencies in this sense are either chosen by users or promulgated by governments, and each type has limited acceptance limits – i.e. legal tender laws may require a specific unit of account for payments to government agencies. Money in one form or another has been used for at least 3,000 years. At a time when it came only in the form of coins, money proved crucial in facilitating trade between continents. Other definitions of the term “money” appear in the respective synonymous articles: banknote, coin and currency. This article uses the definition that focuses on countries` monetary systems. In business, a local currency is a currency that is not backed by a national government and is only intended to be traded in a small area. Proponents such as Jane Jacobs argue that this allows an economically weak region to rise by giving the people who live there a medium of exchange through which they can exchange locally produced services and goods (in a broader sense, this is the original purpose of all money).
Opponents of this concept argue that local currencies create a barrier that can affect economies of scale and comparative advantage, and that, in some cases, they can be used as a means of tax evasion. These fluctuations create the forex trading market. The foreign exchange market where these transactions are made is one of the largest markets in the world, based on volume. All transactions are in large volumes, with a standard minimum lot of 100,000. Most forex traders are professionals who invest for themselves or for institutional clients, including banks and large corporations. In this early stage of money, metals were used as symbols to represent value stored in the form of commodities. This formed the basis of trade with the Fertile Crescent for over 1500 years. However, the collapse of the Middle East`s trading system exposed a flaw: at a time when there was no safe place to store value, the value of a circulating medium could not be as strong as the forces defending that trade. An agreement could only go as far as the credibility of this army. By the end of the Bronze Age, however, a series of treaties had created a safe passage for traders around the eastern Mediterranean, stretching from Minoan Crete and Mycenae in the northwest to Elam and Bahrain in the southeast. It is not known what was used as currency for this exchange, but it is believed that copper ingots in the shape of oxskin made in Cyprus may have served as currency. Originally, the currency was a form of receipt representing grain stored in the warehouses of the Temple of Sumer in ancient Mesopotamia and ancient Egypt.
Britannica.com: Encyclopedia article on currency Since no legal definition of legitimate money has ever been provided, the term has led to a lot of confusion, especially in legal terms. For all intents and purposes, legal money should mean legal tender, but that`s not always the case. This caused a lot of confusion among law and banking students. One of the best examples of local currency is the original LETS currency, founded on Vancouver Island in the early 1980s. In 1982, Canadian central bank lending rates rose to 14 per cent, bringing chartered bank lending rates to 19 per cent. The resulting tightening of money and credit left the islanders only to create a local currency. [20] In Europe, paper money was first introduced regularly in Sweden in 1661 (although Washington Irving records earlier emergency use by the Spanish during a siege during the conquest of Granada). As Sweden was rich in copper, many copper coins were in circulation, but its relatively low value required extraordinarily large coins, often weighing several kilograms. In 1900, most industrialized countries used a kind of gold standard, paper notes and silver coins being the circulation medium. Private banks and governments around the world followed Gresham`s Law: they kept the gold and silver they received, but paid in notes. This did not happen all over the world at the same time, but happened sporadically, usually in times of war or financial crisis, from the beginning of the 20th century and worldwide until the end of the 20th century. This was the first time that the free fiat money regime came into effect.
One of the last countries to break away from the gold standard was the United States in 1971, an action known as the Nixon shock. No country has an enforceable gold or silver standard monetary system. Unlike centrally controlled, government-issued currencies, decentralized private networks with reduced trust support alternative currencies such as Bitcoin, Ethereum Ether, Litecoin, Monero, Peercoin, or Dogecoin, which are classified as cryptocurrency because the transfer of value is ensured by cryptographic signatures validated by all users. There are also branded currencies, for example “bond-based” stores of value, such as the quasi-regulated BarterCard, loyalty points (credit cards, airlines) or game credits (MMO games) based on the reputation of commercial products, or highly regulated “asset-backed alternative currencies” such as mobile money systems such as MPESA (so-called electronic money issuance). [14] Subject to global differences, the local currency can be converted into another currency with or without central bank or government intervention, or vice versa. These conversions take place on the foreign exchange market. Based on the above limitations or free and easily convertible features, currencies are classified as follows: Legal tender is any form of currency issued by the U.S. Treasury Department and not by the Federal Reserve System. It includes gold and silver coins, treasury bills and government bonds. Legal tender contrasts with fiat money, where the government allocates value even if it has no intrinsic value of its own and is not backed by reserves.
Fiat money includes legal tender such as paper money, checks, drawings and banknotes. Understanding what money is clarifies the meaning of money. It is a form of money that is used every day by people all over the world. Cheques are another form of money (known as money substitutes). Cigarettes were even a form of money, as they were for soldiers during World War II. In pre-modern China, the need for credit and a medium of exchange that was physically less cumbersome than many copper coins led to the introduction of paper money, i.e. banknotes. Its introduction was a gradual process that lasted from the end of the Tang Dynasty (618-907) to the Song Dynasty (960-1279).
It began as a way for merchants to exchange heavy coins for token receipts issued by wholesalers as promissory notes. These banknotes were valid for temporary use in a small regional area. In the 10th century, the Song Dynasty government began circulating these notes among merchants in its monopolized salt industry. The Song government granted several shops the right to issue banknotes, and in the early 12th century, the government finally took over these businesses to produce state-issued currency. Nevertheless, the banknotes issued were only local and temporary: it was not until the middle of the 13th century that a single, uniform government issue of paper money became an acceptable national currency.
