Coin
A coin is a piece of hard material, usually metal or a metallic material, usually in the shape of a disc, and very often issued by a government. Coins are used as a form of money in transactions of various kinds, from the everyday circulation coins to the storage of vast numbers of bullion coins. In the present day, coins and banknotes make up the cash forms of all modern money systems. Coins made for circulation (general monetized use) are usually used for lower-valued units, and banknotes for the higher values; also, in most money systems, the highest value coin made for circulation is worth less than the lowest-value note. The face value of circulation coins is usually higher than the gross value of the metal used in making them, but this is not generally the case with historical circulation coins made of precious metals.
Token coins
Token coins are money substitutes in the form of coins, where the owner is in a position to exchange them at need, free of expense and without delay. They have a similar function as banknotes, but have usually smaller denominations[1].
Debasement
Throughout history have governments often debased the coins in circulation, by replacing some of the precious metal by a base metal to achieve direct profit by getting more coins from a given supply of metal, or to inflate the currency to make the payment of debts easier (or both).
But the inflation of coins has certain disadvantages for their producer: the production of debased coins takes time. It is impossible to replace the entire existing stock of coins at once. Old sound coins will circulate side by side with new debased coins. When the market participants realize what is happening, they will spend much more time distinguishing between old and new coins; or they might use only new coins for payments and hoard the old coins, or sell them abroad. This will also attract other counterfeiters to do the same. If the people are free to do so, they could start using another type of coins. The supply of coins will, at least temporarily, undergo a deflation, which will create problems for private users as for public finances. This problem will go away, once the coins become purely nominal, without any precious metal. All of these actions tend to reduce profits of those debasing the currency. It is one of the reasons why the states keep the debasement in secret like private counterfeiters.[2][3]
Other popular form has been also the "clipping" or "shaving" of coins, where a small portion of the metal was shaved off. That is why many coins have their rim marked with stripes (milling or reeding), text (engraving) or some other pattern that would be destroyed if the coin was clipped.
References
- ↑ Ludwig von Mises. "11. The Money-Substitutes", Human Action, online version, Chapter XVII. Indirect Exchange, referenced 2009-06-29.
- ↑ Jörg Guido Hülsmann. "The Ethics of Money Production", online version, Chapter 8. Legalized Falsifications p.110-111, referenced 2009-06-07.
- ↑ Jörg Guido Hülsmann. "The Ethics of Money Production", online version, Chapter 10. Legal-Tender Laws p.125, referenced 2009-06-24.