Currency Encyclopedia..
Currency
A currency is a unit of exchange, facilitating the transfer of goods and services. It is a form of money, where money is defined as a medium of exchange (rather than e.g. a store of value). A currency zone is a country or region in which a specific currency is the dominant medium of exchange. To facilitate trade between currency zones, there are exchange rates i.e. prices at which currencies (and the goods and services of individual currency zones) can be exchanged against each other. Currencies can be classified as either floating currencies or fixed currencies based on their exchange rate regime. In common usage, currency sometimes refers to only paper money, as in "coins and currency", but this is incorrect. Coins and paper money are both forms of currency.
In most cases, each country has monopoly control over its own currency. Member countries of the European Monetary Union are a notable exception to this rule, as they have ceded control of monetary policy to the European Central Bank.
In cases where a country does have control of its own currency, that control is exercised either by a Central Bank or by a Ministry of Finance. In either case, the institution that has control of monetary policy is referred to as the monetary authority. Monetary authorities have varying degrees of autonomy from the governments that create them. In the United States, the Federal Reserve operates with full independence from the government. It is important to note that a monetary authority is created and supported by its sponsoring government, so independence can be reduced or revoked by the legislative or executive authority that creates it. In almost all Western countries, the monetary authority is largely independent from the government.
Several countries can use the same name, each for their own currency (e.g. Canadian dollars and US dollars), several countries can use the same currency (e.g. the euro), or a country can declare the currency of another country to be legal tender. For example, Panama and El Salvador have declared US currency to be legal tender, and from 1791-1857, Spanish silver coins were legal tender in the United States. At various times countries have either restamped foreign coins, or used currency board issuing one note of currency for each note of a foreign government held, as Ecuador currently does.
Each currency typically has one fractional currency, often valued at 1/100 of the main currency: 100 cents = 1 dollar, 100 centimes = 1 franc, 100 pence = 1 pound. Units of 1/10 or 1/1000 are also common, but some currencies do not have any smaller units. Mauritania and Madagascar are the only remaining countries that do not use the decimal system; instead, the Mauritanian ouguiya is divided into 5 khoum, while the Malagasy ariary is divided into 5 iraimbilanja. However, due to inflation, both fractional units have in practice fallen into disuse.
Currency - History
Currency - Early Currency
The origin of currency is the creation of a circulating medium of exchange based on a store of value. Currency evolved from two basic innovations: the use of counters to assure that shipments arrived with the same goods that were shipped, and the use of silver ingots to represent stored value in the form of grain. Both of these developments had occurred by 2000 BC.
This first stage of currency, where metals were used to represent stored value, and symbols to represent commodities, formed the basis of trade in the Fertile Crescent for over 1500 years. However, the collapse of the Near Eastern trading system pointed to a flaw: in an era where there was no place that was safe to store value, the value of a circulating medium could only be as sound as the forces that defended that store. Trade could only reach as far as the credibility of that military.
Currency - Coinage
These factors led to the shift of the store of value being the metal itself: at first silver, then both silver and gold. Metals were mined, weighed, and stamped into coins. This was to assure the individual taking the coin that he was getting a certain known weight of precious metal. Coins could be counterfeited, but they also created a new unit of account, which helped lead to banking. It was with Archimedes' principle that the next link in currency occurred: coins could now be easily tested for their fine weight of metal, and thus the value of a coin could be determined, even if it had been shaved, debased or otherwise tampered with. (See Coinage).
In most major economies using coinage, copper, silver and gold formed three tiers of coins. Gold coins were used for large purchases, payment of the military and backing of state activities. Silver coins were used for large, but common, transactions, and as a unit of account for taxes, dues, contracts and fealty, while copper coins represented the coinage of common transaction. In Europe this system worked through the medieval period because there was virtually no new gold, silver or copper introduced through mining or conquest. Thus the overall ratios of the three coinages remained roughly equivalent.
In China, however, the need for credit and for circulating medium led to the introduction of paper money. In Europe paper money was first introduced in Sweden 1661. Sweden was rich on copper but because of copper's low value extraordinarily big coins had to be made. It was probably more convenient to have a note stating your possession of such a coin.
Currency - The Era of Hard and Credit Money
Paper money was, in one sense, a return to the oldest form of currency: it represented a store of value backed by the credibility of the issuing authority. Drafts and checks issued privately had been in intermittent use for centuries, however, it was with the rise of global trade that paper money would find a permanent place in currency.
The advantages of paper currency were numerous: it reduced transport of gold and silver, and thus lowered the risks; it made loaning gold or silver at interest easier, since the specie (gold or silver) never left the possession of the lender until someone else redeemed the note; and it allowed for a division of currency into credit and specie backed forms. It enabled the sale of stock in joint stock companies, and the redemption of those shares in paper.
However, these advantages held within them disadvantages. First, since a note has no intrinsic value, there was nothing to stop issuing authorities from printing more of it than they had specie to back it with. Second, because it created money that did not exist, it was subject to Gresham's Law: people would exchange money rather than coins of the same value, and this increased the velocity of money and therefore increased inflationary pressures, a fact observed by David Hume in the 18th century. The result is that paper money would often lead to an inflationary bubble, which would then collapse when the demand for paper notes fell to zero, and people began demanding hard money. The printing of paper money was also associated with wars, and financing of wars, and therefore regarded as part of maintaining a standing army.
For these reasons, paper currency was held in suspicion and hostility in Europe and America. It was also addictive, since the speculative profits of trade and capital creation were quite large. Major nations established mints to print money and mint coins, and branches of their treasury to collect taxes and hold gold and silver stock.
Currency - Legal Tender Era
With the creation of central banks, currency underwent several significant changes. During both the coinage and credit money eras the number of entities which had the ability to coin or print money was quite large. One could, literally, have "a license to print money"; many nobles had the right of coinage. Royal colonial companies, such as the Massachusetts Bay Company or the British East India Company could issue notes of credit—money backed by the promise to pay later, or exchangeable for payments owed to the company itself. This led to continual instability of the value of money. The exposure of coins to debasement and shaving, however, presented the same problem in another form: with each pair of hands a coin passed through, its value grew less.
The solution which evolved beginning in the late 18th century and through the 19th century was the creation of a central monetary authority which had a virtual monopoly on issuing currency, and whose notes had to be accepted for "all debts public and private". The creation of a truly national currency, backed by the government's store of precious metals, and enforced by their military and governmental control over an area was, in its time, extremely controversial. Advocates of the old system of Free Banking repealed central banking laws, or slowed down the adoption of restrictions on local currency. (See Gold standard for a fuller discussion of the creation of a standard gold based currency).
At this time both silver and gold were considered legal tender, and accepted by governments for taxes. However, the instability in the ratio between the two grew over the course of the 19th century, with the increase both in supply of these metals, particularly silver, and of trade. This is called bimetallism and the attempt to create a bimetallic standard where both gold and silver backed currency remained in circulation occupied the efforts of inflationists. Governments at this point could use currency as an instrument of policy, printing paper currency such as the United States Greenback, to pay for military expenditures. They could also set the terms at which they would redeem notes for specie, by limiting the amount of purchase, or the minimum amount that could be redeemed.
By 1900, most of the industrializing nations were on some form of gold standard, with paper notes and silver coins constituting the circulating medium. Governments too followed Gresham's Law: keeping gold and silver paid, but paying out in notes.
Currency - The Paper Money Era
See the history of paper money.
ISO 4217 Currency codes, Non-decimal currencies, exchange rate, Foreign Exchange, Foreign exchange trading, Foreign exchange market, Foreign exchange service, Optimal Currency Area
Currency - Modern currencies
To find out which currency is used in a particular country, start at the countries of the world or look at the table of historical exchange rates.
Nowadays ISO have introduced a system, ISO 4217, using three-letter codes to define currency (as opposed to simple names or currency signs), in order to remove the confusion that there are dozens of currencies called the dollar and many called the franc. Even the pound is used in nearly a dozen different countries, all, of course, with wildly differing values. In general, the three-letter code uses the ISO 3166-1 country code for the first two letters and the first letter of the name of the currency (D for dollar, for instance) as the third letter.
The International Monetary Fund uses a variant system when referring to national currencies.
For exchange rates, see here.
Currency - Privately-issued currencies
See also: Private currency
From the earliest times token coins were issued by companies in remote parts of the world to overcome the shortage of circulating currency.
Several large companies issue points to their customers, to be redeemed for products and services produced by that company. Often, a network of companies will join to share in the offering and redemption of points. While these can hardly be considered stable currency systems, they present many of the same features as "legitimate" currency: they are a store of value, issued in discrete units; they are controlled by a central issuing authority; and they have varying rates of exchange with other forms of currency. For example, frequent flyer miles can be bought using U.S. dollars.
Alternative currency: A currency such as the Liberty Dollar, with a one-to-one exchange rate with the U.S. Dollar.
Digital gold currency: Privately issued digital currency backed by gold
Frequent flyer miles: A type of private currency, different versions of which are issued by most major airlines to encourage customer loyalty. Other customer loyalty incentives have followed this model, including points systems offered by soft drink manufacturers such as PepsiCo. Subway tokens, issued by city transit authorities, can be considered a highly specialized form of currency.
Scrip: A type of private currency where a certain value is captured, and used to purchase goods from a company. Examples of scrip include gift certificates, gift cards, and Disney Dollars or Canadian Tire Money. However, scrip is not considered a currency in itself, but merely a store of value, denominated in another currency.
Currency - Local currencies
See also: Local currency
In economics, a local currency is a currency not backed by a national government, and intended to trade only in a small area. Advocates such as Jane Jacobs argue that this enables an economically depressed region to pull itself up, by giving the people living there a medium of exchange that they can use to exchange services and locally-produced goods (In a broader sense, this is the original purpose of all money.) Opponents of this concept argue that local currency creates a barrier which can interfere with economies of scale and comparative advantage, and that in some cases they can serve as a means of tax evasion.
Local currencies can also come into being when there is economic turmoil involving the national currency. An example of this is the Argentine economic crisis of 2002 in which IOUs issued by local governments quickly took on some of the characteristics of local currencies.
Currency - World currency
With such developments as the Euro allowing for facilitated trade and perhaps a corresponding increase in a wider identity, proposals for a global currency have accelerated, even while it is recognized that several political and economic factors would need to be addressed and intermediate steps taken before such a concept might be accepted by the diverse nations of the world.
Currency - Circulating currencies
See List of currencies for a list of all current and historical currencies. See List of historical currencies or historical currencies below for historical currencies. See List of circulating currencies for a list of currencies by country. The following is a list of currency names (denominations) of the world in alphabetic order by currency name:
Currency - A-E
Afghani - Afghanistan
Ariary - Madagascar
Baht - Thailand
Balboa - Panama (U.S. dollar used for paper money)
Birr - Ethiopia
Bolívar - Venezuela
Boliviano - Bolivia
Cedi - Ghana
Colón - Costa Rica
Córdoba - Nicaragua
Dalasi - The Gambia
Denar - Macedonia
Dinar
Algerian dinar - Algeria
Bahraini dinar - Bahrain
Iraqi dinar - Iraq
Jordanian dinar - Jordan, Palestine
Kuwaiti dinar - Kuwait
Libyan dinar - Libya
Tunisian dinar - Tunisia
Serbian dinar - Serbia
Sudanese dinar - Sudan
Dirham
Moroccan dirham
United Arab Emirates dirham
Dobra - São Tomé and Príncipe
Dollar
Australian dollar - Australia, Christmas Island, Cocos (Keeling) Islands, Heard Island and McDonald Islands, Norfolk Island, Kiribati, Nauru and Tuvalu
Barbados dollar - Barbados
Bahamian dollar - Bahama
Belize dollar - Belize
Bermuda dollar - Bermuda
Brunei dollar - Brunei
Canadian dollar - Canada
Cayman Islands dollar - Cayman Islands
Cook Islands dollar - Cook Islands
East Caribbean dollar - Anguilla, Antigua and Barbuda, Dominica, Grenada, Montserrat, Saint Kitts and Nevis, Saint Lucia, Saint Vincent and the Grenadines
Fijian dollar - Fiji
Guyanese dollar - Guyana
Hong Kong dollar - Hong Kong
International dollar - hypothetical currency pegged 1:1 to the United States dollar
Jamaican dollar - Jamaica
Liberian dollar - Liberia
Namibian dollar - Namibia
New Zealand dollar - New Zealand, Cook Islands, Niue, Tokelau, Pitcairn Islands.
Singapore dollar - Singapore
Solomon Islands dollar - Solomon Islands
Suriname dollar - Suriname
New Taiwan dollar - Taiwan
Trinidad and Tobago dollar - Trinidad and Tobago
Tuvaluan dollar - Tuvalu (not an independent currency, equivalent to Australian dollar)
United States dollar - United States of America; also used officially in several other countries: East Timor (has own centavo coins), Ecuador (has own centavo coins), El Salvador, Marshall Islands, Federated States of Micronesia, Palau and Panama (has own Balboa currency)
Zimbabwe dollar - Zimbabwe
Dong - Vietnam
Dram - Armenia
Escudo - Cape Verde
Euro - Austria, Belgium, Finland, France, Germany, Greece, Ireland, Italy, Luxembourg, Netherlands, Portugal, Spain
Countries that have made legal agreements with the EU to use the euro: Monaco, San Marino, Vatican City
Territories that unilaterally use the euro: Andorra, Montenegro, Kosovo
Currencies pegged to the euro: Cape Verdean escudo, CFA franc, CFP franc, Comorian franc, Bulgarian lev, Estonian kroon, Lithuanian litas, Bosnia and Herzegovina convertible mark
Currency - F-M
Florin - Aruba
Forint - Hungary
Franc
CFA franc - Benin, Burkina Faso, Cameroon, Central African Republic, Chad, Côte d'Ivoire, Republic of the Congo, Equatorial Guinea, Gabon, Guinea-Bissau, Mali, Niger, Senegal, Togo
CFP franc - New Caledonia, French Polynesia, Wallis and Futuna
Comorian franc - Comoros
Congolese franc - Democratic Republic of Congo (replaced in 1967, re-established in 1998)
Burundi franc - Burundi
Rwandan franc - Rwanda
Djiboutian franc - Djibouti
Guinean franc - Guinea (replaced in 1971, re-established in 1985)
Malagasy franc - Madagascar (replaced by Ariary in 2004)
Swiss franc - Switzerland, Liechtenstein.
Gourde - Haiti
Guaraní - Paraguay
Gulden - Netherlands Antilles
Hryvnia - Ukraine
Kina - Papua New Guinea
Kip - Laos
Koruna
Czech koruna - Czech Republic
Slovak koruna - Slovakia
Kroon - Estonia
Króna
Faroese króna (not an independent currency, equivalent to Danish krone)
Icelandic króna
Krona - Sweden
Krone
Danish krone - Denmark, Greenland
Norwegian krone - Norway
Kuna - Croatia
Kwacha
Malawian kwacha - Malawi
Zambian kwacha - Zambia
Kwanza - Angola
Kyat - Myanmar
Lat - Latvia
Lari - Georgia
Lek - Albania
Lempira - Honduras
Leone - Sierra Leone
Leu
Moldovan leu - Moldova
Romanian leu - Romania
Lev - Bulgaria
Lilangeni - Swaziland
Lira
Maltese lira - Malta
Turkish new lira - Turkey
Litas - Lithuania
Loti - Lesotho
Manat
Azeri manat - Azerbaijan
Turkmenistani manat - Turkmenistan
Mark, convertible - Bosnia and Herzegovina
Metical - Mozambique
Currency - N-R
Nakfa - Eritrea
Naira - Nigeria
Ngultrum - Bhutan
Ouguiya - Mauritania
Pa'anga - Tonga
Pataca - Macau
Peso
Argentine peso - Argentina
Chilean peso - Chile
Colombian peso - Colombia
Cuban peso, Cuban convertible peso - Cuba
Dominican peso - Dominican Republic
Mexican peso - Mexico
Philippine peso - Philippines
Uruguayan peso - Uruguay
Pound
Cyprus pound - Cyprus
Egyptian pound - Egypt
Falkland pound - Falkland Islands
Gibraltar pound - Gibraltar
Guernsey pound - Guernsey
Isle of Man pound - Isle of Man
Jersey pound - Jersey
Lebanese pound - Lebanon
Saint Helenian pound - Saint Helena
Pound sterling - United Kingdom
(New) Sudanese pound - Southern Sudan
Syrian pound - Syria
Pula - Botswana
Quetzal - Guatemala
Rand - South Africa
Real - Brazil
Renminbi - People's Republic of China
Rial
Iranian rial - Iran
Omani rial - Oman
Yemeni rial - Yemen
Riel - Cambodia
Ringgit - Malaysia
Riyal
Qatari riyal - Qatar
Saudi riyal - Saudi Arabia
Ruble
Belarusian ruble - Belarus
Russian ruble - Russia
Transnistrian ruble - Transnistria (non-recognized currency)
Rufiyah - Maldives
Rupee
Indian rupee - India
Mauritian rupee - Mauritius
Nepalese rupee - Nepal
Pakistani rupee - Pakistan
Seychelles rupee - Seychelles
Sri Lankan rupee - Sri Lanka
Rupiah - Indonesia
Currency - S-Z
Sheqel - Israel, Gaza Strip, West Bank
Shilling
Kenyan shilling - Kenya
Somali shilling - Somalia
Tanzanian shilling - Tanzania
Ugandan shilling - Uganda
Sol - Peru
Som
Kyrgyzstani som - Kyrgyzstan
Uzbekistani som - Uzbekistan
Somoni - Tajikistan
Taka - Bangladesh
Tala - Samoa
Tenge - Kazakhstan
Tolar - Slovenia
Tugrug - Mongolia
Vatu - Vanuatu
Won
North Korean won - North Korea
South Korean won - South Korea
Japanese yen - Japan
Złoty - Poland
Currency - Historical currencies
See also List of historical currencies.
Currency - Ancient Greece
Drachma
Currency - Ancient Rome
Antoninianus
As
Denarius
Dupondius
Sestertius
Currency - Africa
Dollar - Rhodesia
Escudo
Mozambican escudo - Mozambique
São Tomé and Príncipe escudo - São Tomé and Príncipe
Ekwele (Ekuele) - Equatorial Guinea
Florin - Kenya, Somalia, Tanzania and Uganda
Franc
Moroccan franc
Malagasy franc
Metica - Mozambique
Peseta - Equatorial Guinea
Peso - Guinea Bissau
Pound
Biafran pound - Biafra
Gambian pound - Gambia
Ghanaian pound - Ghana
Libyan pound - Libya
Malawian pound - Malaŵi
Nigerian pound - Nigeria
Rhodesian pound - Rhodesia and Nyasaland
South African pound - South Africa
Sudanese pound - Sudan
West African pound - Cameroon, Gambia, Ghana, Nigeria and Sierra Leone
Zambian pound - Zambia
Rial - Morocco
Rupee - Kenya, Somalia, Tanzania and Uganda
Shilling - Kenya, Somalia, Tanzania and Uganda
Somalo - Somalia
Syli - Guinea
Zaire - Zaire
Currency - America
Austral - Argentina
Colón - El Salvador
Continental Currency - Colonial America
Cruzeiro, Cruzado - Brazil
Escudo - Chile
Gulden - Suriname
Inti - Peru
Peso
Bolivian peso - Bolivia
Costa Rican peso - Costa Rica
Guatamalan peso - Guatamala
Honduran peso - Honduras
Nicaraguan peso - Nicaragua
Paraguayan peso - Paraguay
Venezuelan peso - Venezuela
Pound - Jamaica
Scudo - Bolivia
Sucre - Ecuador
Trade dollar - United States of America
Venezolano - Venezuela
Currency - Asia
Dollar
Mongolian dollar
Taiwan dollar
Escudo
Portuguese Indian escudo - Portuguese India
Portuguese Timor escudo - East Timor
Franc - Cambodia
Hwan - Korea
Kori - Kutch
Lira - Turkey
Mohar - Nepal
Pound
Israeli pound - Israel
Palestinian pound - Palestine
Rixdollar - Sri Lanka
Ruble - Tajikistan
Piastre - Cambodia, Laos and Vietnam
Rupee
Gulf rupee - Bahrain, Kuwait, Oman, Qatar and UAE
Burmese rupee - Burma
French Indian rupee - French India
Hyderabad rupee - Hyderabad
Portuguese Indian rupia - Portuguese India
Tael - China
Tical - Cambodia
Currency - Australasia
Franc - New Hebrides
Pound
Australian pound - Australia
New Zealand pound - New Zealand
Tongan pound - Tonga
Currency - Europe
14 national currencies which were replaced by the Euro in 2002:
Austrian schilling
Belgian franc
Dutch gulden
Finnish markka
French franc
German mark
Greek drachma
Irish pound
Italian lira
Luxembourgian franc
Portuguese escudo
San Marinese lira
Spanish peseta
Vatican lira
Daler
Rigsdaler - Denmark and Norway
Rijkdaalder - Netherlands
Riksdaler - Sweden
Speciedaler - Norway
Dinar
Bosnia and Herzegovina dinar
Croatian dinar
Yugoslav dinar
Florin - Austria
Gulden
Austro-Hungarian gulden - Austria-Hungary
Danzig gulden - Danzig
South German gulden - Baden, Bavaria, Frankfurt, Hohenzollern, Württemberg and other states
Karbovanets - Ukraine
Koruna - Slovakia (Second World War)
Lira - Turkey
Mark - Hamburg
Marka - Poland
Real
Gibraltar real - Gibraltar
Spanish real - Spain (plural reales)
Portuguese real - Portugal (plural réis)
Rubłi - Latvia
Perper
Serbian perper
Montenegrin perper
Scudo
Italian scudo - Lombardy-Venetia, Modena and Papal States
Maltese scudo - Malta
Peso - Spain
Talonas - Lithuania
Thaler - Germany, Austria, Hungary
Bremen thaler
Conventionsthaler
Reichsthaler
Vereinsthaler
Currency - Accounting units
Franc Poincaré
Special Drawing Rights
European Currency Unit
Currency sign
Krugerrand
Fictional currency
Local currencies
Petrocurrency
Currency Pair
Currency - Proposed Currencies
Eco
Perun
Currency - Lists
List of circulating currencies
List of motifs on banknotes
List of international trade topics
List of historical exchange rates
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