Posted on Categories:Monetary Economics, 货币银行学, 金融代写

# 金融代写|货币银行学代写Monetary Economics代考|ECON3200 A brief history of the definition of money

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## 金融代写|货币银行学代写Monetary Economics代考|A brief history of the definition of money

The multiplicity of the functions performed by money does not aid in the task of unambiguously identifying particular assets with money and often poses severe problems for such identification, since different assets perform these functions to varying degrees. Problems with an empirical measure of money are not new, nor have they necessarily taken their most acute form only recently.

Early stages in the evolution from a barter economy to a monetary economy usually have one or more commodity monies. One form of these is currency in the form of coins made of a precious metal, with an exchange value which is, at least roughly, equal to the value of the metal in the coin. These coins were usually minted with the monarch’s authority and were declared to be “legal tender,” which obligated the seller or creditor to accept them in payment.
Legal tender was in certain circumstances supplemented as a means of payment by the promissory notes of trustworthy persons or institutions and, in the eighteenth and nineteenth centuries, by bills of exchange ${ }^4$ in Britain. However, they never became a generally accepted medium of payment. The emergence of private commercial banks ${ }^5 \mathrm{after}$ the eighteenth century in Britain led to (private) note issues ${ }^6$ by them and eventually also to orders of withdrawal – i.e. check – drawn upon these banks by those holding demand deposits with them. However, while the keeping of demand deposits with banks had become common among firms and richer individuals by the beginning of the twentieth century, the popularity of such deposits among ordinary persons came only in the twentieth century. With this popularity, demand deposits became a component of the medium of payments in the economy, with their amount eventually becoming larger than that of currency.

In Britain, in the mid-nineteenth century, economists and bankers faced the problem of whether to treat the demand liabilities of commercial banks, in addition to currency, as money or not. Commercial banking was still in its infancy and was confined to richer individuals and larger firms. While checks functioned as a medium for payments among these groups, most of the population did not use them. In such a context, there was considerable controversy on the proper definition of money and the appropriate monetary policies and regulations in mid-nineteenth century England. These disputes revolved around the emergence of bank demand deposits as a substitute, though yet quite imperfect, for currency and whether or not the former were a part of the money supply. Further evolution of demand deposits and of banks in the late nineteenth century and the first half of the twentieth century in Britain, Canada and the USA led to the relative security and common usage of demand deposits and established their close substitutability for currency. Consequently, the accepted definition of money by the second quarter of the twentieth century had become currency in the hands of the public plus demand deposits in commercial banks. During this period, saving deposits were not checkable and the banks holding them could insist on due notice being given prior to withdrawal personally by the depositor, so that they were not as liquid as demand deposits and were not taken to be money, defined as the medium of payments. Consequently, until the second half of the twentieth century, the standard definition of money was the narrow definition of money, denoted as M1.

## 金融代写|货币银行学代写Monetary Economics代考|Evolution of money and near-monies since 1945

To summarize the developments on the definition of money in the period since 1945 , this period opened with the widely accepted definition of money as being currency in the hands of the public plus demand deposits in commercial banks (M1). This definition emphasized the medium of payments role of money. Demand deposits were regulated in several respects, interest could not be legally – or was not customarily – paid on them, and certain amounts of reserves had to be legally – or were customarily – maintained against them in the banks. Against this background, a variety of developments led to the widespread creation and acceptance of new substitutes for demand deposits and the increasing closeness of savings deposits to demand deposits. In Canada, this evolution increased the liquidity of savings deposits with the chartered banks, which dominated this end of the financial sector, with also some increase in the liquidity of the liabilities of such non-monetary financial institutions as trust companies, credit associations ${ }^7$, and mortgage and loan associations. In the United States, until the 1970s, the changes increased the liquidity primarily of time deposits in the commercial banks, and to some extent of deposits in mutual savings banks, and shares in savings and loan associations. In the United Kingdom, the increase in liquidity occurred for interest-bearing deposits in retail banks and building societies. Given this evolution in the 1960 s and 1970 s, a variety of studies established these assets to be fairly close – but not perfect – substitutes for demand deposits.

This evolution of close substitutes for M1 led in the 1950 s to a renewal of controversy, almost dormant in the first half of this century, on the proper definition of money. In particular, in the third quarter of the twentieth century, there was rapid growth of savings deposits in commercial banks and in non-bank financial intermediaries, with their liabilities becoming increasingly closer substitutes for demand deposits, without their becoming direct media of payments. This led to the acceptance of M2 as the appropriate definition of money, numerous innovations that have made many liabilities of financial intermediaries increasingly numerous innovations that have made many liabilities of financial intermediaries increasingly indistinguishable from demand deposits. This has led to the adoption or at least espousal of still wider definitions under the symbols M3, M4, etc.

## 金融代写|货币银行学代写Monetary Economics代考|Evolution of money and near-monies since 1945

M1 的近似替代品的这种演变在 1950 年代引发了一场关于货币正确定义的争论，该争论在本世纪上半叶几乎处于休眠状态。特别是20世纪第三季度，商业银行和非银行金融中介机构的储蓄存款快速增长，其负债越来越接近活期存款，但并未成为直接的支付媒介。这导致人们接受 M2 作为货币的适当定义，许多创新使金融中介机构的许多负债越来越多，许多创新使金融中介机构的许多负债越来越难以与活期存款区分开来。

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