Author Topic: There are only four basic currency systems in the world  (Read 35249 times)

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Offline Figleaf

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Re: There are only four basic currency systems in the world
« Reply #15 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:

  • means of payment
  • means of storing wealth
  • unit of account and value

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
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Offline <k>

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Re: There are only four basic currency systems in the world
« Reply #16 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".
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Offline Figleaf

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Re: There are only four basic currency systems in the world
« Reply #17 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
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Austrokiwi

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Re: There are only four basic currency systems in the world
« Reply #18 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)

Offline <k>

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Re: There are only four basic currency systems in the world
« Reply #19 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.
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Offline Prosit

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Re: There are only four basic currency systems in the world
« Reply #20 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.

Offline <k>

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Re: There are only four basic currency systems in the world
« Reply #21 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?
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Offline andyg

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Re: There are only four basic currency systems in the world
« Reply #22 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?
always willing to trade modern UK coins for modern coins from elsewhere....

Offline <k>

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Re: There are only four basic currency systems in the world
« Reply #23 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.

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Offline <k>

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Re: There are only four basic currency systems in the world
« Reply #24 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.
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Offline andyg

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Re: There are only four basic currency systems in the world
« Reply #25 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....
always willing to trade modern UK coins for modern coins from elsewhere....

Offline <k>

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Re: There are only four basic currency systems in the world
« Reply #26 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.
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Offline <k>

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Re: There are only four basic currency systems in the world
« Reply #27 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?



« Last Edit: July 30, 2011, 12:55:35 AM by coffeetime »
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Offline Figleaf

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Re: There are only four basic currency systems in the world
« Reply #28 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
« Last Edit: June 26, 2010, 02:20:50 AM by Figleaf »
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Offline chrisild

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Re: There are only four basic currency systems in the world
« Reply #29 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