Metallism

Metallismis the economic principle that thevalueofmoneyderives from thepurchasing powerof thecommodityupon which it is based. Thecurrencyin a metallist monetary system may be made from the commodity itself (commodity money) or it may usetokens(such as nationalbanknotes) redeemable in that commodity.Georg Friedrich Knapp(1842–1926) coined the term "metallism" to describemonetary systemsusing coin minted insilver,goldor other metals.^[1]

In metallist economic theory, the value of the currency derives from themarketvalue of the commodity upon which it is based independent of its monetary role.Carl Menger(1840–1921) theorized that money came about when buyers and sellers in a market agreed on a common commodity as amedium of exchangein order to reduce the costs of barter. The intrinsic value of that commodity must be sufficient to make it highly "saleable", or readily accepted as payment. In this system, buyers and sellers of real goods and services establish the medium of exchange, independently of anysovereign state.Metallists view the state's role in the minting or official stamping of coins as one of authenticating the quality and quantity of metal used in making the coin. Knapp distinguished metallism fromchartalism(or antimetallism), a monetary system in which the state has monopoly power over its own currency and creates a unique market and demand for that currency by imposing taxes or other such legally enforceable debts upon its people which they can only pay by using that currency.

Joseph Schumpeter(1883–1950) distinguished between "theoretical" and "practical" metallism. Schumpeter categorized the Menger position, that a commodity link is essential to understanding the origins and nature of money, as "theoretical metallism". He defined "practical metallism" as the theory that although a sovereign state has unfettered power to create non-backed currencies (money with no intrinsic or redeemable commodity value), it is more prudent to adopt a backed currency system.^[2]

Contradistinctions

Versus fiat monetary systems

Adherents of metallism are opposed to the use offiat money,i.e. governmentally-issued money with nointrinsic value.

Versus chartalism

Historically, the main rival school of thought to metallism has beenchartalism,which holds that even in systems where coins are made of precious metals, money derives its value mainly from the authority of thestate.^[3]Competition between these two alternative systems has existed for millennia, long before the concepts were formalised. At times hybrid monetary systems were used. Constantina Katsari has argued that principles from both metallism and chartalism were reflected in the monetary system introduced byAugustus,which was used in the eastern provinces of theRoman Empirefrom the early 1st century to the late 3rd century AD.^[4]

Monometallism versus bimetallism

A smaller disagreement which takes place relating to metallism is whetheronemetal should be used as currency (as inmonometallism), or should there be two or more metals for that purpose (as inbimetallism).

History of metallic monetary systems

Historically, silver has been the main kind of money around the world, circulating bimetallically with gold. In manylanguages,the words for "money" and "silver" are identical. In the final era of global metal-based money, i.e. the first quarter of the 20th century, monometallic gold use has been the standard.

Zimbabwehas a multi-currency system that recognizes the goldMosi-oa-Tunya (coin)and the ZiG, a digital token backed by gold, as legal tender in parallel with theZimbabwean dollar (2019–present)and the US dollar.^[5]^[6] ^[7]

Broad sense of the term

In the broad sense of the term, which tends to be used only by scholars, metallism considers money to be a "creature of the market", a means to facilitate exchange of goods and services. In this broad sense, the essential nature of money is purchasing power, and it does not necessarily need to be backed by metals. Understood in this broad sense, metallism reflects the majority view among mainstream economists, which has prevailed since the early 19th century.^[3]

References

^ von Mises, Ludwig(2009) [1953].The Theory of Money and Credit.Translated by Batson, Harold Edward (reprint ed.). Auburn, Alabama: Ludwig von Mises Institute. p. 473.ISBN 9781610163224.Retrieved16 November2020.First of all, there is the use of the term 'metallism'. The expression comes from Knapp.
^ Ramón Tortajada (1999).The Economics of James Steuart.Routledge.,p. 187.
^^a ^bStephanie A. Bell and Edward J. Nell, ed. (2003).The State, the Market, and the Euro: Chartalism Versus Metallism in the theory of money.Edward Elgar.ISBN 1843761564.
^ Constantina Katsari (2011). "Chpt. 7".The Roman Monetary System.Cambridge University Press.ISBN 0521769469.
^"GOVT EXTENDS MULTI CURRENCY SYSTEM TO 2030".NewsdzeZimbabwe. 27 October 2023.Archivedfrom the original on 28 October 2023.Retrieved9 November2023.
^"ISSUANCE AND USAGE OF GOLD-BACKED DIGITAL TOKENS"(PDF).Reserve Bank of Zimbabwe.28 April 2023.Archived(PDF)from the original on 10 June 2023.Retrieved9 November2023.
^"INTRODUCTION OF THE ZIMBABWE GOLD-BACKED DIGITAL TOKEN (ZiG) AS A MEANS OF PAYMENT"(PDF).Reserve Bank of Zimbabwe.5 October 2023.Archived(PDF)from the original on 10 October 2023.Retrieved9 November2023.