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Money Supply in the Philippines

Deposit Money Checks and Currency (notes and coins) and it facilitates the
process of exchange.
Barter First stage of monetary development.
Direct exchange of swapping goods for goods, service for service
and service for goods.
Evolution of money
Goldsmith accepts gold bullion to be converted into coins, accepts gold
deposits for safe keeping, helps in the transfer of precious metal by means of
receipts which are interest bearing; later share the interest earned to gold
depositors, hence, the beginning of BANKING.
Minting of coins gold bullions coins
Standard coin stamped to guarantee its integrity and fineness.

Functions of money
1. As a medium of exchange
2. As a standard to measure the value of goods and services
3. As a store of value
4. Liquidity the magnitude of the cost of converting an asset into money.
5. As a means of deferred payment

Attributes of good money
1. General acceptability accepted by anyone in exchange for goods and services.
2. Stability of value value must not change every now and then and not susceptible
to fluctuation, devaluation, inflation and etc.
3. Portability money is made light, to be easily carried from one place to another.
4. Cognizability design should not only be aesthetically beautiful but also difficult to
counterfeit.
5. Divisibility money is divisible into smaller amount.
6. Homogeneity materials used must be uniform in composition throughout.
7. Elasticity
8. Durability money must withstand longer period time against wear and tear.

Kinds of money
1. Commodity money money that is made up of precious metal or another valuable
commodity.
a. Metallic
b. Non-metallic
2. Credit money credit instruments by the government backed by a promise to pay.
a. Government notes
b. Bank notes
3. Fiat money refers to paper currency decreed by government as legal tender but
not convertible into coins or precious metal; it is backed by a government promised
that it is legally acceptable as a means of exchange for products; State Theory of
Money (Japanese Imperial Notes)
4. Legal tender money - Any official medium of payment recognized by law that can
be used to extinguish a public or private debt, or meet a financial obligation. The
national currency is legal tender in practically every country. A creditor is obligated
to accept legal tender toward repayment of a debt.

3 kinds of Credit Money
1. Representative paper money a claim on a commodity, for example gold
certificates or silver certificates. In this sense it may be called commodity-backed
money. Any type of money that has face value greater than its value as material
substance. Used in this sense, fiat money is a type of representative money
2. Fiduciary money - Money that depends for its value on confidence that it is an
accepted medium of exchange. It originated as a paper certificate that was a
promise to pay a certain amount of gold or silver to the bearer. From the Latin
fiducia meaning confidence or trust.
3. Bank notes - is a type of negotiable instrument known as a promissory note, made
by a bank, payable to the bearer on demand. When banknotes were first introduced,
they were, in effect, a promise to pay the bearer in coins, but gradually became a
substitute for the coins and a form of money in their own right.

Kinds of Coinage
1. Free/ Gratuitous Coinage the unrestricted coinage of bullion or of a specified
metal, as silver, into money for any person bringing it to the mint, either with or
without charge for minting.
2. Brassage Coinage A sum formerly levied to pay the expense of coinage.
3. Seigniorage Coinage - the charge over and above the expenses of coinage (making
into coins) that is deducted from the bullion brought to a mint to be coined.
4. Limited Coinage - When Govt. imposes limits on the conversion of metal in to
standard coins.
Mint place or factory where coins manufactured.
Monetary standards currency adapted in one country.


History of money in the Philippines.
Pre-Spanish Regime
Rice used as the principal primitive currency
Land sold for several heads of carabaos
Penniform Gold Barter Ring used in trading with foreign merchants
(8-14
th
century)
Piloncito made of crude rounded coin with flat sides
Spanish Regime
1571
Hilis Kalamay hammered in Mexico
Cabo de bara de plata/Silver cobs First coins that widely circulated
during and after the reign of King Philip II.
Spanish Barilla first coin minted in the Philippines
Spanish Dos Mundos Worlds Most Famous coin, A.K.A Mexican Pillar
Dollar.
Colderillas (1766) 2
nd
coin minted in the Philippines, equivalent to one
centavo
Cuatro Coins (1771) 1/4 Real
Isabelinas after the death of King Ferdinand VII
El Banco Espaol Filipino de Isabel II Pesos Fuerte / First bank note in
the Philippines.
Five Peseta (1855) silver coin minted in Madrid / Paris
1814 Manila was made a port
1897 6 million silver dollars marked Filipinas were circulated
American Regime
1901 Philippine National Bank was established
El Banco De Las Islas Filipinas (BPI) was also authorized to issue bank
notes.
Japanese Regime
Japanese War Notes Mickey Mouse Money
Post war period
July 4, 1994 commonwealth
1949 Central Bank was established






Functions of Credit
1. Medium of Exchange
2. Facilitates productions and consumptions of goods
3. Elevates the moral standards of people
4. Induces savings
5. Contributes to the growth of the economy
6. Capital
A. Loans
B. Stocks
C. Bonds
7. Full utilization of wealth
8. Expansion and contraction of money supply

Characteristics of Credit
1. Bipartite Contract it always has two persons. A debtor and a creditor
2. Pecuniary Contract it always expressed in terms of money
3. Fiduciary Contract it always requires a trust or a confidence
4. Risk is always involved
5. It has futurity

Significance of credit
1. Production of goods
2. Distribution of goods
3. Vital link between production and distribution
4. Promotes fill employment

Classification of Credit
1. Personal Credit
a. Service Credit
b. Retail Credit
i. Regular Charge Account
ii. Revolving Charge
iii. Installment Plan
c. Personal Loan Credit
2. Commercial/ Mercantile Credit
3. Bank Credit
4. Export and Import Credit
5. Investment Credit
6. Agricultural Credit
7. Industrial Credit
8. Real Estate Credit
9. Government/ Public Credit
10. Secured or Unsecured Credit
11. Short, Medium, and Long Term Credit
12. Direct Loans, Discount Loans, and Credit Line
a. Regular Credit Line
b. Maximum Loan
c. Commitment
d. Over Draft

Criteria for Personal Credit
1. Employment and Personal Resources
2. Wealth and Accumulated Resources

5c of Credit
1. Character
2. Capital
3. Capacity
4. Collateral
5. Conditions

Credit Instruments a term used in the banking and finance world to describe any item
agreed upon that can be used as currency
General Acceptability widely acceptable without questioning the integrity of
the person offering it; only credit money meets the qualification of general
acceptability
1. Bank Notes
2. Treasury Certificate
Limited Acceptability accepted only by few people
1. Investment Purposes
a. Stock Certificates Ownership of a corporation
b. Bond Certificates Issued by a government or a corporation in order to
raise money
c. Money Market Bills Negotiable financial instruments bought and sold
in the market



2. Commercial Purposes
a. Promise-to-pay
-the maker (debtor)
-the payee (creditor)
1. Promissory Note
2. Financial Institution Deposit
3. Letter of Credit
4. Open Book Account
b. Orders-to-pay
-the drawer (who orders payment)
-the drawee (who are ordered to pay)
-the payee (receiver of the payment)
1. Checks
2. Drafts
3. Money Orders

Kinds of Bonds
1. Debenture Bonds unsecured bonds issued against the general credit standing of
the user.
2. Collateral Trust Bonds secured by a pledge of corporate stocks and bonds, and
evidences of indebtedness of other corporations which are owned by the issuing
corporation
3. Mortgage Bonds bonded indebtedness secured by a mortgage on real properties
of the corporation
4. Sinking Fund Bonds are bonded indebtedness requiring the compulsory
maintenance of a sinking fund to redeem the bonds at maturity
5. Registered Bonds is one which is issued in the name of a particular person or entity
6. Guaranteed Bonds are bonds, the principal and interest payments of which are
guaranteed by a company other than the issuing corporation
7. Convertible Bonds are bonds which could be exchanged with other securities of the
corporation within the duration of the bonded indebtedness
8. Redeemable Bonds bonds which are subject to call, redemption, or repurchase
before they are due
9. Serial Bonds bonded indebtedness of single issue but are divided into groups of
different maturity dates and could possibly have variable terms and conditions
10. Income Bonds the interest payments of income bonds are dependent on the
happenings of a vent or after lapse of a certain period of time
11. Coupon Bonds bonds with detachable coupon which evidence interest obligations
payable at specified periods
12. Profit Sharing Bonds are bonds allowed to participate in the earning of the
company in addition to the interest payments

Kinds of Money Market System
1. Interbank loans loans which should be paid upon demand or call by the lending
institutions and have no definite maturity
2. Promissory notes also called dealers papers. They are short term indebtedness
issued by institutions as direct obligors
3. Repurchase agreement are papers sold by dealers to buyers at an agreed price. The
dealer undertakes to buy the same paper from the buyer at a specified future time
and at a price agreed upon
4. Certificate of assignments are debt instruments which evidences lawful ownership
of the holder to the extent of the Peso value indicated on the face of the instruments
or a batch of an original lump sum promissory notes
5. Certificate of participation are debt instruments which evidences lawful ownership
of the holder to the extent of the Peso value indicated on the face of the instruments
or a portion of an original lump sum obligation subsequently broken down and
denominated into a different Peso value
6. Commercial papers an instrument which is issued, endorsed, sold, transferred or
conveyed to another person, or entity with or without recourse, specifying the
indebtedness of any person or entity
7. C.B.C.I tax-free and earn reasonable rate of interest, they are the Central Bank
Certificate of Indebtedness
8. Treasury Bills are bearer notes of debt instruments sold every week at a discount by
the Central Bank through competitive auction
9. C.B.P Progress Bonds issued by the Development Bank of the Philippines and
secured by their assets, they are tax-free and convertible

Kinds of Check
1. Cross check crosses are visible and for deposit only
2. Post dated check shows the future date
3. Stale check changeable to the new check
4. Managers/cashiers/treasurers check assured of, against the finds of the bank, and
drown by the bank
5. Bouncing check has no sufficient fund
6. Counter check issued when a holder has no more checks
7. Certified check depositors own checks which the bank certifies
8. Falsified and forged check has been deliberated
9. Travelers check universal acceptability
10. Personal and business check for personal/ business expenses
11. Cancelled check cancelled by the bank, because it has been paid
12. Returned check returned because of an inconsistency of an amount or etc.

Differences between draft and check
Draft Check
May/may not have fund Must have fund
Issued by the bank or a person Always issued by the depositors
Drawee is writable by the person Name of the drawee is printed


Kinds of draft
1. Demand/ Time draft subject to payment upon presentation
a. Time date
b. Time sight
2. Bank/ Trade draft
3. Acceptance draft

2 Kinds of money order
1. Bank money order
2. Postal money order