The concept and types of currencies

2024 Author: Howard Calhoun | [email protected]. Last modified: 2023-12-17 10:16

Today a person is completely dependent on money. Everyone is literally obsessed with how to increase their capital. As economists of the 19th and 20th centuries used to say, the main goal of capitalism is to earn capital in order to increase your capital. Let's delve into the history of money.

History of money

Money is a kind of equivalent for evaluating and measuring the cost of goods and services. Of course, the first money was far from what we are used to seeing now. These were different items. In Ancient Russia, the role of money was played by s alt, skins, honey, and so on. In Australia, shells and pearls were used for this.

Initially, coins played the role of money. At first they were made of expensive metals such as gold and silver. But this did not last long, because why waste such expensive resources if they can be replaced with cheaper metals. This old money is worth a fortune these days.

The first paper money appeared in China in 910. Of course, they were far from similar to the paper banknotes we are used to. The issuance of the first paper banknotes began in the capital of Sweden in the second half of the 17th century. In Russia, they appeared with the adventto the power of Catherine II in 1769.

What does the term "currency" mean?

The word "currency" comes from the Italian valuta and denotes a means of payment in the form of national, world or foreign money in cash and non-cash form. Basically, each state has its own independent currency, which has a certain relation to world currencies to adjust its rate.

Currency: concept and types

There are a lot of signs for currency classifications. Let's talk about what a currency is, its concept and types. They are divided on such a basis as convertibility in relation to the foreign exchange market and to other currencies. What does it mean? Convertibility is the ability to exchange one currency to receive another. Not all currencies in the world can be easily exchanged. Therefore, they are divided according to the degree of convertibility, which is determined by the IMF (World Monetary Fund).

• SCR (freely convertible currency) - this type of currency is in no way limited by the state that issues it in exchange for other currencies. An example of such currencies is the US dollar and the British pound.
• ChKV (partially convertible currency) - this type of currency has certain restrictions on the exchange. Such currencies include the Russian ruble, the Ukrainian hryvnia and many others.
• The last type of currency in terms of convertibility is non-convertible currency (NCV) - it exists and is a form of payment only in the territory of the country that issues it.

This is the division of currenciesdoes not end.

There is a division of currencies into types according to the rate:

• In relation of two currencies to each other.
• Current - at the rate of the cash transaction when settling within a couple of days.
• Floating - this rate is set at exchange auctions.
• Cross rate - also the ratio of two currencies, but compared to the third currency.
• The futures rate is the rate for settlement of a forward contract.

The main types of monetary currencies are:

• National.
• World.
• Foreign.

Currencies of different countries

Now let's get down to the most important part of the article - consideration of the types of national currencies. Of course, it is physically impossible to fit information about all of them in one article. But we can talk about the main types of currencies in the countries of the world. There are several currencies in the world, which are combined into one group called "major currencies". These include: US dollar, euro, Japanese yen, pounds sterling and Swiss francs.

As you may have noticed, there are 3 more types of foreign currencies here - these are the Canadian, Australian and New Zealand dollars. But among these 8 currencies they are rather of secondary importance. Other foreign currencies include the ruble, hryvnia, tenge, yuan, Emirati dirham and some others. Let's take a closer look at the main types of currency.

Dollar History

Even during the exploration of the New World, such a type of foreign currency as the dollar was introduced. Initially, it was understoodEuropean thalers and Spanish pesos. As such, the dollar was not yet a currency. A little later, it began to look like silver coins.

Many people often ask why these banknotes are issued in green. It was all due to the Civil War. The thing is that after the start of the Civil War, huge amounts of money were required. For comparison, this amount in the national currency equivalent would amount to a total of 60 million rubles. The Treasury ordered to start printing this amount of money, the printing company first decided to count how much ink they had, and it was decided to use green, since there was more of it. This is how the dollar began to be issued green and remains green today.

American dollar

This currency is the main one in the US and in many countries around the world. The dollar is one of the world's reserve currencies. As a type of currency, the dollar is quite young, but has managed to survive both sharp rises and rapid falls. Until the middle of the 20th century, the dollar did not have a rather serious influence on the world economy. The Second World War gave the United States of America an opportunity to make a powerful start and bring the country, and with it the dollar, to the world stage. Up to this point, the country's affairs were far from perfect.

Even in the 18th-19th centuries, the government tried to link the dollar with gold, but since the United States did not have a serious gold reserve, they could only maintain the exchange rate against gold by lowering it. Even during the Great Depression, America triedkeep the dollar tied to gold, but the rate continued to fall. Now more than 80% of all transactions in the world are carried out in dollar terms. What is the most common currency in the world? Of course, the dollar literally captured Australia, Belize, Canada, New Zealand, Namibia, Singapore, East Timor, Puerto Rico, Panama, Palau, Brunei, British and Bahamas, Bermuda, Marshall, Solomon Islands, part of African countries and Jamaica, as well as a number of other countries that have made it the main national currency. At the moment, the dollar is in the top 5 in the world exchange rate and is consistently on this list. There are, as already mentioned, several varieties of the dollar as a currency.

The history of the birth of the euro

In connection with the creation of the European Union, the participating countries had to switch to a single currency called the euro. The union itself was created in 1993, but the new currency appeared in circulation only on the 1st of 1999. Euro is one of the youngest currencies. More than 900 billion euros are currently in circulation. This is a huge amount that has overtaken the number of dollars in circulation in the world.

About the currency itself

The euro and the dollar are the most important world currencies, although the euro is an order of magnitude more expensive than the dollar, but inferior to it in primacy. The euro is also the official currency of 19 eurozone countries and 9 more states. But what is remarkable, only these 19 countries can influence the course and development of the currency. Members of the European Union onlymay send their representatives to the European Central Bank. Euro convertibility fully open.

Worth mentioning the Maastricht criteria. The fact is that in order to gain access to the euro, it is necessary to meet the following criteria: a low level of inflation, public debt must be below 60% of GDP. Inflation cannot be higher than 1.5% compared to the 3 countries with the most reasonable and stable prices. Only by meeting these criteria, you can get access to the currency. Many countries received this access only after 2010. These were Latvia, Lithuania and several other countries. Some countries in Europe still kept their own currency above the euro, such as the United Kingdom.

History of the Japanese yen

Yen is a fairly old currency. The first minted coin dates back to 1869. From this moment begins the history of Japanese money. The yen was the bloc's main currency during World War II. Often the Japanese government tied the currency to gold, but then canceled this, depending on the economic situation in the country. Japan even entered the sterling bloc. 1 yen was equal to 14 British pence. From the list of interesting facts, it can be noted that in 1927 there was a crisis in Japan, depositors were afraid for their savings and massively withdrew them from their accounts. There was a shortage of banknotes, and the Central Bank ordered the printing of banknotes in denominations of 200 yen, the back of which was completely blank.

British pounds: history

The pound is nationalcurrency in the United Kingdom of Great Britain and Northern Ireland. The pound is subdivided into 100 pence. The exchange rate of this currency is higher than the euro. Until recently, Britain was part of the European Union, but now the process of leaving the union is underway. The pound, like the yen, is an old currency. The first information about it dates back to the XII century. In 2013, it was announced that the Bank of England might start issuing polymer banknotes next year. In September 2016, the Bank of England issued a series G polymer £5 note. On the back of the note is a portrait of Sir Winston Churchill. The Bank of England plans to switch to 10- and 20-pound notes no later than 2020, and completely withdraw denominations of less than 10 pounds. Interestingly, the United Kingdom has always used pounds, even though it was a member of the European Union. Great Britain has always put its own currency higher.

Swiss franc: a little about it

The Swiss franc is the national currency of Switzerland and Liechtenstein. It is noteworthy that only one currency remained in Europe, which is still called the franc. Most banknotes depict artists, which is quite unusual, because mostly presidents, rulers or prominent historical heroes are depicted on money. Like previous currencies, it is used as a reserve due to its stability. Refers to the type of floating currencies, that is, the franc is influenced by the foreign exchange market. Each banknote looks very beautiful, like a separate work of art.

A little about the Russian currency

What kind of currency is in Russia? Of course, in our state they pay in rubles. The ruble is a rather weak currency, unstable. It is not included in the top 10 currencies of the world at the rate, it is not a reserve currency. And in recent years, its course is generally difficult to predict. Leaps against the US dollar from 30 rubles to 70-80 greatly undermine its credibility.

The most expensive bill is a banknote of 5000 rubles. In 2017, two new banknotes of 200 and 2000 rubles were put into use. As a type of currency, the ruble is partially convertible, that is, it cannot be exchanged for absolutely any currency. By the way, it is the national currency in Abkhazia, South Ossetia and Russia. The issuing countries of the ruble, that is, those who issued it, are all the countries that are part of the Soviet Union, but only the three above states remained such. By the way, in the interbank turnover, the ruble has less than 0.5% participation. For comparison, the dollar and the euro have 40% and 30% respectively.

Conclusion

There are a huge number of types of currencies in the world. Blue and green, red and blue, with portraits of government leaders and world famous artists - they can be completely different. There are several types of currencies, the main criteria for their division is the scale of distribution and convertibility. The leaders in the world are 5 currencies: dollars, pounds, yen, francs, euros. The absolute leaders among them are the euro and the dollar. The Russian currency, unfortunately, is not included in this top five. There are also 3 more dollar currencies in the list of main ones. These are Australian, New Zealand and Canadian dollars, but in reality they are secondary.