History Of Philippine Monetary System

History Of Philippine M whiztary System Most people dont spend oft time wondering what bullion is, their major c at one timern is how much they confuse, and how to get more. Usually, the question of what specie IS arises solely when currency ceases to utilization properly. In economics (properly understood), the answer to the question what is notes? consists of three wordsThats all. leadd the conception of a moderate of transpose ranks below only language (with its corollaries speech and the writ ex word) as the greatest intellectual discovery in recital. Without language, the change of anything but the most rudimentary ideas is im viable. Without property, the production and supervene upon of anything but the most rudimentary levelheadeds and utilitys is impossible. It is non difficult or time consuming, or inefficient, it is unrealisticAnimals dont exchange (or flock) amongst one nigh new(prenominal). They atomic number 18 self- able, or they take from ea ch roller(a), or they exercise the prerogative of hypernym strength and/or cunning. There are some mankind bes who get along in a very similar fashion, but the overwhelming majority recognises the benefits of unpaid exchange. Strictly speaking, the use of the word voluntary in this context is redundant. The phrase your property or your life is not the precursor to an exchange, whether the person uttering it brandishes a gun or a government identity card.The first rule of any voluntary exchange is simplicity itself. If two people are imparting to exchange, each must view the results of the exchange as being beneficial. If either of them is not of that view, the exchange will not take place.Direct exchange, or barter, is on the dot that my good or service for your good or service. The problem is that I might want what you conduct to offer, but you might not want what I offer in exchange. With no medium of exchange, at that place is no deal. Indirect exchange takes place whe n one party has a medium that is always acceptable, not for what it is, but for what can be done with it. If you offer me money, I will accept it, because I cheat that I can exchange it for what I want, whe neer I want it.Indirect exchange involves the use of money the medium of exchange. cash is the universal place, it fits all locks. And the world it has unlocked is the world we live in today. bills has made the division of labor possible. It has made specialization possible. It has made the accumulation of wealth over periods which glide by a human lifetime possible. Perhaps most important of all, it has hugely advanced the potential for friendly interaction between people. To survive as such, and to prosper, a rational animal must exchange. He or she has language, to exchange ideas, and money, to exchange the fruits of ideas. From that foundation, everything else we disclose around us has been built.That covers the concept or idea of money. But an idea, as such, does not exist as a fleshly entity. funds must be a physical entity. Neither the electronic money of today nor the notes and coin which circulate as cash has any contrivealized or legal connection with Gold and Silver. But they once did, and most people think that they slake do. As long as that situation persists, the redbrick monetary system will function.Now, how does one go about choosing what is to be utilize as money? Simple, one looks for the most tradable good, the good which is in highest demand, the good that has begun to be veritable, not as an end in it, but as a representation to an end. money is the good that people do not want to consume, but want to use to make gain exchanges easier.Human beings hold up lived together for more than two million years. coin in its modern form coin of fixed weight and denomination came into use less than three thousand years ago. It took a long time to discover the physical good which best serves the purpose of a medium of exchange. (http//www.the-privateer.com/ prosperous-b.html)Functions notes as a Unit of ValueThe first function of money is to be a social social unit of pry or a unit of account. The monetary unit is the unit in terms of which the cling to of all goods and services is calculated and expressed. The honour of each good or service is expressed as a price, which is the number of monetary units for which the good or service can be exchanged.If the price of a pen is Rs. 10 then a pen can be had in exchange for ten monetary units (where the monetary unit in this case is the rupee). Measuring values in monetary units helps in measuring the exchange values of commodities. If a pen is expense Rs. 10 and a notebook is worth Rs.20 then a notebook is worth two pens. Further, accounting is simplified, as all heads will be recorded in terms of monetary units that can be added and subtracted. Money is a useful measuring rod of value only if the value of money itself corpse constant. This is similar to saying that a outgo is a useful measure of length only if the length of the scale itself is constant. The value of money is united to its purchasing power. Purchasing power is the inverse of the average or general level of prices as measured by the consumer price index etc. As the general price level increases, a unit of money can purchase a lesser amount of goods and services so the value or purchasing power of money declines. So, money will be a useful unit of value only as long as its own value or purchasing power remains constant. (http//hubpages.com/hub/Functions-of-Money)Money as a Medium of ExchangeMoney also acts as a medium of exchange or as a medium of payments. This function of money is served by anything that is generally accepted by people in exchange for goods and services. Anything has been quite a variety of things across places and times. most of the things that draw served as money are clay, cowry shells, tortoise shells, cattle, pigs, horses, sheep, tea, tobacco, wool, salt, wine, boats, atomic number 26, blur, brass, specie, gold, bronze, nickel, paper, leather, playing cards, debts of individuals, debts of cambers, debts of governments, etc. Money will then digest the time and energy spent in barter. The person who owned a cow can in a flash simply sell it to the person who offers the most money for it and then buy the bullock cart from an different person who offers him the best bargain. Ultimately, all trade whitethorn be acquireed barter one good or service is traded for another good or service -either directly, or indirectly with money acting as the intermediary. However, by acting as an intermediary, money increases the ease of trade. Money is also called a bearer of options or generalized purchasing power. This indicates the freedom of choice that the use of money offers. The owner of the cow need not procure goods and services from those to whom he sold his cow. He can use the money to buy the things he wants most, from those who offer him the best bargain (not of necessity those who bought his cow), at the time he considers most advantageous (not necessarily immediately). Again, this function can only be performed properly if the value of money remains constant. (http//hubpages.com/hub/Functions-of-Money)Money as a Standard of Deferred PaymentsIf money performs the previous two functions then it whitethorn also perform the function of being the unit in terms of which deferred or time to come payments are stated. Examples of situations where future payments are to be made are pensions, principal and interest on debt, salaries etc. As long as money maintains a constant value through time, it will overcome the problems associated with fashioning future payments with specific commodities. (http//hubpages.com/hub/Functions-of-Money)Money as a Store of ValueIf money becomes a unit of value and a means of payment then it may also perform the function of serving as a inventory of value. The holde rs of money are holders of generalized purchasing power that can be spent through time. They have it away that it will be accepted at any time for any good or service and is thus a store of value. This function will be performed well as long as money retains a constant purchasing power. (http//hubpages.com/hub/Functions-of-Money)It may be noted that any asset other than money may also perform the function of store of value, for example, bonds, land, houses, etc. These assets have the advantage that, impertinent money, they yield income and may appreciate in value over time. However, they are subject to the following(1) They may involve terminus costs,(2) They may not be liquid in the sense that they could not be quickly converted into money without loss of value, and(3) They may depreciate in value. A person may choose to store value in any form depending on considerations of income, safety and liquidity. (http//hubpages.com/hub/Functions-of-Money)KindsCommodity MoneyCommodity mo ney refers to money whose value comes from a trade good out of which it is made. Examples of commodities that have been used as money include gold, silver, copper, salt, large stones, decorated belts, shells, and cigarettes.Commodity money is to be distinguished from articulation money which is a certificate or token which can be exchanged for the underlying commodity. A key feature of commodity money is that the value is directly perceived by the users of this money, who recognize the utility or beauty of the tokens as they would recognize the goods themselves. That is, the effect of holding a token for a barrel of fossil oil must be the same economically as real(a)ly having the barrel at hand. This thinking guides the modern commodity grocery stores, although they use a sophisticated range of financial instruments that are more than one-to-one representations of units of a given type of commodity.In situations where the commodity is metal, regular(prenominal)ly gold or silve r, a government cumulus will often coin money by placing a mark on the metal that serves as a guarantee of the weight and purity of the metal. In doing so, the government will often impose a fee which is cognise as seigniorage. The role of a mint and of coin is different between commodity money and parliamentary law money. In situations where there is commodity money, the coin retains its value if it is melted and physically altered, man in parliamentary law money it does not.Commodity money often comes into being in situations where other forms of money are not available or not trusted. Various commodities were used in pre-Revolutionary America including wampum, maize, iron nails, beaver pelts, and tobacco. In post-war Germany, cigarettes became used as a form of commodity money in some areas. Cigarettes are still used as a form of commodity money in prison house cell.Although commodity money is more convenient than barter, it can also be inconvenient to use as a medium of exc hange or a standard of deferred payment due to the transport and storage concerns. Accordingly, notes began to circulate that a government or other trusted entity (e.g. the Knights Templar in Europe in the thirteenth century) would guarantee as representing a certain stored value on account. This creates a form of money known as representative money the beginning of a long slow shift to credit money.historically gold was by far the most widely acknowledge commodity out of which to make money gold was compact, easy to work into more beautiful jewelry, had decorative and functional utility as a finely strung wire or thin foil leaf, and most importantly, could always be traded for other metals to make weapons with. A state could be described as a political enterprise with sufficient land, gold and reputation for protecting both, e.g. the Fort Knox gold repository long maintained by the linked States, could reliably issue certificates to substitute for the gold and be trusted to actu ally have it. Between 1933 and 1970, one U.S. dollar was technically worth exactly 1/35 of a troy ounce (889 mg) of gold. However, actual trade in gold as a precious metal within the United States was forbidden presumably to prevent anyone from actually going up to Fort Knox and asking for their gold. This was a fairly typical transition from commodity to representative to revise money, with people trading in other goods being coerce to trade in gold, then to receive paper money that purported to be as good as gold, and then ultimately see this currency float on commodity markets.However, commodity money remained busy in the background in some form or another, and seems to have been revived thanks to globular capitalism, wherein a currency is widely traded as a commodity. One way to view such trade is that currency of resource-rich nations tends to be tied to the price of those particular commodity items until it becomes a developed nation. Thus, one could see the nominally fi at money of say Cuba as being tied to the commodity sugar planetaryly, kind of than to the military power of Cuba that holds within its own borders.Also, commodity supplies and protections of supplies by states military fiat remain critical to trade, and there are active commodity market speculations on the stability of certain states, e.g. speculation on the survival of the regime of Saddam Hussein in Iraq has from time to time driven the price of oil. Some argue that this is not so much a commodity market but more of an assassination market speculating on the survival (or not) of Saddam himself.Finally, commodity money is undergoing a more direct revitalisation thanks to theorists of green economics, congenital capitalism and global resource banking, some of whom suggest a form of money based on ecological yield. They argue that the outputs of natural capital are the only authenticated commodities air, water, and calories of renewable energy we consume being mostly interch angeable when they are free of pollution or disease. However, such goods cannot be held directly, and so it is common to suggest that representative money be issued based on enhancing and extending natures services, giving one the right to receive the yield as a benefit. They argue that reframing political rescue 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 actual global credit money regime pillared by the Bank for International Settlements, would provide measurable benefits to human well-being worldwide.Some seek to replace the B.I.S. with a Global Resource Bank to manage global resources outside national jurisdiction for global benefit. Others would replace the gold standard with a biodiversity standard. It remains to be seen if such schemes have any merit other than as political ways to draw precaution to the way capitalism itself interacts with life.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 Greshams Law which states that bad money drives out good. Other proposals, such as time-based money, rely on the availability of human labor as a commodity, especially within a community, which is presumably harder to guarantee access code to, but also harder to steal. Still others deny the utility of co modifying labor as such, and suggest making free time the standard, since physical capital used for leisure, sport, art, theatre, and other forms of play is co modifiable and possible to control. (http//www.wordiq.com/definition/Commodity_money) commendation MoneyCredit money refers to money that constitutes future claims of a valuable item against an entity. The holder of credit money can use it to purchas e goods and services when the holder wants to, he or she can present it to get the item by which it is backed. Credit money is made of a genuine that has low intrinsic value compared to the value it represents when exchanged. Some types of credit money include IOUs, bonds and money market accounts. Some people also consider paper money and coins to be credit money because they have no intrinsic value and can be exchanged for valuable commodity.To illustrate how this concept came about, consider English goldsmiths, who centuries ago used to keep deposits of precious metals. They issued paper notes to those who deposited gold or silver for future redemption. These goldsmiths realized that they did not need to comp permitely back their notes with precious metals because only a small division of holders come back to convert their notes. The goldsmiths then issued non-backed notes as loans to people who needed funds and received loot from interest payments. These notes constituted th e early form of credit money.When a government issues banknotes, it decides on a valuable commodity on which to fix them, gold or silver, for example. It then fixes a stable value on the banknotes and sets them as a medium of exchange. The government can choose to maintain enough valuable commodities to let everyone with banknotes redeem it. The government can also choose to keep just enough valuable commodities to cope with the small fraction of people who actually want to make the redemption. In this sense, banknotes are credit money because people can use them to redeem gold or silver.In modern monetary systems, however, the interchange bank often issues money that is not backed by valuable commodity. The size of the money total in these systems does not depend on the availability of valuable commodity or the obligation of the key bank to repay credit money with valuable commodity. This kind of money is known as fiat money and is the most ubiquitous form of money in most mode rn monetary systems.Credit money can also refer to any claim on valuable commodity that is used as a medium of exchange instead of banknotes. Checks, IOUs and bonds that can be redeemed for banknotes are examples of this. sometimes credit money has a maturity date, as in the case of checks where the bank pays the check receiver a certain amount of banknotes at maturity.Fiat MoneyFiat money is the opposite of salutary money. Fiat money is money that is declared to have value even if it does not. Honest money has value regardless of what people say. Gold and silver are often referred to as honest money and since they have been dug out of the ground at considerable expense, they do have value regardless. People will pay variable sums for them.Fiat money is also known as paper money, or electronic money. Since there is nothing behind paper money but the obligation of a state to redeem it in more paper or electronic money, fiat moneys ultimate worth is questionable at best. In fact, th ere is a history of states walking away from the face value of the fiat money that has been printed (created). But if one has it in ones possession, it is impossible to walk away from the value of gold and silver and strange to fiat money, they have an inherent quality.Mainly an outgrowth of central banking, in the modern age, fiat money probably would not be attractive without state support. Thats because fiat money, unlike fractional reserve money, has no inherent value. Fractional reserve banking, in fact, is a private market phenomenon in which private banks provide paper notes the face value of which adds up to more than the reserves held by the bank. There is a history of successful fractional reserve banking efforts within the private marketplace however fiat money eer collapses, as it is impossible to issue a substance of value year after year and times after generation that HAS no value.In the United States, the worlds largest and most dominant economy, the greenback be came a fiat currency when President Richard Nixon broke the final link between gold and the dollar in 1971. He did this because the French were apparently threatening to redeem their dollars in gold and either the US central bank and/or Treasury did not have enough gold to In any event, Nixon severed the dollars relationship to gold and ever since then the world has embarked on a bold experiment in which the global, anchor currency has no specific relationship to an underlying asset. Predictably, this has meant that the United States has continually created more and more fiat dollars, thus inflating the overall stock of dollars and making them worth less and less.China, one of the worlds most ancient civilizations, is state to have had no less than eight separate interregnums of fiat currency each collapsing and then being replaced by another. In the 1800s, fiat money was even banned by the Chinese. Today, however, the Chinese government is once again a user of fiat money along wi th the rest of the world. Fiat money has never been as prevalent perhaps as in the modern age. But that doesnt make it any fitter or less prone to failure. Those who ignore history are doomed to repeat it. (http//www.thedailybell.com/803/Fiat-Money.html)Legal bleak MoneyLegal crude is any form of payment that must be accepted for a debt, according to the laws of the area. Generally, the term refers to government-issued cash money such as bills and coins, as opposed to credit lines, checks, or cards. The laws surrounding legal tender have proved vital in the formation of the fiscal indemnity of many nations. (http//www.wisegeek.com/what-is-legal-tender.htm)The term legal tender means currency that is legally permitted to be used to bewilder goods or services in a particular country.Immediately recognized as legal tender for purchases and to settle outstanding debts, currency remains the single most common of all liquid assets that are used on a consistent basis by retail customer s. (http//www.wisegeek.com/topics/legal-tender.htm)II. Development of Philippine MoneyPre-Hispanic EraArchaeological evidence indicates that small seafaring communities existed throughout the Philippine Archipelago for at least 2000 years, front to the arrival of the Spaniards. The chief means of trading was barter. Records show that Chinese merchants came to the Philippines to trade porcelain, silk and metalwork in exchange for gold, pearls, beeswax and medicinal plants, which the Philippines is naturally rich in. Excavations also unearthed gold ingots, known as piloncitos, the first recognized form of coinage in the country. Barter rings in different sizes, gold ornaments and beads were the other objects used as medium of exchange during the period. (http//www.bsp.gov.ph/about/history/story2.asp)Spanish EraThe Galleon Trade, which startleed during the colonization of the Philippines in 1565 and lasted for 250 years, was responsible for transforming Manila into a trade center for oriental goods. These were brought across the Pacific, in exchange for odd-shaped silver coins called cobs or macuquinas. Other coins that followed were the dos mundos or pillar dollars in silver, the counterstamped coins and the portrait serial publication, also in silver. In the 18th century, the Royalty of Spain authorized the production of copper coins by the Ayuntamiento or Municipality of Manila in response to the acute shortage of fractional coins. These were called barrillas which first appeared in 1728.In 1852, the first banknotes called pesos fuertes were issued, and in 1861,the Casa de Moneda de Manila minted the first gold coins with the word Filipinas inscribed, which were called Isabelinas and Alfonsinos. (http//www.bsp.gov.ph/about/history/story3.asp)Revolutionary PeriodOn August 23, 1896, the Cry of Balintawak, headed by Andres Bonifacio signaled the start of the Philippine Revolution. After General Emilio Aguinaldos proclamation as President of the First Philippi ne body politic, Two types of 2-centavo copper coins were struck in the army arsenal of Malolos. Because their mintage was so few, they are considered extremely rare collection. news report notes were also issued, but the circulation was limited because the government was short-lived. (http//www.bsp.gov.ph/about/history/story4.asp)American RegimeWhen the Americans took over the Philippines in 1901, the US Congress passed the Philippine Coinage Act, which authorized the mintage of silver coins from 1903 to 1912. Subsequently, Silver Certificates were issued until 1918. These were replaced with Treasury Certificates from 1918 to 1935. The American Government deemed it more economical and convenient to mint silver coins in the Philippines, hence, the re-opening of the Manila Mint in 1920, which produced coins until the Commonwealth Period. This also became the first seat of the primordial Bank in 1949. (http//www.bsp.gov.ph/about/history/story5.asp) gentlemans gentleman War IIDuring the Nipponese Occupation from 1941 to 1944, two kinds of notes circulated the Japanese Invasion Money issued by the Japanese Government, and the Guerrilla Notes or Resistance Currencies issued by Filipino guerrillas. (http//www.bsp.gov.ph/about/history/story6.asp)Republic PeriodRepublic Act No.265 created the telephone exchange Bank of the Philippines (CBP) on January 3, 1949, which was vested the power of administering the banking credit system of the country. Initially, the CBP issued the Victory Notes with the overprint Central Bank of the Philippines in 1949. The first official banknotes issued by the Central Bank were the English series in 1951, followed by the Pilipino series in 1967, the Ang Bagong Lipunan series in 1973 and the New Design series in 1985. Central Bank coins of the English series were also issued in 1959, followed by the Pilipino series in 1967, and the Ang Bagong Lipunan series in 1975. The Flora and Fauna series were introduced in 1983, and subsequently , the improved version in 1992, until the demonetization of all the series in 1998. (http//www.bsp.gov.ph/about/history/story7.asp)