Money is any object that is generally accepted as payment for goods and services and repayment of debts in a given country or socio-economic context. The main functions of money are distinguished as: a medium of exchange; a unit of account; a store of value; and, occasionally, a standard of deferred payment.
Money originated as commodity money, but nearly all contemporary money systems are based on fiat money. Fiat money is without intrinsic use value as a physical commodity, and derives its value by being declared by a government to be legal tender; that is, it must be accepted as a form of payment within the boundaries of the country, for "all debts, public and private".
The money supply of a country consists of currency (banknotes and coins) and demand deposits or 'bank money' (the balance held in checking accounts and savings accounts). These demand deposits usually account for a much larger part of the money supply than currency. Bank money is intangible and exists only in the form of various bank records. Despite being intangible, bank money still performs the basic functions of money, being generally accepted as a form of payment.
When gold and silver are used as money, the money supply can grow only if the supply of these metals is increased by mining. This rate of increase will accelerate during periods of gold rushes and discoveries, such as when Columbus discovered the new world and brought back gold and silver to Spain, or when gold was discovered in California in 1848. This causes inflation, as the value of gold goes down. However, if the rate of gold mining cannot keep up with the growth of the economy, gold becomes relatively more valuable, and prices (denominated in gold) will drop, causing deflation. Deflation was the more typical situation for over a century when gold and paper money backed by gold were used as money in the 18th and 19th centuries.
Modern day monetary systems are based on fiat money and are no longer tied to the value of gold. The control of the amount of money in the economy is known as monetary policy. Monetary policy is the process by which a government, central bank, or monetary authority manages the money supply to achieve specific goals. Usually the goal of monetary policy is to accommodate economic growth in an environment of stable prices. For example, it is clearly stated in the Federal Reserve Act that the Board of Governors and the Federal Open Market Committee should seek "to promote effectively the goals of maximum employment, stable prices, and moderate long-term interest rates."
A failed monetary policy can have significant detrimental effects on an economy and the society that depends on it. These include hyperinflation, stagflation, recession, high unemployment, shortages of imported goods, inability to export goods, and even total monetary collapse and the adoption of a much less efficient barter economy. This happened in Russia, for instance, after the fall of the Soviet Union.
Governments and central banks have taken both regulatory and free market approaches to monetary policy. Some of the tools used to control the money supply include: * changing the interest rate at which the central bank loans money to (or borrows money from) the commercial banks * currency purchases or sales * increasing or lowering government borrowing * increasing or lowering government spending * manipulation of exchange rates * raising or lowering bank reserve requirements * regulation or prohibition of private currencies * taxation or tax breaks on imports or exports of capital into a country
In the US, the Federal Reserve is responsible for controlling the money supply, while in the Euro area the respective institution is the European Central Bank. Other central banks with significant impact on global finances are the Bank of Japan, People's Bank of China and the Bank of England.
For many years much of monetary policy was influenced by an economic theory known as monetarism. Monetarism is an economic theory which argues that management of the money supply should be the primary means of regulating economic activity. The stability of the demand for money prior to the 1980s was a key finding of Milton Friedman and Anna Schwartz supported by the work of David Laidler, and many others. The nature of the demand for money changed during the 1980s owing to technical, institutional, and legal factors and the influence of monetarism has since decreased.
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10:58
Three Types of Money (Part 1)by Instrumentally5,951 views
@BZdaKritta Please shut up.
DriftPirateD 1 year ago
Fixed by the government, Fixed by the government, Fixed by the government, Fixed by the government - ok, I think I am good and brainwashed now. But thats all pretty much common sense. but where is all the important stuff about the part the Fed plays and how the "monetary system" is by design really a tool to control everything !!! hmmm...
BZdaKritta 1 year ago
Wow you cant do almost anything you could back in those days,
Number 1, Nobody Anywhere Trusts Checks
Sad world where you cant even use the money you have
itsadeadmansparty 1 year ago
@firefox8192 Exactly, Wow, seems like the worlds changed so much, since silver certificates, You know just a day ago, federal reserve celebrated at Jekyll Island the 100th Anavisary of its creation, They did it publically, on main news stations like cnn, so now we know the dirty truth about Jekyll island, I cant believe we still havent stoped the fed, Did you hear the Spokesperson at Chinas central bank say on nation media that USA Monetary System needs to be changed, Crazy, even Germany
itsadeadmansparty 1 year ago
HAHA thefilmarchive so funny you post this video 5 days ago,
it seems we all need to study basic money concepts,
lol its like people in the Federal Reserve never studied what happens when you print money without concern lol
I mean did they goto school? or are they like most CEOs of fortune 500 companies, just bumbling dummies,
Anyway thanks for these cool old time videos
itsadeadmansparty 1 year ago
IS IT A SILVER CERTIFICATE federal reserve notes are not money
firefox8192 1 year ago
gee wiz aww shucks
Mezocosm 1 year ago