In economics, we use the term currency to refer a particular currency, for example the US Dollar, or we may also use this term for the coins and banknotes of a particular currency, which comprise the physical aspects of a nation’s money supply. The money deposited in banks (sometimes called deposit money) forms the other part of a nation’s money supply and its ownership can be transferred by means of checks which are referred to as cheques in the United Kingdom and Australia or they may be transferred by means of other forms of money transfer such as credit and debit cards. Deposit money and currency are both referred to as ‘money’ in the sense that both are acceptable as a means of exchange, but it is not necessary that money must be ‘currency’.
Historically, money that is in the form of currency has predominated. Usually those gold or silver coins that posses intrinsic value commensurate with the monetary unit (commodity money), have been the norm. By difference, modern currency, as fiat money, is intrinsically worthless. Usually when through decrees a government designates, that only particular monetary units shall be accepted in payment for taxes then the prevalence of one type of currency over another in commodity money systems has arisen.
Currently, a three-letter system of codes (ISO 4217) to define currency (as opposed to simple names or currency signs) has been introduced by the International Organization for Standardization. This has been done for removing the confusion that there are dozens of currencies called the dollar and many called the franc. Even nearly a dozen different countries use the pound, all of them of course, are having a wide difference in their values. In general, the ISO 3166-1 country code is used by the three-letter 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. For instance United States currency is globally referred to as USD.
When referring to national currencies a variant system is used by the International Monetary Fund .
-
Local Currencies
-
In economics, a currency that is not backed by a national government is called local currency, and it is intended to trade only in a small area. It has been argued by the advocates such as Jane Jacobs, that these local currencies enables an economically depressed region to pull itself up, by giving a medium of exchange to those people that are living there so that they can use them to exchange services and locally-produced goods. Those who opposes this concept argue that a barrier is created by local currency which can interfere with economies of scale and comparative advantage, and that they can serve as a means of tax evasion in some cases .
Local currencies can also be formed when there is economic turmoil involving the national currency. An example of such economic turmoil is the Argentinian economic crisis of 2002 in which IOUs that were issued by local governments quickly took on some of the characteristics of local currencies.
People who liked this Post also read
Posted by R. MAK. in Currency Trade, Forex Facts · 0 Comment
