Currency

In monetary economics Currency can refer either to a particular currency, for example British Pounds or United States Dollars, or, to the coins and banknotes of a particular currency, which actually form only a small part of the monetary base of a nation’s money supply. The other part of a nation’s money supply consists of money deposited in banks (sometimes called deposit money), ownership of which can be transferred by means of checks (cheques in the United Kingdom and Australia) or other forms of money transfer such as credit and debit cards. Deposit money and currency are ‘money’ in the sense that both are acceptable as a means of exchange, but money need not necessarily be ‘currency’.

Historically, money in the form of currency has predominated. Usually (gold or silver) coins of intrinsic value commensurate with the monetary unit (commodity money), have been the norm. By contrast, modern currency, as fiat money, is intrinsically worthless. The prevalence of one type of currency over another in commodity money systems has arisen, usually when a government designates through decrees, that only particular monetary units shall be accepted in payment for taxes.