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HISTORY OF MONEY
What is Money?
Money is any item or verifiable record that is generally accepted as payment for goods and
services and repayments of debts in a particular country and socio-economics contexts .
The word money comes from the latin word “Moneo”, which means “to warn” and is named
after the roman goddess, Juno Moneta. (the goddess of money).
The invention of money made specialization of economic activities possible. Money was
invented thousands of years ago. The ancient Greeks used gold and silver coins.
“Three hundreds of Spanish rules let many indelible imprints on Philippines numismatics. At the
end of the Spanish regime, Philippine money was a multiplicity of currencies that included
Mexican pesos, alfonsino pesos and copper coins of other currencies.”
Philippines gained its independence from Spain in 1898, the government begun to issue and use
our very first currency in the form of coins and papers backed, not by gold, but by the countries
natural resources.
Money is used as a medium of exchange, a unit of store account and a Store value.
Money supply refers to the amount of money which is in circulation in an economy at any given
time.
Medium of exchange
Unit of account
Store of value
1. Earn it
2. Spend it
3. Save it
4. Invest it
5. Give it
FUNCTIONS OF MONEY
Money serves three general functions.
It is the basic tool used to pay or settle obligation. By being “generally acceptable as payment for
gods and services,” it serves as physical means for conducting business transaction.
Unit of account
Money serves as a yardstick for measuring prices and value for comparing items. Goods and
services are expressed in relative values of money. Their prices are related to the value of money,
which as the measuring sick.
Store of value
Money is a reservoir of future purchasing power. It is both a temporary and permanent store of
purchasing power.
Money is used as a medium for fulfilling obligation of debtors to creditors or maturity. It serves
to measure the extent of obligation by debtors and claims by creditors.
IMPORTANCE OF MONEY
Money is any time or verifiable record that is generally accepted as payment for goods and
services and repayment of debts in a particular country or socio-economic context. Without
money, individuals in the economy would have to devote more time to buying what they want
and selling what they don’t. Money simplifies matters. Workers are paid in money, which they
can then use to pay their bills and make their purchase. Money becomes the medium of
exchange. Goods and services are then expressed in terms of money.
One of the most important thing about the medium of exchange is that everyone must be
confident that it can be passed on, that is generally acceptable in trade. The value of a unit of
money is determined, therefore by the prices of each and everything – more accurately, the
average level of all prices. If prices go up, money is worthless because it will buy less; if prices
go down, money is worth more because it will buy more. However money is not everything and
there are other things that are more valuable in life. Money is only a tool or medium to achieve
happiness, it may not be the everlasting happiness in itself.
LAWS RELATED TO OUR PHILIPPINE MONETARY SYSTEM
Obviously, materials having economic values like utility, among others, will command
general acceptability among the people aside from their real and intrinsic value.
All notes and coins issued by the Bangko Sentral shall be fully guaranteed by the
government of the Republic of the Philippines and shall be legal tender in the
Philippines for all debts, both public and private. Provided, however, that, unless
otherwise fixed by the monetary board, coins shall be legal tender in amounts not
exceeding fifty pesos (P50) for denominations for twenty-five centavos and above,
and in amounts not exceeding Twenty pesos (P20)for denominations of ten centavos
or less.
Durability Money was be able to bear normal wear and tear when use in any transaction. It
must be made of materials which can last for a reasonable lo9ng period of time without using its
usefulness as a medium of exchange.
Originally, in the history of coinage, coins were made of pure metals, like that of gold and
silver. However, because these metals are soft in their pure form, in order to give such cins the
quality of hardness, governments have added alloy to them in their minting. In the case of paper
money, when they become mutilated or destroyed, the government has to replace them with new
ones. In like manner, coins that have suffered from excessive abrasion are withdrawn from
circulation and likewise replaced with new ones.
Section 57 of the new Central Bank Act, Retirement of old notes and coins.
The Bangko Sentral may call in for replacement notes of any series or denominations
which are more than Five years old and Coins which are more than 10 years old.
Notes and Coins called in for replacement in accordance with this provision shall
remain legal tender for a period of one year from the date of call. After this period,
they shall cease to be legal tender but during the following year, or for such longer
period as the Monetary board may determine, they may be exchanged at par and
without charge in the bangko sentral and by agents duly authorized by the Bangko
Sentral for this purpose. After the expiration of this latter period, the notes and coins
which have not been exchanged shall cease to be a liability of the bangko sentral and
shall be demonetized. The Bangko Sentral shall also demonetized all notes and coins
which have been called in and replaced.
Portability Money must be easy to carry for faster settlement of transactions. Material used, like
metal alloys must not be bulky. For higher denominations paper based materials are preferable
for easy transport.
Imagine if money is very bulky as well as very heavy, such a circumstances will slow
down if not actually hinder exchange transactions. Thus, in addition to metallic money, there is
in a circulation paper money in various denominations for such purpose.
Divisibility Money as a unit of account must be capable of being subdivided into smaller
denominations to settle obligations or collections arising from various transactions.
The Philippine peso which represents our standards monetary unit Is divided into
fractions,each fraction denominated as a centavo. These fractions (centavo), when combined
together, results in the same value as that of a whole , that is, one peso without loss or
impairment in value.
Section 48 of the new Central bank Act, The Peso
The unit of monetary value in the Philippines is the “Peso” which is represented by
the sign “P”. the peso is divided into one-hundred (100) equal parts called “Centavo”
which are represented by the sign “C”
Stability of Money Value The purchasing power of money must be maintained for a period of
time to maximize economic development thereby increasing employment level, production and
income level.
Cognizability Good money must be easy to recognize. Each denomination must be distinct to
avoid confusion with other denomination during exchange transactions. This will help minimize
counterfeiting and eliminate confusion. This is the purpose behind the minting of coins into
desired sizes and weights with marks of sovereignty of the imposing country duly stamped on
them.
Homogeneity or Uniformity Money belong to the same denomination must have the same
characteristics in terms of weight, fineness and designs.
Good money must be of the same quality and quantity. The unit of money must be of the
respects otherwise there will be confusion in buying and selling of goods and services. The color
and sizes of money material help the people to deal in the market/
Malleability Materials for the minting of money must be capable of being stamped with proper
design and durable to maintain its form.
Expressed very simply, this means that the volume of money in circulation could be
easily increased or reduced in accordance with the needs as well as dictates of the economy.
COINAGE
Mint Place for manufacture of money.
KINDS OF COINAGE
Free Coinage The government defines sizes, shapes , weight and designs of coins but allows
people to bring their precious metal to the mint to cover such into standard coins.
Limited Coinage Government purchases precious metal in an open market and mint them as a
medium of exchange at face values higher than material content to facilitate trade.
COMMODITY MONEY
Money evolved from simple forms of things with intrinsic values.
Since there was no uniformity in the use of commodities as money, requisites considered wer:
METALLIC MONEY
Due to economic development and improved standard of living, people desired for better
medium of exchange. Metals proved to be more efficient.
In the evolution of money, several properties served to favor the use of metallic coins and
eliminate other commodities as material for money.
PAPER MONEY
Its main purpose for the paper as money is to minimize inconvenience of carrying large
quantities of heavy metals.
Coins are metallic money which has a value that are used as a medium of exchange in
trading or to acquire something like goods and services in return.
Standard Coins are those made of metal like gold. They are also known as full
bodied money under the good standards.
Subsidiary or Token coins are coins where face value is greater than material used.
It is also similar to the term representative full-bodied money.
Fiat, credit or fiduciary Money Money whose value as a commodity is less than its
value in exchange for goods and services.
Various types of Money:
1. Full-bodied Money
2. Representative full-bodied Money
3. Credit money
a. Token coins
b. Representative token coins
c. Government promissory notes
d. Commercial bank promissory notes
e. Central bank promissory notes
4. Demand deposits subject to transfer by checks.