Representative money


Representative money is any medium of exchange, often printed on paper, that represents something of value, but has little or no value of its own. Unlike some forms of fiat money, genuine representative money must have something of intrinsic value supporting the face value.
More specifically, the term representative money has been used variously to mean:
Historically, the use of representative money predates the invention of coinage. In the ancient empires of Egypt, Babylon, India and China, the temples and palaces often had commodity warehouses which issued certificates of deposit as evidence of a claim upon a portion of the goods stored in the warehouses, a form of "representative money".
According to economist William Stanley Jevons, representative money in the form of bank notes arose because metal coins often were "variously clipped or depreciated" during use, but representative money could not have its face value thus divided.
In 1895 economist Joseph Shield Nicholson wrote that credit expansion and contraction was in fact the expansion and contraction of representative money.
In 1934 economist William Howard Steiner wrote that the term was used "at one time to signify that a certain amount of bullion was stored in the Treasury while the equivalent paper in circulation" represented the bullion.