World of Coins

Research and reference => Numismatics => Topic started by: <k> on June 16, 2010, 01:00:37 AM

Title: There are only four basic currency systems in the world
Post by: <k> on June 16, 2010, 01:00:37 AM
Disagree with me if you wish, and correct me where I am wrong, but I believe there are only four basic currency systems in the world. Since I am talking about the modern world, I will begin by excluding barter, or “payment in kind”. That said, the four systems are:

1] The state or national currency.

2] Dollarisation.

3] The currency union.

4] The currency board.
Title: Re: There are only four basic currency systems in the world
Post by: <k> on June 16, 2010, 01:00:45 AM
The State or National Currency.

The national currency is the one we are probably most familiar with. I should perhaps refer to it as the state currency, since many states contain more than one nation, and some nations, e.g. the Kurds, are lacking a state.

A state currency is officially issued by and within a single state: one country, one currency. The US dollar and the UK pound sterling are two good examples of this. The state currency is issued by a central bank: in the case of the UK, by the Bank of England; and in the USA, by the Federal Reserve (popularly known as “The Fed”).

As a coin collector, the state or national currency is my favoured system. States or nations using this system produce coins whose specifications are either unique or close to being so. This gives rise to a greater variety of coinage.

However, within that system, there may be features that are not unique, for instance the effigy of the British monarch that many coins of the British Empire or Commonwealth were required to carry. Additionally, the names and denominations of those coins are not always unique. More than one country, for instance, uses coins called cents, or dirhams, or roubles; the denominations they use may or may not be unique – to my knowledge, only one country, the Bahamas, issues a fifteen cents coin.

Title: Re: There are only four basic currency systems in the world
Post by: <k> on June 16, 2010, 01:01:17 AM
Dollarisation.

Issuing your own currency comes with its own costs and complications. Some countries prefer to use the currency of other countries, either officially or unofficially. This system is called “dollarisation”, a generic term used whether the currency used is dollar, the euro, or whatever. Timor Leste is, to my knowledge, the latest dollarised country.

Some countries, e.g. Palau, have continued to use the US dollar, despite becoming independent from the US. This makes sense for a small country, as issuing your own currency costs money. Two British dependencies also use the U.S. dollar: the British Virgin Islands since 1959, and the Turks and Caicos Islands since 1973. This likewise makes sense, given their location.

In Europe, we find that Montenegro has opted to use the euro as its sole official currency, despite not being a member of the European Union. Some dollarised countries use a variety of foreign currencies. Zimbabwe reportedly uses the UK pound sterling, the US dollar, the South African rand, the euro, and the Botswana pula.

The disadvantage of dollarisation is that a dollarised country does not earn seignorage: this goes to the country that issues the currency.

As a coin collector, I disapprove of dollarisation, as it reduces the variety of world coinage available for me to collect. However, that is not always the case: there are hybrid situations, where a dollarised country uses the US dollar but still issues its own coins for circulation. An example of this is Timor Leste, where one US dollar equals 100 Timorese centavos; Timor issues its own nationally themed centavo coins for circulation but uses only US bank notes.

According to Wikipedia, dollarised Ecuador uses US coins in addition to its own centavo coins:

“Ecuadorian centavo coins were introduced in 2000 when Ecuador converted its currency from the sucre to the U.S. dollar. The coins are in denominations of 1, 5, 10, 25 and 50 centavos and are identical in size and value to their US cent counterparts (although the US 50-cent piece is rarely used.) They circulate within Ecuador alongside coins and banknotes from the U.S.A. Unlike in the United States, the $1 coin is commonly found in circulation. Ecuador does not issue any banknotes, relying on US issues.”
Title: Re: There are only four basic currency systems in the world
Post by: <k> on June 16, 2010, 01:01:39 AM
The Currency Union.

This is where two or more countries share a currency. Probably the best known current example is the euro. Formerly the members of the euro currency union issued their own currencies. The citizens of those countries incurred costs when they had to exchange, say, French francs into Italian lire. Now, citizens enjoy the convenience of travelling throughout the euro zone without having to exchange currencies.

The disadvantage is that there is only one central bank setting a single interest rate for the whole of the euro zone. The optimum interest rate for the euro zone as a whole may not be the optimum rate for, say, Spain or Germany. It may also take a long time for the economies within the euro zone to converge – and that convergence may turn out to be painful, as we have seen in the case of Greece.

Proponents of the currency union talk about the “optimal currency area”. A currency that crosses national boundaries may in some sense be more efficient and less costly to maintain than a national one. Nevertheless, an optimal currency area, however it is defined, may vary over time. What was once an optimal area may no longer be so in 10 years’ time. Some observers of the euro zone think it may currently contain two optimal currency areas: a northern European one (France, Germany, etc.) and a southern European one (Greece, Spain, etc.) - one of which may eventually leave the euro.

The euro coinage enjoys the benefit of uniformity. Each member of the euro zone is allowed its own national designs on the reverse of the coins - with certain restrictions - but otherwise the euro coinage is uniform from country to country in its obverse design, its range of denominations, and its size, shape, metal content and general specifications.

As a coin collector, I mourn the loss of the variety of the old national European currencies. The euro enjoys  variety in its national designs only – otherwise all its denominations are obviously restricted to the same specifications. Some euro countries use the same single design on the reverse of all its euro coins: Ireland, for instance, uses only its harp, replacing the diversity of its old barnyard set designs. I am told that the inhabitants of the euro zone actually prefer a single design per country, as it makes the coins less confusing and easier to recognise. If the euro zone grows, I fear that “one design per country” will eventually become a requirement.



Unlike the euro, the coins of some currency unions, for instance those of the East Caribbean states, do not include any national identifiers on their coins; although the coins of the East Caribbean states circulate throughout all the member states, the legend on the coins reads only "East Caribbean States" and does not identify any individual state or nation. So, the euro allows more design variation than the East Caribbean States, which has only one standard set of designs for all its member states.
Title: Re: There are only four basic currency systems in the world
Post by: <k> on June 16, 2010, 01:01:55 AM
The Hybrid Currency Union.

Just as there are hybrid dollarisation systems, where US dollar bills are used side by side with a national coinage, there are also hybrid currency unions. Everybody knows that any euro coin, whether its national design is Slovenian, German or whatever, is legal tender in any and every country of the euro zone.

However, what would you think if I told you that there are currency unions where that is not the case? It may surprise you to know that Jersey, Guernsey, and the Isle of Man are considered to be in currency union with the UK. This is because the Crown Dependencies, as the three dependencies are known, are semi-autonomous, are not part of the UK, and are therefore not under any requirement to use the UK pound sterling. All three do use it, however, as their only official currency. In addition, though, they are allowed to produce coins and banknotes bearing their own local designs. Apart from the designs, their banknotes and coins conform in all other respects to those of the United Kingdom: denomination, size, shape, metal content or material. All bear a portrait of Queen Elizabeth on the obverse.

Although the Crown Dependencies have their own local coins and notes, UK coins and notes are legal tender and circulate alongside the local issues. Despite all this, and despite the fact that these three dependencies are in official currency union with the UK, and despite the fact that their coins and notes are equal in value to their UK counterparts, the coins of the Crown Dependencies are not legal tender in the United Kingdom itself.

This seems to me to be an illogical and anomalous situation. Just imagine if you could spend your French euros in Germany, but not vice versa? What would be the point of that? In practice, the coins (but not the notes) of the Crown Dependencies do circulate in the UK in small numbers. In part, this is because they are almost identical in specification to the UK coins, and they also carry a portrait of the Queen. They therefore easily slip into circulation unnoticed. In part, it is because the average person cannot tell the difference between UK coins and those of the dependencies. That also goes for many shop assistants and shopkeepers.

As a coin collector, I welcome variety in coinage. I do not, however, think one-sided currency unions are logical. The UK should make the coins and banknotes of the Crown Dependencies legal tender within the UK. Then we would enjoy a true currency union.
Title: Re: There are only four basic currency systems in the world
Post by: <k> on June 16, 2010, 01:02:12 AM
The Currency Board.

Countries, dependencies or territories that use currency boards do not have a central bank that issues its own independent currency. Instead, they issue their own coins and banknotes that are backed by someone else’s currency. The backing currency is technically known as the “anchor currency”. The currency board then maintains it national or local currency at a fixed rate to the anchor currency.

In the case of, say, Gibraltar, the currency board takes in UK banknotes, banks them to earn interest, then issues its own banknotes with its own distinctive local designs. It calls it own currency the “Gibraltar pound sterling” and backs it with the anchor currency, the UK pound sterling, at a rate of one Gibraltar pound to one UK pound. UK banknotes and coins are accepted and circulate alongside the Gibraltarian versions. Any Briton visiting Gibraltar will therefore find a situation that is superficially the same as the one he encounters in Jersey, where local coins and notes circulate alongside UK ones of the same denominations and value. However, technically they are two very different situations, since Jersey is in currency union with the UK, and its currency IS the UK pound sterling, despite its locally different designs. The Gibraltar pound and the UK pound are technically two different currencies, despite the fact that the former is dependent on the latter, whilst the UK pound is a totally independent currency.

A currency board must typically back its currency with 105% to 115% of the anchor currency. It will find that over time its inflation rate comes into line with that of the country providing the anchor currency. However, unlike dollarised countries, a country using a currency board is able to earn interest on its anchor currency reserves. If its currency is not fully backed, this will cause problems once it becomes generally known. By 1994, the Cook Islands’ dollar was backed to a rate of only around 95% by its anchor currency, the New Zealand dollar. The New Zealand banks thereafter refused to accept Cook Islands dollars, and as a result the Cook Islands were forced to abandon their currency board and revert to dollarisation, by using the New Zealand dollar as their official currency.

As a coin collector, I find that a currency board is a welcome alternative to dollarisation, in that it leads to greater variety of coinage than would otherwise be the case. However, the coinage will often enough follow the same format and denominational system as those of the anchor currency, and only its designs will be unique.
Title: Re: There are only four basic currency systems in the world
Post by: <k> on June 16, 2010, 01:02:24 AM
The only situation I believe I have not mentioned is where different currencies are used in different parts of a country. Logic dictates that such a country is then no longer a country. We saw that situation in recent years in the confederation known as Serbia-Montenegro, where Serbia used the dinar and Montenegro used the euro. That country duly fell apart, and its former constituent parts are now independent states.
Title: Re: There are only four basic currency systems in the world
Post by: Figleaf on June 16, 2010, 01:46:38 AM
It depends on how you define currency. In most countries, tokens still play a role, e.g. the national transport tokens in the UK, car wash tokens, parking tokens, coffee machine tokens, beer tokens, prison tokens, to name a few. Some are just another form of the national currency (transport tokens), others can be bought (e.g. beer tokens), some are emphatically not the national currency (prison tokens) and some have no monetary value (parking tokens).

The IMF distinguishes other forms of currency and calls what you call dollarization fixed rate currencies (e.g. DKK) or currencies floating against a basket (e.g. the Chinese Yuan) or in a band as it considers convertibility and the reach of central banks important, but it doesn't distinguish between what you call currency unions and national currencies. I think this is correct, as it is an implicit value judgement on the form of government of its members.

The differences between unitary states, federal states and the unique EU are just not very important for the efficiency of the currency. The "one-size-fits-all" argument can just as well be applied to the US, Germany, Australia or, for that matter, the UK, where e.g. economic growth in England is different from economic growth in Scotland. In fact, you can stretch the argument ad absurdum to city (London grows faster than Newcastle), or even quarter level or on a pan-regional level, making the argument that fixed rates can never work in theory because of this argument, which reminds me of the archeologists who "proved" that archeopterix couldn't fly, until it was shown that by the same argument, bees couldn't fly either. ::)

Speaking of the IMF, there are also constructed currencies, such as the ECU and the SDR. Go back a few decades only in time, and you find that the gold-franc (a currency that no longer existed) was used as a unit of account, e.g. by the International Postal Union and for telecommunication payments. Similar mechanisms exist for payments between countries with inconvertible or partially convertible currencies.

Peter
Title: Re: There are only four basic currency systems in the world
Post by: <k> on June 16, 2010, 01:51:50 AM
The differences between unitary states, federal states and the unique EU are just not very important for the efficiency of the currency. The "one-size-fits-all" argument can just as well be applied to the US, Germany, Australia or, for that matter, the UK, where e.g. economic growth in England is different from economic growth in Scotland. In fact, you can stretch the argument ad absurdum to city (London grows faster than Newcastle), or even quarter level or on a pan-regional level, making the argument that fixed rates can never work in theory because of this argument, which reminds me of the archeologists who "proved" that archeopterix couldn't fly, until it was shown that by the same argument, bees couldn't fly either. ::)

Peter

Which is why I made my point about Serbia-Montenegro (as a let-out clause!) and what constitutes a country: it doesn't use different currencies in different regions.
Title: Re: There are only four basic currency systems in the world
Post by: Figleaf on June 16, 2010, 02:04:44 AM
The Republic used many different currencies and produced even more, the Holy Roman Empire used tens of different currencies, the double-monarchy used two currencies, even France used at least three different currencies simultaneously. Several Spanish colonies used the heavy real and the light real. All were single countries.

Peter
Title: Re: There are only four basic currency systems in the world
Post by: Figleaf on June 16, 2010, 02:46:27 AM
I was recently in the Turkish part of Nicosia. OK, I was in a touristy area only, but the only prices I saw were in euros, not in Turkish lira ...

Peter
Title: Re: There are only four basic currency systems in the world
Post by: Austrokiwi on June 16, 2010, 10:57:56 AM
Good Thread but it runs the danger of conflicting discussion. 

I recently read Keynes Treatise on Money ( both Volumes). I Initially found Keynes description of money types( not Currency) overly anally retentive ( apologies to Feud), but then as I read on I realised the analysis was important if only to highlight the fluid nature of the "substance" we call money.  Given that money is so hard to define a fear a clear and accepted definition of currency and its types will always be subject to discussion ( worthwhile discussion that is).
Title: Re: There are only four basic currency systems in the world
Post by: <k> on June 16, 2010, 01:28:01 PM
> Good Thread but it runs the danger of conflicting discussion. 

Agreed, but the point of the forum is to discuss, disagree, and hopefully enlighten along the way.

> Given that money is so hard to define a fear a clear and accepted definition of currency and its types will always be subject to discussion ( worthwhile discussion that is).

Also agreed. I recognise my categories are largely subjective, but I find them to be a good starting point, from my collector point of view, to understanding the relationship between modern currency systems and the types of coinage they throw up.
Title: Re: There are only four basic currency systems in the world
Post by: Figleaf on June 16, 2010, 01:59:52 PM
I never managed to read Keynes or Freud. Compliments for tenacity.

As a former financial economist, I feel that Keynes was way too system-oriented, neglecting the individual, while Freud was too individual oriented. There's a truth somewhere in the middle, but it is so complicated. Even behavioral investing doesn't capture it, as the BI funds don't produce an excess return (alpha) in practice. Markets fersure don't capture it, as they tend to be either regulated or wildly unstable.

Keynes and his "mathematical" approach are to be commended for bringing some rigor to economics, but model elasticities are just tools. They vary by the second on outside impulses (or advertising would be useless) and one cannot build a model with the elasticities as variables. Same for observed correlations (probabilities). During the banking crisis they all tended towards 1, destroying diversification.

Freud explains fear pretty well, though IMHO he describes too much to childhood and not enough to experience. Traders who never went through a down cycle are a danger to stability or an easy prey, depending on where you are in the market. Freud doesn't explain greed, the other major market driver, unless you see it as part of the sex drive. However, I think the sex drive is part of the power drive, which at its most basic is an attempt to control the world (or at least the environment of the individual) and the thing that comes closest to explaining greed.

Haven't tried sociology for an answer, but there may be something there. The herd mentality is a good example.

Sorry for the shop talk. It's all Austrokiwi's fault ;D Akona, can you comment?

Peter
Title: Re: There are only four basic currency systems in the world
Post by: akona20 on June 16, 2010, 02:06:32 PM
The function of various currencies these days is merely something to speculate on.
Title: Re: There are only four basic currency systems in the world
Post by: Figleaf on June 16, 2010, 02:35:03 PM
My comments were a tad broader than on currency, but I find it impossible to split the thread in a useful way now.

As for the function of currency, I would say hat this is still what the classical economists thought it was:


Form has changed, of course, as most money no longer physically exists and coins and banknotes have a negligible absolute intrinsic value, but I don't see how it has changed function. One thing hasn't changed. Coins and banknotes are still propaganda.

Peter
Title: Re: There are only four basic currency systems in the world
Post by: <k> on June 16, 2010, 02:59:32 PM
There are some Americans who lament the fall of the gold standard, and who complain of "fiat money"; one person even refers to fiat money as "hallucinated money".
Title: Re: There are only four basic currency systems in the world
Post by: Figleaf on June 16, 2010, 03:18:10 PM
These severely deluded people have no idea that there's not enough gold in the universe to cover the amount of money on earth. They would happily bring back the global economy to its size in Napoleonic times, when world population has increased manifold, causing unimagined hardship and misery. Maybe they should all be convinced to relocate to the same place. Arkansas? The Falklands? They'd blend in really well with the sheep...

Peter
Title: Re: There are only four basic currency systems in the world
Post by: Austrokiwi on June 22, 2010, 08:23:18 AM
There are some Americans who lament the fall of the gold standard, and who complain of "fiat money"; one person even refers to fiat money as "hallucinated money".


There were Americans who lamented the fall of the Silver standard back in the 1870s & 1890s.  Funny thing is ( at least in the 19th century) they seemed to be republicans ( sorry for bringing politics into this)
Title: Re: There are only four basic currency systems in the world
Post by: <k> on June 23, 2010, 03:58:14 AM
That is true today. You have a split between the "deficits don't matter" Bush-types, and those who would return the USA to the perceived path of righteousness.
Title: Re: There are only four basic currency systems in the world
Post by: Prosit on June 23, 2010, 04:05:07 AM
Then there is me and I claim both sides are wrong wrong wrong. This economy has never done well without deficit government spending and also generally does poorly with excessive deficit spending. 

Only thing worse than those people are people that ride the fence!   ;D

Dale


That is true today. You have a split between the "deficits don't matter" Bush-types, and those who would return the USA to the perceived path of righteousness.
Title: Re: There are only four basic currency systems in the world
Post by: <k> on June 24, 2010, 09:48:17 PM
...there are hybrid situations, where a dollarised country uses the US dollar but still issues its own coins for circulation. An example of this is Timor Leste, where one US dollar equals 100 Timorese centavos; Timor issues its own nationally themed centavo coins for circulation but use only US bank notes and not coins.

According to Wikipedia, dollarised Ecuador uses US coins in addition to its own centavo coins:

“Ecuadorian centavo coins were introduced in 2000 when Ecuador converted its currency from the sucre to the U.S. dollar. The coins are in denominations of 1, 5, 10, 25 and 50 centavos and are identical in size and value to their US cent counterparts (although the US 50-cent piece is rarely used.) They circulate within Ecuador alongside coins and banknotes from the U.S.A. Unlike in the United States, the $1 coin is commonly found in circulation. Ecuador does not issue any banknotes, relying on US issues.”

I quote myself only to wonder how many dollarised countries there are that currently use only their own coins, but in tandem with foreign banknotes, as in the situations mentioned above?
Title: Re: There are only four basic currency systems in the world
Post by: andyg on June 24, 2010, 09:52:42 PM
I quote myself only to wonder how many dollarised countries there are that currently use only their own coins, but in tandem with foreign banknotes, as in the situations mentioned above?


Panama?
Title: Re: There are only four basic currency systems in the world
Post by: <k> on June 24, 2010, 10:04:48 PM
Panama - from Wikipedia:

BANKNOTES
'Panamanian banknotes, denominated in balboas, were printed in 1941 by President Arnulfo Arias. They were recalled several days later, giving them the name "The Seven Day Dollar." The notes were burned after the seven days but some one balboa notes can be found with some collectors. These were the only banknotes issued by Panama.  U.S. notes have circulated both before and since.'

NOTES
Modern 1 and 5 centésimos and 1⁄10, ¼ and ½ balboa coins are the same weight, dimensions and composition as the U.S. cent, nickel, dime, quarter and half-dollar, respectively.

Title: Re: There are only four basic currency systems in the world
Post by: <k> on June 24, 2010, 10:10:01 PM
The portraits of historical figures on the coins of Panama are of little interest to me. In recent years, though, they've included two or three more attractive ones showing local architecture. I hope they continue in this vein, until they've supplanted all the portrait designs.

The Bahamas is another state that is gradually changing the face of its coins. It is replacing the old designs with updated ones of the same theme. For instance, the one cent got an updated design of starfish (or seastars, as I think the Merkins call them) one year, while in a later year the bonefish design was updated. Maybe by 2015 the series will be complete.
Title: Re: There are only four basic currency systems in the world
Post by: andyg on June 24, 2010, 10:29:22 PM
In recent years, though, they've included two or three more attractive ones showing local architecture.

So far these have all been one off designs....
Title: Re: There are only four basic currency systems in the world
Post by: <k> on June 24, 2010, 10:47:16 PM
Right, you are! I've just looked, and they are one year circulating commemoratives.

My favourites are 25 Centesimos (2003) Spanish Ruins and 25 Centesimos (2005) Stone bridge.
Title: Re: There are only four basic currency systems in the world
Post by: <k> on June 25, 2010, 11:27:47 PM
I want to return briefly to the subject of dollarised countries (countries that use the currency of another country). I gave Panama and Timor Leste as examples of countries that use foreign banknotes. Both countries actually use US dollar bills. However, both countries use their own coinage. It is this practice of using their own coins but somebody else's banknotes that I want to examine in more detail.

I'll start by reminding you of the situation in Timor Leste:

"One US dollar equals 100 Timorese centavos; Timor issues its own nationally themed centavo coins for circulation but uses only US bank notes."

What are the advantages of this hybrid system, I wonder? Well, first of all, by using a foreign currency, this small country does not need to incur the costs of creating and running its own central bank. However, one disadvantage is that its banknotes cannot be printed at home. It has to import them in quantity, and presumably at some cost.

The most apparent advantage of using its own coins is that they help to give Timor Leste a sense of national identity. The designs on the coins depict Timor Leste culture and Timor Leste national themes, unlike the US dollar bills that circulate.

In West European countries, of the value of the money in circulation, typically coins constitute about 2 or 3 percent of the total. I don't know what the ratio is in Timor Leste or typical Third World countries. A point to note, however, is that a coin is far heavier in relation to its value than a banknote. What would you rather have? A kilo of one centavo coins - or a kilo of 100 dollar bills? Well, I know which I would choose.

So I'm wondering now, does the relative weight of coins and banknotes play any part in the homeland coins / foreign banknotes situation that we find in Timor Leste? It might, if Timor Leste minted its own coins. However, they are minted in Portugal, so Timor still has to bear the costs of importing these coins. Because each coin is much heavier than a banknote but worth a lot less, then it is in effect much more expensive to import coins than banknotes.

Also, given Timor's location, what would be the difference in cost between importing US coinage from the USA (if this were allowed) and importing its own coinage from Portugal? Would there really be such a great difference? I'm guessing not.

The final consideration: does the USA allow its coinage to be exported for use in foreign countries? I don't know, but its bills certainly end up in these countries and are used, whether legally or not. But ultimately I'm not clear on the legal position. Can anybody enlighten me?

If it were legal for Timor Leste to import US coins, but it chooses not to and uses its own instead, then I think it must being doing so for cultural reasons, that is, for reasons of national pride. Since it still has to import its own coinage, I suspect that it is not a question of cost. Because it doesn't have a national mint, one way or another it would have to import its coins. I suppose another option would be to use no coins at all and instead issue banknotes denominated in centavos; however, that might not be practical.

So I conclude that Timor Leste issues its own coinage for reasons of national pride alone, and that other countries in a similar situation, such as Panama, do the same.

Admittedly I have reached my conclusion by logic alone, and my logic may be wrong. Does anybody disagree with my conclusion, or have any points to add?



Title: Re: There are only four basic currency systems in the world
Post by: Figleaf on June 26, 2010, 12:07:01 AM
I got my Timor coins years ago in Lisbon and was told they never reached Timor. Maybe that has changed now?

Peter
Title: Re: There are only four basic currency systems in the world
Post by: chrisild on June 26, 2010, 12:43:54 AM
Not sure about Timor Leste, but Ecuador and Panama do have "their own" coins along with USD coins, and they are actually used there. (From what I have heard and read, that is.) As for why this is done, I don't know either. The US dollar is not the currency of a monetary union but can only be introduced unilaterally, so in theory those countries might as well import the coins along with the notes. And if it was a language issue, they would have Spanish notes along with the Spanish language coins - but they don't. So yes, this national pride thing makes some sense to me too.

Christian
Title: Re: There are only four basic currency systems in the world
Post by: andyg on June 26, 2010, 01:45:34 AM
I got my Timor coins years ago in Lissabon and was told they never reached Timor. Maybe that has changed now?

Peter

Interesting you bought them in Lisbon, that's where they were struck.
This document sets out their acceptance by law in Timor-Leste
http://www.bancocentral.tl/Download/Regulations/BPA-Pub-Inst-2004-01en.pdf (http://web.archive.org/web/20150409103956/http://www.bancocentral.tl/Download/Regulations/BPA-Pub-Inst-2004-01en.pdf)

Title: Re: There are only four basic currency systems in the world
Post by: <k> on June 26, 2010, 01:49:23 AM
According to that document, both US and Timorese coins are legal tender (up to certain amounts) in Timor Leste, so they obviously circulate in tandem.
Title: Re: There are only four basic currency systems in the world
Post by: andyg on June 26, 2010, 01:55:47 AM
just in case you are interested, here (https://www.bancocentral.tl/en/currency.asp#centavos) is the bank website, took some finding!
Title: Re: There are only four basic currency systems in the world
Post by: <k> on June 28, 2010, 09:54:49 PM
So, there are dollarised countries that issue their own national coins. We have seen that Timor-Leste, for instance, issues centavo coins, where 100 centavos = 1 US dollar. The centavos coins come in the same denominations as their US cent counterparts. This makes sense. I assume this will be the same with all dollarised countries that issue their own coins, e.g. Ecuador, Panama, and whoever else. Or does anybody know of any exceptions here?

I now want to look at non-dollarised countries: specifically countries that use currency boards, and whose currency is linked to the anchor currency at a rate of one to one. A good example is Gibraltar. Its Gibraltar pound sterling is linked to its anchor currency, the UK pound sterling, at a rate of one to one. Gibraltar issues its coins and notes in the same denominations as the UK. I know that the coins are minted to the same specifications (size, weight, metal content). I can add the UK overseas territories of a] the Falkland Islands and b] Saint Helena and Ascension to that list. As for countries that run currency boards and whose currencies have a one to one peg to the dollar, I can name the Bahamas and Bermuda as two, but I don't know the whole list.

What I am wondering is whether all the currency board countries whose currencies have a one to one peg to their anchor currency issue coins to the same specifications, and in the same denominations, as their anchor currency counterparts. When I say "the same specification", I mean apart from the designs, as these will emphasise the culture of the country issuing them.

Does anyone have any thoughts or answers?

Title: Re: There are only four basic currency systems in the world
Post by: <k> on June 28, 2010, 10:03:59 PM
Apparently the Brunei dollar is linked to the Singapore dollar at a rate of one to one. To my knowledge, the Brunei coin denominations go up to only 50 cents. Does anyone know whether they match their Singapore counterparts in terms of size and shape? I have seen dollar coins for Singapore, but do not know whether they circulate.
Title: Re: There are only four basic currency systems in the world
Post by: andyg on June 28, 2010, 10:39:28 PM
Apparently the Brunei dollar is linked to the Singapore dollar at a rate of one to one. To my knowledge, the Brunei coin denominations go up to only 50 cents. Does anyone know whether they match their Singapore counterparts in terms of size and shape? I have seen dollar coins for Singapore, but do not know whether they circulate.

They used to match, but Singapore reduced the size of it's coins in 1985 to distinguish them from the Malay coins.

Another monetary area is that of Swaziland / Lesotho / Namibia and South Africa - though the coins are of different sizes.
Title: Re: There are only four basic currency systems in the world
Post by: <k> on June 28, 2010, 10:48:11 PM
It seems illogical to me to make them different sizes when there is a one to one link between the currencies. What were they thinking of?
Title: Re: There are only four basic currency systems in the world
Post by: Austrokiwi on June 29, 2010, 04:49:18 AM
It seems illogical to me to make them different sizes when there is a one to one link between the currencies. What were they thinking of?

AS we are not dealing with Specie based currencies I think the answer is they needed to distinguish between the coins so that people did not pass off coins as being from one country when in fact they were from another.
Title: Re: There are only four basic currency systems in the world
Post by: <k> on June 29, 2010, 10:40:05 AM
AS we are not dealing with Specie based currencies I think the answer is they needed to distinguish between the coins so that people did not pass off coins as being from one country when in fact they were from another.

But since the coins are of the same value, and the country name will be included in the legends, just what is the risk or the real issue here?
Title: Re: There are only four basic currency systems in the world
Post by: chrisild on June 29, 2010, 11:14:39 AM
No idea if identical specifications would actually be a risk, but in Namibia for example the South African Rand (ZAR) is legal tender, and pretty widely used. The Namibian Dollar (NAD), however, is not legal tender in South Africa, and accepted in some border regions only. Here is a document that explains the current* situation: http://www.finforum.co.za/regional/bispap17o.pdf

(* That file is dated May 2003; don't know whether there have been any major changes between then and now.)

Christian
Title: Re: There are only four basic currency systems in the world
Post by: <k> on June 29, 2010, 11:28:41 AM
Thanks for that, Christian. So the word "unilateral" comes to mind. For instance, Jersey is in currency union with the UK - but the UK is not in currency union with Jersey! Ridiculous, considering that Jersey money is UK sterling and worth exactly the same. Jersey coins are not legal tender in the UK, but a few escape into circulation because they look very similar. Gibraltar is NOT in currency union with the UK, but it is pegged at a rate of 1 to 1 to the UK pound. Again, the Gibraltar currency is not legal tender in the UK, but their coins escape into circulation in the UK often enough.
Title: Re: There are only four basic currency systems in the world
Post by: <k> on June 29, 2010, 11:48:56 AM
Yes, the territories that use their own versions of the UK pound are:

1] The Crown Dependencies: Jersey, Guernsey, and the Isle of Man.

2] Three UK overseas territories: Gibraltar, the Falkland Islands, and Saint Helena and Ascension.

There are other overseas territories that issue collector coins only. I have mentioned only those three that have their own coins actually circulating.

The Crown Dependencies happily accept each other's notes and coins. The UK overseas territories do not! All of them accept UK coins and notes.
Title: Re: There are only four basic currency systems in the world
Post by: devondad93 on July 05, 2010, 07:19:01 AM
I think I am not here to disagree on what you have mentioned in your post. I am here to agree on you because you are perfectly right! Of course, most money no longer physically exists and coins and banknotes have a negligible absolute intrinsic value, but I don't see how it has changed function.
Title: Re: There are only four basic currency systems in the world
Post by: <k> on July 11, 2010, 01:44:45 PM
A variation on the state or national currency is the system of two currencies operated in Cuba. One is called the national peso, which is used by Cubans; the other is the convertible peso, used mainly by tourists, and which is worth roughly 25 times more than the national peso.

Cuba even issues the two currencies with different designs. Here is a type set of the convertible peso coinage.

Does anybody know of any countries that issue their coins in two flavours, so to speak?
Title: Re: There are only four basic currency systems in the world
Post by: Figleaf on July 11, 2010, 01:50:31 PM
Not coins, but I used "tourist yuan" in China when I first went there. They were very popular, because they were convertible in other currencies. I kept a set, but traded them away. I presume the reason for issuing the Cuban tourist money is the same.

On a more virtual level, my first bank account in France (I still have it) was in convertible Francs, which was important, because the Franc was at the time not fully convertible, but currency smuggling was rampant. Each time I withdrew money from the account, I was given a formal warning that cash was not fully convertible.

Peter
Title: Re: There are only four basic currency systems in the world
Post by: <k> on July 11, 2010, 11:52:19 PM
Not coins, but I used "tourist yuan" in China when I first went there. They were very popular, because they were convertible in other currencies. I kept a set, but traded them away. I presume the reason for issuing the Cuban tourist money is the same.

From Wikipedia:

The second series of renminbi banknotes was introduced in 1955. During the era of the command economy, the value of the renminbi was set to unrealistic values in exchange with western currency and severe currency exchange rules were put in place. With the opening of the mainland Chinese economy in 1978, a dual-track currency system was instituted, with renminbi usable only domestically, and with foreigners forced to use foreign exchange certificates. The unrealistic levels at which exchange rates were pegged led to a strong black market in currency transactions.

In the late 1980s and early 1990s, the PRC worked to make the RMB more convertible. Through the use of swap centres, the exchange rate was brought to realistic levels and the dual track currency system was abolished.

Source:

http://en.wikipedia.org/wiki/Renminbi
Title: Re: There are only four basic currency systems in the world
Post by: <k> on July 12, 2010, 12:18:05 PM
I got my Timor coins years ago in Lisbon and was told they never reached Timor. Maybe that has changed now?

Peter

I've just been speaking to a couple who work in East Timor. They said that at first US bills and coins circulated, then the Timorese introduced their own coins. The US coins no longer circulate, and of the Timorese coins, the one centavo coin is now rarely seen.
Title: Re: There are only four basic currency systems in the world
Post by: Figleaf on July 12, 2010, 12:32:56 PM
Good for Timor. For countries to succeed, they need first to stay out of the headlines, yet continually make progress, even as little as having your own money circulate. Now let's see how they do on corruption...

Peter
Title: Re: There are only four basic currency systems in the world
Post by: <k> on July 13, 2010, 08:48:45 PM
Not sure about Timor Leste, but Ecuador and Panama do have "their own" coins along with USD coins, and they are actually used there. (From what I have heard and read, that is.)

Christian

So now we know that, of the three known dollarised countries that use their own coinage, Panama and Ecuador also use US coins, but Timor Leste does not. Do we know of any other dollarised countries that use US dollar bills but circulate their own national coinage?
Title: Re: There are only four basic currency systems in the world
Post by: Figleaf on July 13, 2010, 08:58:21 PM
This is known as a fixed exchange rate. China is an example. Look here (http://en.wikipedia.org/wiki/United_States_dollar#Dollarization_and_fixed_exchange_rates) for more information.

Peter
Title: Re: There are only four basic currency systems in the world
Post by: <k> on July 13, 2010, 09:06:24 PM
This is known as a fixed exchange rate. China is an example. Look here (http://en.wikipedia.org/wiki/United_States_dollar#Dollarization_and_fixed_exchange_rates) for more information.

Peter

Of those with a fixed rate, there are states that are dollarised, and therefore presumably have neither a central bank nor a currency board, and those, such as the Bahamas and Bermuda, that presumably do have a currency board, since they issue their own notes and coins but use the US dollar as an anchor currency. So there are categories within categories.
Title: Re: There are only four basic currency systems in the world
Post by: <k> on July 18, 2010, 02:19:26 PM
I've just been speaking to a couple who work in East Timor. They said that at first US bills and coins circulated, then the Timorese introduced their own coins. The US coins no longer circulate, and of the Timorese coins, the one centavo coin is now rarely seen.

A comparison of the diameter of the US coins and the Timor coins shows that the Timorese always intended that the two coinages would NOT circulate in tandem:

1 ctvo     17mm
5 ctvos    18.8mm
10 ctvos  20.8mm
25 ctvos  21.3mm
50 ctvos  25mm

Cent          19mm
Nickel         21.2mm
Dime          17.9mm
Quarter      24.3mm
Half dollar   30.4mm

They are of different sizes. Now, in the two countries where the national coinage DOES circulate in tandem with US coinage (Panama and Ecuador), do coins of a matching face value or denomination also match in size? Does anyone know?



Title: Re: There are only four basic currency systems in the world
Post by: <k> on July 22, 2010, 01:45:37 PM
I have amended reply#3 in this topic, to incorporate a point that forum member Engipress makes in his topic, Coins of the East Caribbean States (http://www.worldofcoins.eu/forum/index.php/topic,7017.0.html):

Unlike the euro, the coins of some currency unions, for instance those of the East Caribbean states, do not include any national identifiers on their coins; although the coins of the East Caribbean states circulate throughout all the member states, the legend on the coins reads only "East Caribbean States" and does not identify any individual state or nation. So, the euro allows more design variation than the East Caribbean States, which has only one standard set of designs for all its member states.
Title: Re: There are only four basic currency systems in the world
Post by: Ukrainii Pyat on July 22, 2010, 03:36:55 PM
So now we know that, of the three known dollarised countries that use their own coinage, Panama and Ecuador also use US coins, but Timor Leste does not. Do we know of any other dollarised countries that use US dollar bills but circulate their own national coinage?

Panama also circulates it's own coinage which is the same dimensions and composition as USA coinage.  Occasionally I will find a Panamanian coin in change, usually a centavo or 1/10th Balboa.  Last week I got a Barbados cent in a box search.
Title: There are only four basic currency systems in the world
Post by: Bimat on July 22, 2010, 04:11:55 PM
There's no monetary agreement between India and Nepal as such,but Indian currency is widely accepted (and is legal too) in Nepal.Recently,the Nepalese government has banned the two high denominated Indian banknotes (500 and 1000 Rupees),and carrying them is a offence now,which may put you behind bars for 3 years!

I have also heard that some Bangladeshi shopkeepers accept Indian currency,but I can't confirm.

Aditya
Title: Re: There are only four basic currency systems in the world
Post by: <k> on July 22, 2010, 05:06:26 PM
Panama also circulates its own coinage which is the same dimensions and composition as USA coinage.  Occasionally I will find a Panamanian coin in change, usually a centavo or 1/10th Balboa. 

Thanks for the update, scottishmoney. Now I just need to find out the relative sizes of the USA and Ecuadorian coinage.
Title: Re: There are only four basic currency systems in the world
Post by: <k> on July 22, 2010, 05:09:04 PM
There's no monetary agreement between India and Nepal as such,but Indian currency is widely accepted (and is legal too) in Nepal.

On various occasions in Europe I've found that the currency of one country is accepted just across the border. For instance in 1987, the Austrians in Innsbruck were quite happy to accept German money from me.

Title: Re: There are only four basic currency systems in the world
Post by: chrisild on July 22, 2010, 10:33:53 PM
That is pretty common in many "border" areas. Before we had the euro, many stores in Dutch cities "near Germany" would accept marks, and the other way round. But of course you could never be sure whether they did or not, and of course the exchange rate had a "convenience fee" built in. Fortunately those days are over. Also, in the Öresund region (Copenhagen/Malmö) quite a few places accept the money of the neighbors so to say. But with plastic that is not a big issue anyway. :)

Christian
Title: Re: There are only four basic currency systems in the world
Post by: Ukrainii Pyat on July 23, 2010, 12:08:49 AM
Around where I live we take Canadian coins, but usually not paper money unless in a shopping centre that attracts many Canadian citizens.  It is good for me since several of the businesses in the shopping centre bank with one of my banks and deposit their Canadian cash there.  I get calls when older, ie Series 1954 notes come in.

Canadian coins in our change is fairly common occurrence.  There is benefit since Canadians don't seem to collect or care about older coins and occasionally I come across George V cents(pre-1936) or George VI(1937-52) in the change.
Title: Re: There are only four basic currency systems in the world
Post by: <k> on July 25, 2010, 12:36:17 PM
Panama also circulates its own coinage which is the same dimensions and composition as USA coinage.  Occasionally I will find a Panamanian coin in change, usually a centavo or 1/10th Balboa.  Last week I got a Barbados cent in a box search.

I've checked online the size and weight of the coinage of Ecuador, and their coins match the corresponding US coins in size and weight. Both sets of coins do circulate in Ecuador. The only difference is in the metal content:

Ecuadorian coins


I do not know whether the Ecuadorian one sucre coin circulates in Ecuador.

Ecuadorian Sucre Coin.
Metal: Nickel Clad Steel
Diameter: 30.5 mm   
Weight: 11.25 g

US Dollar Coin.
Metal: Copper 88.5%; Zinc 6%; Manganese 3.5%; Nickel 2%
Diameter: 26.5 mm   
Weight: 8.1 g
Title: Re: There are only four basic currency systems in the world
Post by: <k> on July 25, 2010, 01:57:16 PM
There are other countries where two coinages do circulate to some extent. However, these are legacy situations.

The Cook Islands.
Until 1995 the C.I. ran a currency board, with the New Zealand dollar as the anchor currency. It produced its own coins and banknotes, but in 1994 the New Zealand banks refused to accept C.I. notes, as they were no longer backed 100% by N.Z. currency. C.I. uses N.Z. currency now and scarcely any of its own currency, apart from the $5 coin, which is not matched by any N.Z. coin denomination. NZ$5 notes also circulate. 

Tuvalu.
The Australian dollar is the official currency of Tuvalu. Australian paper money and coins are in circulation around the islands. Some Tuvaluan coins, mostly of 1976 vintage, are also in circulation.

Kiribati
Kiribati started issuing its own coinage in 1979, but only the 1989 $2 is now found in circulation. The Australian dollar is the official currency of Kiribati.

See also The Official Currencies and Coinages of Oceania (http://www.worldofcoins.eu/forum/index.php/topic,4370.0.html).