Currency Definition

Any commodity that can perform the functions of a medium of exchange, a measure of value, a deferred payment standard, or a fully liquid store of wealth can be considered a currency.

Currency is the product of commodity exchange that has developed to a certain stage. The essence of money is general equivalent.

(1) Currency is precious metal and wealth

This view believes that currency must have substantial value, its value is determined by its metal value, and the entity of currency must be composed of precious metals. This theory originated from the simple metal theory of the ancient Greek philosopher Aristotle. The early characteristic of the mercantilist ideological and theoretical system formed in the 16th and 7th centuries was "heavy metalism" or "metalism", which believed that only gold and silver were the real wealth of a country.

(2) Money is a special commodity as a general equivalent

This is Marx’s analysis of the origin of money (see the “Related Knowledge” column “Marx’s Thoughts on the Origin of Money” "Logic"), its meaning has two points:

1. Money has the properties of commodities

In Marx's analysis of the origin of money, the predecessor of money is ordinary A common commodity, which gradually evolves into a general equivalent in the process of exchange. The era when Marx founded monetary theory was the era when gold coins were widely circulated in various countries. Therefore, Marx regarded gold as the highest stage of currency, and gold itself was a valuable commodity. A further corollary is that anything that serves as currency in the exchange of commodities is that they are commodities in the first place and have value and use value just like ordinary commodities. Without this consistency with ordinary commodities, currency would not have the basis for exchange with commodities.

2. There is an essential difference between currency and ordinary commodities

Currency is a commodity, but it is not an ordinary commodity, but a special commodity. Its particularity lies not in value but in use value. Gold is fixedly used as a general equivalent. After being used as currency, its use value is "duplicated". It not only has a specific use value determined by its natural properties, such as being used for decoration, making utensils, etc., but also has other uses. The general use value determined by social attributes serves as a general equivalent and means of exchange. Obviously, when it appears as the first use value, it is an ordinary commodity, and when it appears as the second use value, it is currency. When currency serves as a general equivalent, it has two basic characteristics: First, currency can express the value of all commodities. After the emergence of money, the entire commodity world was divided into two poles. One pole was a special commodity-money, and the other pole was all ordinary commodities. Ordinary commodities appear in the form of various use values, while currency appears as the embodiment or measure of value. The value of ordinary commodities can only be reflected through comparison with currency. The value of all commodities can only be reflected through comparison with currency. Only after comparing currencies can they be compared with each other. Second, money has the ability to directly exchange all commodities. Since currency is a general representative of value and social wealth, whoever possesses currency is equivalent to possessing value and wealth. In actual exchange, currency is a general means of exchange, and there is no obstacle to the other party's special demand for its use value. The exchange capacity of currency transcends the limitations of the particularity of use value and has the nature of direct exchange. General equivalents are attributes given to money by commodity exchange, and have nothing to do with whether monetary materials have value or use value. The significance of ordinary commodities is to meet people's special needs in production or life through exchange, while the significance of currency is to act as an expression of the value of all commodities. materials, serve as a general means of exchange, and serve the exchange of goods. This is the essential difference between currency and ordinary commodities. It can be seen that when examining the nature of money, one should distinguish its qualitative definition and form of existence. No matter what money is made of, its nature as a general equivalent will never change, otherwise it cannot be called money.

In the chapter on currency in his famous book "Economics", Samuelson quoted a famous saying by Kim Hubbard: "Only one person in ten thousand understands the currency problem, and every day we Everyone encounters it.” From this point of view, currency seems simple, but it is actually extremely complex.

However, the issue of the nature of money is the most complex issue. In the mid-19th century, a British MP, Graydon, once said, "Those who are deceived in studying the nature of money are more likely to be deceived than those who fall in love." There are even more people who have been deceived.

"This is really the case. Even today, whether it is Marx or scholars in Western economics, there are still a lot of debates about the nature of money.

The concepts of money in Western economics are diverse. Initially, Defined based on the function of currency, the definition of currency as an economic variable or policy variable was later formed. The main definitions of currency are as follows: 1. Items generally accepted by people to pay for goods, services and debts. 2. Items that serve as a medium of exchange, a standard of value, a store of price, and a standard of deferred payment. 3. Excess supply or demand causes excess demand for or supply of other assets. 5. No need to pay interest, as a temporary residence for the public. Liquid assets of net wealth. 6. The largest liquid assets related to national income, etc. In fact, the following four items should be the functional definition of currency. Regarding the nature of currency, in the history of Western monetary theory. There have been two different views: one is the monetary metal theory, and the other is the monetary nomenclature theory. Starting from the value scale of currency, storage means and the function of world currency, currency and precious metals are equivalent, and currency must have metal content. And the real value, the value of currency depends on the value of precious metals. Starting from the functions of currency as a means of circulation and payment, the currency nomenclature denies the real value of currency and believes that currency is only a symbol and a currency in name. The theory of metal is the product of the monetary gold and silver standard. With the collapse of the gold standard system in the early 20th century, its influence is increasingly weakening. Currently, in Western monetary theory, the dominant position is the monetary nominal theory, which comes from Western economics. This can be seen in the textbook definition of money. The recently published "Monetary Finance" by the famous American economist Mishkin defines money as: "Money or money supply is any payment for goods or services or the repayment of debts. Something generally accepted. "None of these definitions scientifically captures the essence of currency, but they are also useful for monetary economic analysis. Although different theories have their reasonable connotations, they fail to summarize currency on a scientific and comprehensive basis, resulting in "Currency fetishism" has long existed in economic life.

Marx was the first to scientifically define currency from multiple perspectives. Currency is a special commodity that serves as a general equivalent and is inevitable for the development of commodity exchange and value form. Product. In a developed commodity economy, currency performs five functions: a measure of value, a means of circulation, a means of payment, a means of storage, and a world currency. Different commodity exchanges have served as currencies in different regions in history. Later, monetary commodities gradually became the currency. Transitioning to precious metals such as gold and silver. With the development of commodity production and the expansion of exchange, the supply of commodity currency (gold and silver) is increasingly unable to meet the growing demand for currency, and substitute currencies and credit currencies gradually appear to make up for it. Insufficient means of circulation. In the 20th century, gold and silver slowly withdrew from the currency stage, and uncashed banknotes and bank checks became the main means of circulation and payment procedures in various countries. However, the laws of currency circulation revealed by Marx have always dominated currency movements. /p>

Usually, each country uses only one currency, which is issued and controlled by the central bank. However, there are exceptions, that is, multiple countries can use the same currency, such as in the European Union. The euro, the franc in the West African Economic Community, and the Latin Monetary Union in the 19th century are equivalent currencies with different names but that can circulate freely within the union. A country can choose the currency of another country as its legal currency, for example, Panama chooses the U.S. dollar as its legal currency. Currencies in different countries may also use the same name. For example, before France and Belgium adopted the euro, their currencies and those of Switzerland were both called francs. Sometimes, for special reasons, different municipalities in the same country may have the same name. Different versions of currency will also be issued. For example, in the United Kingdom, including England, Scotland, or even the remote islands of Jersey and Guernsey, they all have different versions of the pound issued by themselves, and they can be traded with each other in other areas of the United Kingdom, but only The English pound is the internationally recognized trading currency, and other versions of the pound may be rejected after being taken out of the UK.

Each basic currency unit can usually be divided into smaller minor currencies, which are the most commonly used. The ratio is 1/100 of the secondary currency as the main currency, for example, 100 cents = 1 yuan.

Before the French Revolution promoted the metric system, Europe had long used the 1/20/240 base system. For example, in the United Kingdom, 1 pound was equal to 20 shillings and 240 pence; in France, 12 denier was equal to 1 sou. (Sol), 20 sous equals 1 livre (also known as lithium). 1:7, 1:14, 1:25, 1:10, 1:1000, and other base systems were also used.

Some countries' currencies do not have auxiliary currencies, or although they have auxiliary currencies, they are only theoretical conversion units because the currency value is too small, and no actual currencies are issued, such as Japanese yen and Korean won.

In modern economic society, currency includes the following types.

(1) Coin

A coin is a small denomination of auxiliary currency. It is made of copper, aluminum or nickel.

(2) Paper money

Paper money is a kind of legal tender, called legal tender. Fiat currency is currency that is forced into circulation by the government. The basic power to issue banknotes belongs to the government, specifically the central bank. The sum of notes and coins is called currency or cash.

(3) Deposit currency

Deposit currency refers to demand deposits of commercial banks that can be withdrawn at any time. It is also called demand deposit. Since demand deposits can be converted into cash at any time, there is no difference between a bank's demand deposits and currency. It is also a currency.

(4) Time deposits and savings deposits

Time deposits and savings deposits are deposits that can earn interest after a certain period of time. Although these deposits cannot be used by writing checks, they can usually be converted into cash by notifying the bank in advance. In addition, the emergence of negotiable withdrawal orders (NOW) and automatic transfer services (ATS) since the 1970s has narrowed the difference between time deposits and demand deposits. The result of this narrowing of differences is that time deposits and savings deposits also become a kind of currency.

(5) Quasi-money

Quasi-money (near-money) refers to assets that can perform the function of storing value and are easily converted into a medium of exchange, but are not themselves a medium of exchange. For example, financial assets such as stocks and bonds are quasi-currencies.

(6) Money substitutes

Money substitutes refer to things that can temporarily perform the function of a medium of exchange, but cannot perform the function of a store of value. For example, a credit card is a currency substitute.