Representative money refers to money that consists of token coins, other physical tokens such as certificates, and even non-physical "digital certificates" (authenticated digital transactions) that can be reliably exchanged for a fixed quantity of a commodity such as gold, silver or potentially water, oil or food. Money is anything that is generally accepted as Payment for Goods and services and repayment of Debts. In the study of Numismatics, token coins or tokens are coin-like objects used instead of Coins The field of tokens is part of Exonumia. Gold (ˈɡoʊld is a Chemical element with the symbol Au (from its Latin name aurum) and Atomic number 79 Silver (ˈsɪlvɚ is a Chemical element with the symbol " Ag " (argentum from the Ancient Greek: ἀργήντος - argēntos gen Water is a common Chemical substance that is essential for the survival of all known forms of Life. Petroleum ( L petroleum, from Greek πετρέλαιον, lit Food is any substance usually composed primarily of Carbohydrates Fats water and/or Proteins that can be eaten or drunk by an Representative money thus stands in direct and fixed relation to the commodity which backs it. This is to be distinguished from commodity money which is actually composed of a real physical commodity. Commodity money is Money whose value comes from a Commodity out of which it is made It is also distinguished from fiat money, in which the value of the money varies with regard to commodities, according to government dictate in regions where government authority holds sway, or else according to market forces where it does not. The terms fiat currency and fiat money relate to types of currency or Money whose usefulness results not from any intrinsic value or guarantee that it can be
Traditional representative money
Representative money is widely believed to have originated in ancient Sumer where small baked clay tokens in the shape of sheep or goats were used to replace barter in trade. Sumer ( Sumerian: sux-Latn [[Ki (earth ki]]-[[EN (cuneiform en]]-'''ĝir15''', Akkadian: Šumeru; possibly Biblical Shinar Barter is a type of Trade in which goods or services are directly exchanged Over time, they were sealed in clay vessels which contained a certain number and had that number written on the outside - but it was only possible to verify the number of tokens inside by shaking the vessel and guessing, or by breaking it. At which point, the number written on the outside originally became subject to doubt. Apparently, however, this system was good enough to have discouraged much counterfeiting - penalties for "short-sheeping" or selling the same goat twice were quite severe, and often such activities in ancient societies were thought to offend one or more gods. A counterfeit is an imitation that is made usually with the intent to deceptively represent its content or origins
Later during the crusades, representative banking notes were established by the Knights of the Temple of Solomon (the Templar Knights), so that pilgrims could protect themselves from robbery along the pilgrimage to the holy lands. The Crusades were a series of military campaigns of a religious character waged by much of Christian Europe against external and internal opponents The Poor Fellow-Soldiers of Christ and of the Temple of Solomon (Pauperes commilitones Christi Templique Solomonici commonly known as the Knights Templar or the Order Pilgrims would deposit an amount of gold in a Templar monastery in Europe and were given an equivalent in banking notes, then would "cash in" these notes for the amount of gold once they had arrived in the holy lands. The notes would have been worthless to any highway robbers and therefore were not taken. This banking system and the presence of paper monies has evolved into our modern banking system.
A key feature of representative money is that its value is very directly perceived by the users of this money, who recognize the utility or appeal of the tokens as they would recognize the goods themselves. That is, the effect of holding a token for a barrel of oil must be (to the holder) the same both emotionally and economically as actually having the barrel at hand. This thinking guides the modern commodity markets, although they use screens full of software-based tokens and a sophisticated range of financial instruments that are more than one-to-one representations of units of a given type of commodity. Commodity markets are markets where raw or primary products are exchanged Financial instruments are cash evidence of an ownership interest in an entity or a contractual right to receive or deliver cash or another financial instrument They still, however, guarantee the moving a certain amount of a commodity to, or on behalf of, the owner. This is usually only to a well-known point of delivery.
In the late 19th and early 20th century most currencies were examples of representative money in that they were based on the gold standard in which a currency could be exchanged for a fixed amount of gold, at least in theory. The gold standard is a monetary system in which a region's common media of exchange are paper notes that are normally freely convertible into pre-set fixed quantities of Gold In fact, in many countries, such exchange was discouraged, difficult and likely almost impossible except for a few with access to the commodity markets in major capital cities, or in some cases, any but those in government or with proven foreign exchange needs that were supported by the government. Commodity markets are markets where raw or primary products are exchanged For the government of parliamentary systems see Executive (government. The foreign exchange ( currency or forex or FX) market refers to the market for currencies.
For example, the United States claimed to have representative money from the U.S. Civil War (when "greenbacks" were first issued) to 1970 when the gold standard was officially abandoned. The United States of America —commonly referred to as the Causes of the war See also Origins of the American Civil War, Timeline of events leading to the American Civil War The coexistence of a slave-owning South Year 1970 ( MCMLXX) was a Common year starting on Thursday (link shows full calendar of the Gregorian calendar. The gold standard is a monetary system in which a region's common media of exchange are paper notes that are normally freely convertible into pre-set fixed quantities of Gold But U. S. citizens were barred from trading directly in gold, and thus could not go to Fort Knox and redeem their dollars for gold. Fort Knox is a United States Army post in Kentucky south of Louisville and north of Elizabethtown. Such tactics were typical, and characterize the long shift from commodity money to representative money to fiat money. Commodity money is Money whose value comes from a Commodity out of which it is made The terms fiat currency and fiat money relate to types of currency or Money whose usefulness results not from any intrinsic value or guarantee that it can be
New proposals for backing of representative money
While representitive money is not currently used as the official currency of any nation, a few theorists of green economics and natural capitalism have argued for its return, some of whom suggest a form of money based on ecological yield. Ecological economics is a Transdisciplinary field of academic research within Economics that aims to address the interdependence between human economies and natural Natural Capitalism Creating the Next Industrial Revolution is a 1999 book co-authored by Paul Hawken, Amory Lovins and Hunter Lovins. Ecological yield is the harvestable Population growth of an Ecosystem. They argue that the outputs of "natural capital" are the only genuine commodities - air, water, and renewable energy we consume being mostly interchangeable when they are free of pollution or disease. Natural capital is the extension of the economic notion of capital (manufactured means of production to environmental goods and services Temperature and layers The temperature of the Earth's atmosphere varies with altitude the mathematical relationship between temperature and altitude varies among five Water is a common Chemical substance that is essential for the survival of all known forms of Life. Renewable energy is Energy generated from Natural resources mdashsuch as Sunlight, Wind, Rain, tides and geothermal However, since such goods cannot be held directly, it is common to suggest that representative money be issued based on enhancing and extending nature's services, giving one the right to receive the yield as benefit. Nature's services is an umbrella term for the ways in which Nature benefits humans particularly those benefits that can be measured in economic terms They argue that reframing political economy to consider the flow of these basic commodities first and foremost, avoiding use of military fiat except to protect "natural capital" itself, and basing credit-worthiness more strictly on commitment to preserving biodiversity rather than repayment of debt, as in the current global credit money regime anchored by the Bank for International Settlements, would provide measurable benefits to human well-being worldwide. Political economy originally was the term for studying production buying and selling and their relations with law custom and government Biodiversity is the variation of Life forms within a given Ecosystem, Biome or for the entire Earth. The Bank for International Settlements (or BIS) is an International organization of Central banks which "fosters international monetary and Quality of life is the degree of well-being felt by an individual or group of people
Critics of this type of proposal often note that, as with other transitions from commodity to representative money, inadequate substitutes will be made on a "just trust me" basis - as per Gresham's Law which states that bad money drives out good. Gresham's law is commonly stated "Bad money drives out good Other proposals, such as time-based money, rely on the availability of human labour as a commodity, especially within a community, which is presumably harder to guarantee access to, but also harder to steal. In Economics, a time-based currency is an Alternative currency where the unit of exchange is the Person-hour. Still others deny the utility of commodifying labour as such, and suggest making free time the standard, since physical capital used for leisure, sport, art, theatre, and other forms of play is commodifiable and possible to control. Leisure or free time, is a period of Time spent out of work and essential domestic Activity. In general physical capital refers to any non-human asset made by humans and then used in production
Some, in environmental economics, argue that the life of the individual human being and the natural ecologies are already both treated as commodities in global markets. Environmental economics is a subfield of Economics concerned with environmental issues They argue that to put a price on both is the most reasonable way to proceed to optimize and increase that value relative to other goods or services. This has led to efforts in measuring well-being, to assign a commercial "value of life", and to the theory of Natural Capitalism - which focuses predictably on energy and material efficiency, i. Quality of life is the degree of well-being felt by an individual or group of people The value of life (or price of life) is an Economic or Moral value assigned to Life in general or to specific living organisms Natural Capitalism Creating the Next Industrial Revolution is a 1999 book co-authored by Paul Hawken, Amory Lovins and Hunter Lovins. Material efficiency is a description or metric which expresses the degree to which a construction project or physical process is carried out in a manner which consumes incorporates e. using far less of any given commodity input to achieve the same service outputs as a result. Michael Benedikt has proposed a theory of value along these lines. " Theory of value " is a generic term which encompasses all the theories within Economics that attempt to explain the Exchange value or Price of An example of this view is held by Indian economist Amartya Sen, who discussed the relationship between access to commodities, labour, and "the right to live as we would like" in his 1999 book "Development as Freedom", arguing that human free time was the only real service, and that sustainable development was best defined as freeing human time. Amartya Kumar Sen CH (Hon (অমর্ত্য কুমার সেন Ômorto Kumar Shen) (born 3 November 1933) is an Indian Sustainable development is a pattern of resource use that aims to meet human needs while preserving the environment so that these needs can be met not only in the present
See also
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