Back when the value of currencies was still linked to the precious metals, and their issuance therefore curtailed, many resented the scarcity of money as the cause of their economic ills. Of course, a deficiency of money makes credit similarly scarce and can slow economic growth even when any stimulus at all would be welcomed.…
Through much of the history of paper money, banknotes were issued by private entities operating in a decentralized system of money and finance. In whatever country and whatever their denomination, banknotes even traded at discounts to their face value that varied according to their liquidity and the health of the issuing bank. In the 19th…
Hyperinflation crippled numerous economies in the 20th century and continues to do so to this day. One of the most severe, and the one that is perhaps the most recounted to this day occurred in Germany following its defeat in the First World War. That episode of hyperinflation, like all the others, was most directly…
When currencies became divorced from the gold and silver that used to determine their value, their utility ceased to be global in extent. From then on, currencies became national phenomena. However, there was a time when the precious metal content of a coin was the sole determinant of its value. In that era, money was…
American coinage, much like its paper banknotes, have changed little in decades, at least in regard to their design. This continuity, surely along with the US dollar’s role as a reserve currency, have made American money recognizable to many around the world for generations, especially those engaged in trade or finance. There was however, an…
During the reign of Trajan, at the beginning of the 2nd century AD, the Roman Empire controlled all of western and southern Europe, the coast of North Africa, and much of the Middle East. Perhaps 100 million people lived under the rule of its emperors. Yet, by the middle of the 3rd century, it was…
If you were shown a paper banknote with ‘The Japanese Government’ printed on top, albeit in English, and was for a sum of 500 pesos, you would probably be left scratching your head wondering from where this strange money came. A sensible person would presume it was just some kind of novelty; in a sense,…
In 1789, France overthrew its government, the replacement for which would be a work in progress for years. The various regimes established in the French Revolution faced daunting fiscal challenges, the very tremors that brought down the old regime. As with many states in financial distress, France turned to the debt markets first and the…
Over the past two thousand years, commerce has transitioned from using metal coins as the principal medium of exchange to using paper banknotes. Paper currencies started off as peculiar local institutions, often conceived as a type of debt obligation, and served as stand-ins for actual coins. Today, they have become the universal norm and are…
In 1992, the Maastricht Treaty committed the European Union to adopting a single currency, the euro. The most immediate precursor to the euro in existence then was the Exchange Rate Mechanism (ERM) which pegged several European currencies to each other, creating a system of fixed exchange rates. The ERM was established in 1979 and disintegrated…
Among the basic functions of a currency is to serve as a medium of exchange. In ages past, gold and silver fulfilled this role and made up much of the world’s currency. Today, most currency is paper money, either pegged to another currency or backed by nothing in particular. However, it is conventional wisdom that…
