Money

Money can be anything, as long as it is generally accepted as payment for goods and services.

Money

Money can be anything, as long as it is generally accepted as payment for goods and services.
Prior to the development of money, societies relied upon barter. Barter is inherently inefficient due to the need to achieve a double coincidence of wants.

Money

Barter is simply trading goods for goods, and is the earliest form of a market. The double coincidence of wants results from the need for both parties to be satisfied in a barter transaction, so each participant must offer something that the other needs and wants.

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Money developed independently in many societies, as the barter economy began to focus on one item (or type of item) that many people were always willing to accept. Eventually, values began to be expressed in terms of that item.

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The earliest types of money are referred to as commodity money, since its value is dependent upon what the money is made of.

Money

The earliest types of money are referred to as commodity money, since its value is dependent upon what the money is made of. Early commodity moneys included: Cattle

Money

The earliest types of money are referred to as commodity money, since its value is dependent upon what the money is made of. Early commodity moneys included: Wheat

Money

The earliest types of money are referred to as commodity money, since its value is dependent upon what the money is made of. Early commodity moneys included: Salt

Money

The earliest types of money are referred to as commodity money, since its value is dependent upon what the money is made of. Early commodity moneys included: Seashells

Money

The earliest types of money are referred to as commodity money, since its value is dependent upon what the money is made of. Early commodity moneys included: Elephant Tails

Money

The earliest types of money are referred to as commodity money, since its value is dependent upon what the money is made of. Early commodity moneys included: Fur Pelts

Money

The earliest types of money are referred to as commodity money, since its value is dependent upon what the money is made of. Early commodity moneys included: Metal Coins

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As economies grew, commodity money proved to be inadequate, since its value tended to fluctuate with the supply, and since that value was beyond the control of government. Beginning with the Romans (in the first century AD) governments began to introduce Fiat

Money, money whose value is backed by force of law.

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Money serves three functions for a society.

First, it eliminates the need for the extraneous trades in barter by providing a Medium of Exchange. This function allows for money to be accepted since people know that it will be accepted by others.

Money

Money serves three functions for a society.

Secondly, having a money gives a society a Measure of Value, meaning that the units of money can be used to draw comparisons regarding the value of disparate things.

Money

Money serves three functions for a society.

Third, choosing a money allows members of a society to have a Store of Value, meaning that there is something that they can accumulate to build wealth. In a barter economy, it is difficult to build wealth because value is determined by each trade.

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When a society settles on the item they will use as a money, there must be some standardization, and some way to control the supply, or the money will not be successful.

There are seven characteristics necessary for a successful money, and the fact that one or more of these is missing can explain why commodity money fell out of favor.

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7 characteristics of a successful money

1. Durability

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7 characteristics of a successful money

1. Durability 2. Portability

Money

7 characteristics of a successful money

1. Durability 2. Portability 3. Divisibility

Money

7 characteristics of a successful money

1. Durability 2. Portability 3. Divisibility 4. Stability of Value

Money

7 characteristics of a successful money

1. Durability 2. Portability 3. Divisibility 4. Stability of Value 5. Homogeneity (Greshams Law)

Money

7 characteristics of a successful money

1. Durability 2. Portability 3. Divisibility 4. Stability of Value 5. Homogeneity (Greshams Law) 6. Recognizability

Money

7 characteristics of a successful money 1. Durability 2. Portability 3. Divisibility 4. Stability of Value 5. Homogeneity (Greshams Law) 6. Recognizability 7. Acceptability

If a money has all seven of these characteristics, it can be successful. Some types of money have stayed in use for thousands of years.

Money American money has its roots in European tradition. We used fiat money during the American Revolution, and again during the Civil War, but otherwise, our money was backed by gold and silver (the Bi-Metallic standard) until the Great Depression. The US dollar was backed by (and convertible into) gold from 1792 until 1933. We continued to back our currency with a 1:4 gold to dollar ratio until 1968. The dollar remained convertible into silver until 1964.
Since 1968, our Federal Reserve Notes have been backed by the Full Faith and Credit of the United States Government.

Money Gold Certificates The gold certificate was used from 1882 to 1933. Each certificate gave its holder title to its corresponding amount of gold coin. Redemption for gold coins was ended by the US government in 1933, and until 1964 it was actually illegal to possess these notes.

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Silver Certificates The silver certificate was used from 1878 to 1964 for smaller denominations (One, five and ten dollars). Each certificate gave its holder title to its corresponding amount of silver coin.

Money American money is produced by two different agencies of the Federal Government.
Coins are produced by the United States Mint. The Mint is a division of the Department of the Treasury

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American money is produced by two different agencies of the Federal Government. Bills are printed by the United States Bureau of Engraving and Printing.

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The US Government measures and reports the US Money Supply using standard aggregated measures. We call these the Money Supply.

Measuring the money supply allows us to track growth, and to have the information necessary to measure inflation. It also helps us to know which policies to follow in attempting to manage our economy.

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There are five measures of the money supply, although only M1 and M2 are routinely reported. 1. M0=Cash in private circulation

Money
There are four measures of the money supply, although only M1 and M2 are routinely reported.

1. M0=Cash in private circulation

2. M1= Cash in circulation + Demand Deposits (Checking Accounts) + Travelers Cheques

Money
There are five measures of the money supply, although only M1 and M2 are routinely reported.

1. M0=Cash in private circulation

2. M1= Cash in circulation + Demand Deposits (Checking Accounts) + Travelers Cheques

3. M2= M1 + Time Deposits (Savings Accounts)

Money
There are five measures of the money supply, although only M1 and M2 are routinely reported.

1. M0=Cash in private circulation

2. M1= Cash in circulation + Demand Deposits (Checking Accounts) + Travelers Cheques

3. M2= M1 + Time Deposits (Savings Accounts)

4. M3= M2 + Short Term Federal Securities (Treasury Bills, Bonds and Notes and Savings Bonds)

Money
There are five measures of the money supply, although only M1 and M2 are routinely reported.

1. M0=Cash in private circulation

2. M1= Cash in circulation + Demand Deposits (Checking Accounts) + Travelers Cheques

3. M2= M1 + Time Deposits (Savings Accounts)

4. M3= M2 + Short Term Federal Securities (Treasury Bills, Bonds and Notes and Savings Bonds)

5. L = M3 + Longest Term and Largest Denomination Federal Securities plus certain High Grade Commercial Paper.

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Why do you want to have money?

Three motives for holding money

Money

Why do you want to have money?

Three motives for holding money

1. The Transactions Motive

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Why do you want to have money?

Three motives for holding money

1. The Transactions Motive You want to have money on hand so that you can make purchases whenever you find something you want to buy.

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Why do you want to have money?

Three motives for holding money

1. The Transactions Motive 2. The Precautionary Motive

Money

Why do you want to have money?

Three motives for holding money

1. The Transactions Motive 2. The Precautionary Motive Saving for a Rainy Day. Holding money in case of emergency.

Money

Why do you want to have money?

Three motives for holding money

1. The Transactions Motive 2. The Precautionary Motive 3. The Speculative Motive

Money

Why do you want to have money?

Three motives for holding money

1. The Transactions Motive 2. The Precautionary Motive 3. The Speculative Motive It takes money to make money. Holding money so that you can take advantage of investment opportunities.