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Fiat Standard
a monetary system in which the face value of monetary unit is very much higher than that of the value of the material used as money.
Criticisms- the most forceful argument against the adoption of a fiat standard lies on the recognition that, since it doesn't have any direct link with the monetary standard of other countries.
OTHER STANDARD
3 DISTINCT TYPES OF FIAT STANDARDS
Utopian Paper Standard- purpose of academic interest.
Managed Currency Standard- abandonment of the gold standard by leading countries of the world sometimes in the early thirties.
Managed Currency System- perhaps as common today as the gold standard prior to its abandonment in 1931.
The Multiple or Tabular Standard
The Compensated Dollar Standard
Limping Standard
is a monetary system where both gold and silver are freely coined and made monetary standard units. The market ratio is obtained by dividing a given weight of silver by the weight of gold for which the amount of gold will exchange. Both metals are legal and there is no restriction upon the movements of either gold and silver in any form.
Two Bimetallic standards folds;
First, it provides for a broader metallic based.
Second, provides for a more stable purchasing power of the currency.
The types of silver standard may now be considered;
Silver coin standard
Silver bullion standard
Silver-exchange
-However in actual practice, only the silver coin standard has been used.
-In certain oriental countries the metal has circulated as money in the form of bullion as well as coin.
Limping Standard
This is a modification of the gold monetary standard to which certain silver coins are treated standard money to the extend that they are made unlimited legal tender which are not redeemable in gold.
This type of monetary standard was describe a having two legs, one longer than other, represented by gold dollars and fiat silver respectively.
When the government issued only as much paper money as it can back up with gold coin or gold bullion, it is said to be a gold standard.
The Multiple or Tabular Standard
This is a plan to secure an unvarying standard of deferred payments. The standard of deferred payments would not be base on the use of single metal, like gold, nor of two metals as in a bimetallic standard.
3 Major types of gold
Gold coin standard
-gold coins of a certain weight fineness are the standard monetary units, that is an offer to pay a debt in gold coins constitutes a legally satisfactory offer to discharge a financial obligation.
Gold-Bullion standard
-the chaos of the twentieth century has created conditions which hamper the free working of the gold standard.
Gold-exchange standard
-Exist only when a country buys and sell to it's citizens foreign exchange of a gold standard country at a rate fixed in terms of domestic non gold standard country.
A country's monetary standard truly has a far-reaching significance.
First, it is made to serve the domestic requirements of the country. Basically, monetary system are national in character which established and maintained by governments of its country to serve their purpose.
Second, owing to the fact that countries most of necessity trade with other countries, therefore becomes incurrent upon the government of each country.
Non-commodity standard
-Purchasing power of the monetary unit id kept equal to the value of a designated quantity of a particular commodity or group of commodities.
Fiat standard
-is a kind of monetary system in which the value or purchasing power of the monetary unit is not kept equal to the value of specific quantity of a particular commodity.
It may be pointed out that, in the evaluation of materials which were use as money, there was a marked tendency as will as preference to the use of those which prove not only useful but equally valuable.
The Compensated Dollar Standard
The main purpose behind such redefinition of the dollar is to keep its constant value or purchasing power in spite of its variation in weight. the value of dollar should be redefined periodically.
A country's monetary standard is adopted by authority of the state as a measure of value. As such, the monetary standard may be held synonymous with standard money or money of standard value.
Monetary standard
-means a particular type or kind of standard money use in monetary system of country to which other kinds of money are related. consist of all forms of money, created and regulated by law, that are necessary to achieve the functions that money is designated to perform.