High-grade money is what?

Many centuries ago people used the simplest method - barter, or an elementary exchange of goods - to obtain the necessary goods and realize those that are in abundance. With the development of crafts, the improvement of agrarian and cattle-breeding processes, as well as the expansion of the areas of movement, this method of calculation became increasingly uncomfortable.

That's when the first money appeared. They got accustomed quickly enough, and soon the whole world used another system of mutual exchange of goods: sale and purchase. Time passed, countries and currencies changed, and settlement systems evolved , full and inferior money, electronic payments and wallets appeared.

Definition of concept

Full-value money is money, whose purchasing power directly depends on the material from which they are made. Most often this is gold, silver, copper. For such banknotes, the nominal value indicated on the front side necessarily coincides with the commodity market.

For example, a coin weighing one gram of gold has a nominal value equal to the price of the same weight of this precious metal on the market. Otherwise, these means of payment can not be considered as full-fledged money. Treatment and issuance has a number of its features, advantages and disadvantages, discussed below.

Character traits

As already indicated above, a mandatory condition for such banknotes is the full correspondence of the nominal value of the real. For example, a silver coin weighing one gram can buy exactly as many goods as the weight of a given metal is worth. In addition, full-value money is an ingot of precious material that can be used not for calculations, but for other purposes. For example, for remelting and further manufacturing of jewelry, household items or art, weapons, etc. History knows a lot of cases of melting money for various needs, both individually and massively.

Special nature

In fact, full-fledged money is a commodity that can be bought, sold or exchanged. But the peculiarity of such a property of these calculation tools is that they only accompany circulation, but are not intended for direct consumption.

Of course, the precious metal itself can be used for other purposes, but then it is no longer considered as full-value money. This phenomenon determines a special commodity form that is not inherent in any other payment instruments.

Anything can be depreciated

By definition, this payment instrument has a value that is sufficiently stable to external factors. Despite the fact that gold mining continues from day to day for many centuries in a row, this metal not only does not become cheaper, but, conversely, the price for it is constantly growing all over the world. Silver, unfortunately, has lost its former value, but still remains among the precious metals. Copper with the development of industry and at all became cheap. In history, there were also facts of depreciation of full-value money.

One example was in the far 16th century, after the discovery of America. In Europe, ships sailed with gold and silver, selected by the local population. Precious metals became sharply and much cheaper, and coins, respectively, lose their value. But this process did not last long: the market rate was determined, and the situation stabilized. Money from silver or copper has also been lost in value for several times in its history.

Important features

Full-value money is not only a payment instrument, but also an important lever of state management and regulation. With their appearance, a new function of the state arises - not only the introduction of certain coins or ingots into circulation, but also the adoption of the necessary regulatory and legal acts to regulate the activities of all people who use such means of payment.

Thus, full-fledged money shows legal and information features or, as they say, they have a "phiatic nature" (from the word "decree", "decree" - fiat). Thanks to this phenomenon, the principles of monetary policy are emerging, and the law and legislative activity of the state is developing.

Appearance and form

Forms of full-value money do not differ in special variety. Initially, gold and silver ingots appeared in circulation. To denote their weight and a sample of metal, the issuer minted this information on them. With such inscriptions, the ingot did not have to be outweighed, which greatly facilitated and accelerated the process of trade. But ingots had a significant drawback - they were cumbersome and inconvenient to use, had a high cost and were deprived of the opportunity to pay for a small commodity or a minor service. Only the elected members of society could have such money, and the rest continued to conduct the usual barter.

These problems were solved with the appearance of coins, which, according to scientists, first minted in the state called Lydia in Asia. A small piece of precious metal, minted in the form of a coin, served as a unit for measuring the value of everyday products, services and works. Coins began to appear not only among the nobility, but also among ordinary people (peasants, artisans, ordinary soldiers, etc.).

Over the next centuries, these kinds of valuable money began to appear in all corners of the world. They were minted in the form of a circle, a square, with relief edges and even. In some Asian countries, for example, holes were made in them to be threaded on a rope and not lost on the way. As a rule, nominal value and name of currency or places where it was minted were applied to the front side. But the variety of images on the reverse side is simply huge: mythical deities and plots, portraits of outstanding figures of politics and art, representatives of flora and fauna, weapons, buildings, cities and much more.

However, this trend has continued today. Moreover, such states could issue such banknotes as well as individual cities, regions, kings and feudal lords. Pay was easy enough anywhere in the world - gold is always appreciated! And today in the wallet most people necessarily have a couple of coins. True, they are made of steel, brass, nickel and various inexpensive alloys.

Another interesting form is the classic banknotes, exchangeable for gold. That is, they are paper bills that have the properties of full-value money, and whose value is expressed in the equivalent of a precious metal. Such money was used at the beginning of the last century. Although they looked like simple papers, their nominal value was in fact confirmed by the country's gold reserves.

Interesting fact

Of course, the entry into circulation of a new type of gold products - banknotes in the form of ingots and coins - entailed the appearance of a mass of people wishing to illegally enrich themselves on this phenomenon. Fraudsters simply sawed coins, and new gold was produced from gold mined in this way. Accordingly, the mass decreased and was no longer equal to the nominal. A simple people could not distinguish a counterfeit in any way, and it was completely inconvenient to weigh coins every time in the calculations.

To solve this problem, they came up with ribbed edges. The sawed coin was now significantly distinguished and immediately aroused suspicions, and it was not so easy to repeat the carvings in artisanal conditions. Later, there were technologies that allowed to apply a variety of drawings and inscriptions, which even more protected from counterfeiting. Today, the value of coins is low, and there are not many wanting to forge them, but the tradition of carving has been preserved.

The main advantage

Full-value money had a very important property, from the point of view of their owners: with excess in turnover, they could simply be deferred as a reserve of precious metal (treasure). And then, if necessary, ingots or coins could be recovered by the owner and re-launched without losing their value (of course, unless they were depreciated due to unforeseen circumstances or events). This eliminated the need for complex regulation of savings and those that are needed for current needs.

disadvantages

Along with all the advantages that allowed us to fulfill our basic functions for a long period of time, full-fledged (real) money also has a number of negative sides:

• Making coins from precious metals (gold, silver) requires a fairly large amount of expensive material, the extraction of which is already a laborious and expensive process. In addition, not all states have stocks of these metals in their bowels and are forced to buy them from other countries.
• As a result of using the full-fledged money wear out, wear off, lose their original weight, and hence, the face value.
• The need for money can change over time depending on many factors. Sometimes there is a sharp increase, and then there may be a sharp shortage of money in circulation. The reason for this is that the extraction of precious metals simply does not keep up with the needs of the market.

Prerequisites for transition

Functions of high-grade money allowed to provide convenient commodity turnover throughout the world for quite a long time, but with the development of banking, credit relations and related processes, the entire payment system required changes.

Scientific and technological progress and population growth have caused a significant increase in the range of goods and services, as well as the need for them. Silver and gold was already not enough to provide the market with the necessary amount of payment means, and in place of the real came inferior money. Another precondition was that the notes ceased to be a value in themselves, but were only necessary as "intermediaries" in sales transactions and did not stay with one owner for a long time, changing for various available goods.

Defective money

At the beginning of the last century, real money was replaced by banknotes, which are made of paper, have virtually no nominal value, confirmed by the "gold" equivalent, are subject to severe depreciation and can not be used as a commodity. Such money is called inferior. Moreover, they have a number of advantages: simplicity in emitting, unlimited in the physical sense, as well as convenience in handling. Such means of payment could solve the problem with a lack of money in the market, but also caused a number of other problems and consequences. Such as, for example, the need for exchange rate determination of the currencies of different states on the basis of a set of variable factors.

Just paper?

In the last century, the notion of "paper money" appeared. Full-value money has a guaranteed nominal value, incomplete - do not have, and paper money is issued by the state to cover the budget deficit or for other similar needs. That is, these means of payment are not only not backed up, but also not coordinated with the needs of the market.

At the time of their issuing, they perform the functions assigned to them, and then depreciate, together with the rest of the money of the same currency in the market. Thus, the phiatic property of money is distorted and leads to negative consequences. It is thanks to this phenomenon that the definition of "paper", that is, meaningless, appeared, and not at all because they are made of such material.

Modern technologies

Progress has taken a long way, and today full-fledged and inferior money is increasingly less popular. They were replaced by electronic currencies. Doing shopping with a bank card or making payments without getting up from an armchair is much more convenient and practical. Electronic money has, of course, its shortcomings, but the information-digital age makes its own adjustments and requires changes in the good old system of settlements with the help of coins and banknotes. True, even today many people prefer to keep their savings in the form of bank gold bars in order to protect them from depreciation, believing that the precious metal is still the most reliable means of payments and savings.