Definition of Paper Money

Money comes in various concrete material forms: coins, checks, or paper money. Thus, paper money is called the piece of paper that represents a certain amount of money. In the language current paper money is equivalent to banknote. In this way, the concept of currency is used to refer to the units of metal and paper money to banknotes.

The historical origin of paper money

About 5000 years ago, Egypt began to use gold and silver as forms of currency, but this metal is not yet was money, since the pieces of gold and silver had a different size and weight and therefore were not interchangeable (each Unit metal was not equivalent to another unit). This meant that it was not possible to put a price on things, which made it difficult to activity commercial and exchange of goods. To solve this limitation metal coins with a certain value were created. From then on it was possible to talk about money proper. The next step in evolution of money occurred in China in the seventh century AD with the

introduction of paper money. The bill was more comfortable and manageable than the metal coin.

In Europe, the first banknotes were made in Sweden in the 17th century and were delivered as a receipt by the national bank in exchange for the gold and silver of the depositors.

The backing of banknotes for gold (known as the gold standard) ceased to exist internationally in the 1970s.

The use of paper money spread throughout Europe from the eighteenth century (in Spain the first banknotes were issued during the reign of Carlos III and at that time the monetary unit was the reals of fleece and the pesos) .

As for the advantages of banknotes over metallic coins, not only were they easier to handle in daily life, but the nominal value of a bill could be equal to that of many coins. On the other hand, paper money was more useful than metal because it is easier to counterfeit a piece of metal than a banknote.

Different kinds of money

Paper money and traditional coins are a material form of money. Also, there is credit money and fiat money. Paper money and coins are tangible, credit money is used to make deferred payments but we do not see it and we do not touch it, and therefore Finally, fiat money, which is the current monetary model used in the world and which is based on reserve currencies such as the dollar or the euro.

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Issues in Paper Currency