1 / 34

Currency

Currency. By John Shi Pd. 6. What is Currency?. A System of Money in Common Use Banknotes plus coins Physical Tokens used for Money Used as a Medium of exchange Currency vs. Money. Origin of Currencies. Bartering System Commodity Money Standardized Coinage

vic
Download Presentation

Currency

An Image/Link below is provided (as is) to download presentation Download Policy: Content on the Website is provided to you AS IS for your information and personal use and may not be sold / licensed / shared on other websites without getting consent from its author. Content is provided to you AS IS for your information and personal use only. Download presentation by click this link. While downloading, if for some reason you are not able to download a presentation, the publisher may have deleted the file from their server. During download, if you can't get a presentation, the file might be deleted by the publisher.

E N D

Presentation Transcript


  1. Currency By John Shi Pd. 6

  2. What is Currency? • A System of Money in Common Use • Banknotes plus coins • Physical Tokens used for Money • Used as a Medium of exchange • Currency vs. Money

  3. Origin of Currencies • Bartering System • Commodity Money • Standardized Coinage • http://www.youtube.com/watch?v=FuHQhGqZvY0

  4. Strong & Weak Currencies • Strong/Hard Currencies – Globally traded currency expected to serve as a reliable store of value • US Dollar, Euro, Swiss Franc, British pound sterling, Japanese Yen • Weak/Soft Currencies – Expected to fluctuate erratically and depreciate against others

  5. Reserve Currencies • Currency held by many governments as part of foreign exchange reserves • Used for pricing commodities on the global market • US Dollar used for the price of a barrel of oil • Most reserve currencies are strong currencies.

  6. Appreciation of Currency • Increase in a currency value relative to other reference currencies. • Causes: • High exports, need currency to pay for exports • Increased interest rates • Foreign exchange market • Employment increase • Effects: • Lower exports • Higher imports • Increase in supply of currency

  7. Depreciation of Currency • Decrease in a currency value relative to other reference currencies. • Causes: • Decreased demand for currency • Low interest rates • High Imports • Low exports • Effects: • Higher exports • Lower imports • Decrease in supply of currency

  8. Currency Manipulation • Freely Floating Currencies – currencies determined by market forces • Currency Manipulation – keeping currency at a set value relative to another currency • China can make its currency a set % of the US dollar to promote trade • Prevents the RMB from being a reserve currency

  9. Inflation • Rise of general level of prices in an economy over a period of time • Around 2-3% per year • Causes: • Demand Pull Inflation • Supply Shock Inflation • Monetary Supply • Wage earners + Producer Costs

  10. Inflation Cont. • Effects: • Elderly on fixed incomes • Gold Standard • Wage + Price Controls • Fixed Exchange Rates • Higher interest rates • Slow Growth of Money Supply

  11. The US Dollar • Most used in international transactions and dominant reserve currency • Used today to trade for commodities such as gold and petroleum • Created by the Coinage Act of 1792 • 1857 – Half cent removed due to high costs • 1971 – US leaves the gold standard • Believed to be an estimated $1 in counterfeit currency for every 12500 in genuine currency

  12. The Euro • 1999 – Introduced in nonphysical form • 1999 – Stability and Growth Pact passed • 2002 – Euro replaces nation’s currency • 2004 – Euro peaks in value • 2008 – First official recession of the Euro (negative growth) • 2009-2010 – Agreed Bailout of Greece and other members • Current Rate: 1 Euro = 1.3 US Dollars

  13. British Pound • 4th traded in the foreign exchange market • Oldest Traded Currency in the World • 1940 – US Agreement at Bretton Woods, 1 pound = $4.03. • 1967 – Severe Devaluation of British Currency to $2.4 • 1971- Decimalization

  14. British Pound Cont. • 1972 – Free floating pound • 1979-1989 – Conservative party enters. $2.4 -> $1.03 -> $1.7. • 1980- Recession due to high exchange rates • Current Rate: 1 British Pound Sterling = $1.52

  15. Russian Ruble • 1885 – 1 Ruble = 0.774 grams gold • 1920s- Gold Standard dropped due to WWI • 1922 – Second Ruble (1 for 10000) • 1923-24- Third Ruble (1 for 100). Issuing of the first Soviet currency • 1924-1947 – Gold 4th Ruble (1 to 50000) • 1947-1961 – Soviet attempt to reduce money in circulation (5th Ruble)

  16. Russian Ruble Cont. • 1961 – 1997 – 1 6th Ruble = 0.9874 g gold • 1991- Fall of Soviet Union, Currency stays • 1998 – 7th Ruble (1 for 1000 old) • 1 1st ruble = 2 E-6 7th Ruble • 2010- Putin and Wen Jiabao agree to use own national currency for bilateral trade over dollar • Current Rate: 1 ruble = $0.03

  17. Chinese Yuan / RMB • Referred to as “Renminbi”, “RMB”, “Yuan,” “Kuai” • 1 Yuan divided into 10 “jiao” or “mao” • 1 Mao divded into 10 fen • 1948 – First series issued by Bank of China • 1 yuan = 10000 old yuan

  18. China Yuan / RMB Cont. • 1955 – Second series of banknotes issued • Command Economy led to Unrealistic exchange rates • 1978 – Opening of Chinese Economy. RMB only used domestically • 1980s-1990s – Exchange rate brought to more realistic levels, Dual system abolished • 2005 – Fixed rate abolished • Currently 1 RMB = $0.16

  19. Chinese Currency Series • 1955 – Second Series – Featured Uyghur, Tibetan, Mongolian and Zhuang languages • 1962 – Third Series – Phased out in 1990s • 1987-1997 – Fourth Series – Still Used Today • 1999 – 5th series – Featuring Mao Zedong only

  20. Chinese Phasing Out Currency • Due to inflation, China has stopped using cent coins (1 fen, 2 fen) • Vendors now only deal in multiples of 10 cents

  21. Mexican Peso • 1863 – First issue of the Peso (of coins measured in centavos) • 1866 – Coins denominated by Pesos • Peso was used in US until 1857 • 1900s – Mexican Peso most stable in Latin America • 1970s – Severe devaluation of Currency • 1993- Second Peso (Nuevo Peso). 1 2nd peso = 1000 old pesos • 1 peso = $0.08

  22. Peso Crash • 1970s – Mexico borrowed money for industrialization • 1980s – Increased oil prices, attempt to improve oil refineries • 1989 – Interest rates in US and Europe increase • 1982 – Defaulted on external debt • Resulted in capital flight, hyperinflation and devaluation • Banks restructure their loans and IMF involvement • 1993 - Stability and Economic Growth Pact • Current Mexican Debt: $274800 Million

  23. Iranian Rial • 1798 – introduction of rial as 1250 dinar (1/8th of a toman) • 1825- Rial ceased to be used • 1932 – Rial replaces Toman at a rate of 1 toman = 10 rials • After the Islamic Revolution, Rial design removes Shah’s effigy • Reported CIA manipulation of the rial • 2002- removal of preferred rate and market rate for a market driven rate • 1 Dollar = 12275 Rial

  24. Nigeria Naira • 1973 – Introduced Naira, replacing the pound at a 2:1 ratio • Rampant Inflation over the existence of the Naira. Annual Inflation rate above 10% • 2007 – Naira appreciates against the US dollar due to high oil reserves • 2008 – Redenomination of Naira with 100 old = 1 new • 2011 – Central bank increases interest rates to 12% to reduce inflation • Foreign Currency in Nigeria regulated by local auctions, Central Bank sets exchange rate • Current Rate: 1 Dollar = 100 Naira

  25. Hyperinflation • Massive Depreciation of Currency Value • High “Unstoppable” Inflation Rates Causes: • Supply Shock • Increase in Money Supply Solutions: • Dollarization • Shock Therapy • Effects: • No purchasing power • Price Controls • Hoarding and Fleeing country

  26. Germany after WWI • Hyperinflation (1 dollar = 4 trillion German Marks) from 1921-1924 • Causes: • War debt – demanded in 1921 • Solution: Introduction of the Retenmark in 1923 (cutting 12 zeroes) • http://www.listenonrepeat.com/watch/?v=uV-GcYwCy-U#t=1m20s

  27. Date ofredenomination Currencycode Value 1 August 2006 ZWN 1 000 ZWD 1 August 2008 ZWR 1010 ZWN= 1013 ZWD 2 February 2009 ZWL 1012 ZWR= 1022 ZWN= 1025 ZWD Zimbabwean Dollar • Causes: Political Turmoil, Dollarization, Money Supply • 1980 – Highest Valued currency units: 1 ZWD = $1.47 • 2007 – ZW$600000 to 1 US Dollar

  28. Anti-counterfeiting Measures • Traditionally involves finer detail on bills • Coins are milled or reeded • EURion constellation – 1996 • Counterfeit Deterrence System

  29. State Quarters/Special Currencies State Quarters • Enacted in 1997, Quarters from 1999-2008 • 2009 – DC and US Territories program • Started to support new coin collectors • America The Beautiful Quarters – 2010 -2021 • Depicting national parks and sites • Presidential Dollars - 2005

  30. Special Currencies Cont. • Olympic Currencies – Bills made to celebrate the Olympics • 6 million Chinese bills made – 2008 • UK Olympic 50p pieces • Russian Olympic note (10 million) - 2013

  31. Melting Currency • 2006 led to a jump in metal prices: • Penny worth ~.26 cents more as metal • Nickel worth ~2.7 cents more as metal • New Mint Rules: illegal to melt coins, illegal to export to melt coins • 5 years in prison and fine of $10,000

  32. Currency Investments • 95% Copper pennies (pre 1982) worth more than pennies today • 0.02-0.03 cents for a copper penny (metal) • Price of 95% copper > copper + zinc pennies http://www.youtube.com/watch?feature=player_embedded&v=GSaJQZxhcqo 31.95 dollars for $15 worth of pennies

  33. Penny Debate US • Should we keep minting the penny or get rid of it? • For Removal: • Pennies are worthless • Wastes Taxpayer money (7.4 billion pennies made per year) and Time • Pennies < minimum wage (6.15 seconds to pick up a penny) • For Keeping It: • Prices round up • Charities need pennies • Nickels cost more to make (7.7 cents per nickel, 1.26 per penny) • Pennies are sentimental

  34. Bibliography • http://usatoday30.usatoday.com/money/2006-12-14-melting-ban-usat_x.htm • http://globalpapersecurity.com/how-the-eurion-constellation-protects-banknotes.htm • http://coins.about.com/od/uscoins/i/penny_debate.htm • http://usatoday30.usatoday.com/money/2006-12-14-melting-ban-usat_x.htm • http://en.wikipedia.org/wiki/Zimbabwean_dollar • http://en.wikipedia.org/wiki/Chinese_yuan • http://nbnl.globalwhelming.com/2008/07/18/the-very-limited-and-rare-beijing-olympic-currency-get-yours-now/ • http://en.wikipedia.org/wiki/Hard_currency • http://en.wikipedia.org/wiki/Zero_stroke • http://en.wikipedia.org/wiki/Pound_sterling • http://en.wikipedia.org/wiki/United_States_dollar • http://en.wikipedia.org/wiki/Bretton_Woods_system • http://en.wikipedia.org/wiki/Soviet_ruble • http://useconomy.about.com/od/criticalssues/p/US-Economy-Collapse.htm • http://en.wikipedia.org/wiki/Latin_American_debt_crisis • http://en.wikipedia.org/wiki/Iranian_rial • http://coinmill.com/IRR_USD.html • http://en.wikipedia.org/wiki/Iranian_toman

More Related