paper money

Examples of paper money in the following topics:

• The Politics of Inflation

  • Congress made two issues of paper money, in 1775–1780, and in 1780–81.
  • This paper money would supposedly be redeemed for state taxes, but the holders were eventually paid off in 1791 at the rate of one cent on the dollar.
  • By 1780, the paper money was "not worth a Continental", as people said, and a second issue of new currency was attempted.
  • In effect, the paper money was a hidden tax on the people, and indeed was the only method of taxation that was possible at the time.
  • During the Revolution, Congress made two issues of paper money to be redeemed for state taxes, such as this paper currency issued in 1776.

• Other Measurements of the Money Supply

  • M2: M1 + most savings accounts, money market accounts, retail money market mutual funds, and small denomination time deposits (certificates of deposit of under $100,000).
  • M4: M4- + treasury bills (or M3 + commercial paper + T-bills)
  • It is M2 – time deposits + money market funds.
  • The different forms of money in the government money supply statistics arise from the practice of fractional-reserve banking.
  • This new type of money is what makes up the non-M0 components in the M1-M3 statistics.

• Invention of Paper

  • Paper was often used as a wrapping material.
  • Paper was also used to wrap poisonous medicines.
  • By the 3rd century CE, paper was commonly used for writing, and by 875 CE it was used as toilet paper.
  • During the Tang dynasty (618-907 CE), paper was folded and sewn into tea bags, and used to make paper cups and napkins.
  • During the Song dynasty (960-1279 CE), the world's first known paper money was produced, and often presented in special paper envelopes.

• The Definition of Money

  • Money comes in three forms: commodity money, fiat money, and fiduciary money.
  • The commodity itself constitutes the money, and the money is the commodity.
  • Paper money is an example of fiat money.
  • However, for most of history, almost all money was commodity money, such as gold and silver coins.
  • The status of money as legal tender means that money can be used for the discharge of debts.

• Commercial Paper

  • Commercial paper is a money-market security issued (sold) by large corporations to get money to meet short term debt obligations.
  • In the global money market, commercial paper is an unsecured promissory note with a fixed maturity of one to 364 days.
  • Commercial paper is a money-market security issued (sold) by large corporations to get money to meet short term debt obligations (for example, payroll), and is only backed by an issuing bank or a corporation's promise to pay the face amount on the maturity date specified on the note.
  • The issuer can market the securities directly to a buy and hold investor such as most money market funds.
  • Alternatively, it can sell the paper to a dealer, who then sells the paper in the market .

• Answers to Chapter 1 Questions

  • If the savers hide their money under the mattress, then they remove this money from the economy.
  • Many assets are technically not money, but the public can easily convert them into money.
  • Fiat money is paper money and is more convenient to carry around than gold coins.
  • Finally, commodity money retains its value and has other purposes than as money.
  • People can convert some assets to money easily, so they are almost money.

• Measuring the Money Supply

  • In economics, the money supply or money stock, is the total amount of money available in an economy at a specific time.
  • In economics, the monetary base (also base money, money base, high-powered money, reserve money, or, in the UK, narrow money) is a term relating to (but not being equivalent to) the money supply (or money stock) or the amount of money in the economy.
  • The monetary base is highly liquid money that consists of coins, paper money (both as bank vault cash and as currency circulating in the public), and commercial banks' reserves with the central bank.
  • M2: Represents money and "close substitutes" for money.
  • Liquid assets include coins, paper currency, checkable-type deposits, and traveler's checks.

• Barter and Functions of Money

  • With money, the author does what he does best and teaches for money.
  • Money must retain its value.
  • Money needs six desirable properties for people and businesses to use money, which are:
  • All modern countries use coins and paper bills as money, which possess the five desirable properties.
  • Total value of paper bills and coins equals currency.

• Types of Currency

  • However, nearly all contemporary money systems are based on fiat money.
  • Fiat money is money that derives its value from government regulation or law.
  • Fiat money, if physically represented in the form of currency (paper or coins), can be accidentally damaged or destroyed .
  • Commercial bank money differs from commodity and fiat money in two ways.
  • Fiat, Commodity, and Commercial Bank money are three main types of money

• The Common Financial Instruments