What money system do you use?

Barter: the most basic form of exchange- I give you something that you want if you give me something I want. Goods and services are exchanged for goods and services of similar value. A good bargainer tries to give something easily obtained or made for things much more difficult to produce.

Medium of Exchange: a specific commodity or resource begins to serve as a medium of exchange and the value of goods and services are calculated according to that resource. So the value of all materials in an economy might be calculated based on bushels of grain, strings of beads, ounces of salt, silver, or mystical psycrystals.

Coinage: The government begins to get involved with this one. The government regulates the medium of exchange by making coins with fixed weights and official images stamped on them. Gold is ideal for this purpose because of how soft it is, making it easy to stamp in official seals or images of Caesar's face. Coinage can become the victim of the economic force of inflation, where the government tries to increase the amount of coins in circulation by diluting the purity of the metal in the coins.

Paper: The government issues special paper money that has (or should have) its value backed up by gold in a kingdom's vaults or grain in the kingdom's granaries. These evolve, like coins, into special, government-printed bills. Eventually, the bills may not even reflect the value of the standard on which they were originally based, but have their value determined by money markets of competing currencies.

Credit: No actual coinage or paper needs to be exchanged in this system, only information that money has changed hands. The appropriate amounts are transferred between financial institutions and the only thing that's actually changed is the numbers in the accountants' spreadsheets.

I am not that far into planning my world...but it may be money/credit.

That is a popular choice. It's one of the systems used in Star Wars.

I use medium of exchange and coinage, depending on how well-organized the nation is. Generally barter isn't used except on a personal level, perhaps.

eru

I think barter would be fun to write about.

I agree, Airi! I think it would work well in an occasional village, though rather than the main money system. I'd be using coinage, personally, and barter sometimes as well.

I agree.

Correct me if I'm wrong, but doesn't barter usually have some sort of medium of exchange that's at least used as a semi-standard?

eru

Not necessarily. Bartering uses whatever is available. Money is always welcome, but often not available to the barterer. So some will barter services, others livestock, or whatever is readily available. Children have also been sold into slavery in a barter system before because they happened to be handy and at market.

This thread is very similar to the one Whackem posted here. Do you think it is different enough to leave, or should I merge them?

Um... Someone else can make that decision. I chose to create this as a separate thread so that people had a reference to the money systems. However, if someone feels they should be merged, I won't grouse.

I've no problem with leaving it, but I thought I should mention it just in case.

* grabs mod hat * I figured they were different enough to leave them apart. But maybe we should ask the ML of this place, whoever that is... * takes mod hat off and tosses it into a corner for future use *

*steals Amanda's mod hat from the corner and runs crazy around the room wearing the hat at wrackish angle, grinning mischievously* Ahem... *puts hat back meekly* Sorry couldn't resist. Do continue...

And sometimes the least unit of money (or whatever your standard-medium-of-exchange is) is too large for the transactions you want to do. I read a story once in which the suggested method of shopping in a marketplace was to buy a basket of apples for a penny (or the equivalent in that system) and then go around to the vendors you really want to buy from and trade them an apple or two or three for what you want.

Ooh, now that is fascinating info to tuck into my mind! Thanks, Kingjon!

That looks good on you, Busheh. But I'm afraid some of the MLs or Council Members might not be happy if I let you wear it. *takes hat and tucks it safely away in the mod control panel *

I'm fine with it, but....

That is a good point, kingjon.

Kait, what I was meaning to say is that even barter will eventually have some sort of standard to it. You'll know that you can trade me three bolts of cloth for the horseshoes that your horse has been needing - that's the going rate. Would that be barter or medium of exchange?

eru

Oh no, true barter has no system. Using the bolt example, the horse shoer doesn't take three bolts for his horse shoes from everyone. See, then he'd have an over abundance of bolts. He says "you give me x,y,z for this" or the buyer says "I have x,y,z, that I'm willing to trade, how many do you want?"

Yes, but say that every fall you have three bolts of cloth that you've just spun from your sheep. It's about time that you be replacing your horse's shoes and so you have an agreement that when you need your horse shod, I will take 3 bolts of cloth, because winter's coming and I need clothes to put on my little ones. And the tailor knows that right about fall is when the blacksmith gets three bolts of cloth so every fall he will make clothes out of three bolts of cloth in exchange for... something he needs done.

I didn't mean a standard across the board - that would turn the blacksmith into a cloth dealer! But usually you do end up with a set price for a specific person. (because it's likely that each person won't need you very often and you won't need what they specifically trade all that often either)

eru

Yes, it could become fairly standard from person to person like that.

Right

eru

Bartering and haggling are often connected---since prices fluctuate even in our society with set prices in a single currency, finding a mutually reasonable and agreeable price would, I think, often involve much spirited discussion ---but neither is essential to the other.

(Resurrecting a few-months-old topic rather than starting a new one for "money in my world".)

(And, before I get into the bulk of this post, one aside: Has anyone else read the fascinating discussion of the morality of coinage and economic exchange in C. S. Lewis' commentary in the Arthurian Torso on Charles Williams' poem "Bors to Elaine: on the King's Coins"?)

Here's my answer to the question that started this thread. The tyrannical, totalitarian Dragon Empire probably uses a single paper currency, backed by nothing except the will of its ruler. But in "the free world" there isn't any one currency or medium of exchange. Since in a free society currency (encompassing coins, paper notes, and other such media) is merely a medium of exchange, of little intrinsic value but given its value by the mutual trust of those who give and accept it, the governments of the free world place few restrictions on this area of commerce. Any bank, banker, or private person, in addition to any political jurisdiction’s treasury, can (with the proper equipment and materials) coin its own money or print its own currency.

What this system does create is a patchwork of competing currencies, all fluctuating in relative value. The Imperial Treasury’s bonds tend to be the reserve currency of the free world, since the Empire has few expenses and (especially with its inability to privatize new enterprises fast enough in the aftermath of the arrival of the Chosen from roughly present-day Earth) unreasonably large income despite few taxes. On the other hand, there’s very little call for a “reserve currency”, since most people and institutions prefer to have their wealth either invested in some business (their own, or someone’s they know well, typically) or kept securely in some more intrinsically-valuable form (or at least a form where the value is less easily depreciable, such as unminted gold).

One effect you might expect is an explosion of counterfeit money. The production and circulation of counterfeit coins or notes is nearly universally forbidden under broader laws against counterfeit goods in general. And counterfeit money---whether false currency, as we deal with today, or impure coins---is not difficult to detect with a combination of mundane techniques (much like those that our world has developed over the past several millennia) and applied metaphysics, and avoiding all or even many of the various custom detection schemes that every bank and most businesses have is effectively impossible. Further, once a counterfeit has been discovered, it is not all that difficult to trace its history back to its creator, who is then usually held liable for the face value of the counterfeits, as well as additional penalties---a substantial deterrent.

One last tangent: Banking in the Empire and its neighbors never developed in the … curious … way it has here. Loans with a set interest rate are rare (other than institutional bonds, which are not all that common); instead, the standard practice is an investment in return for a small share of the profit (for a defined term or otherwise), though for riskier investments the lender/investor might still ask for some sort of collateral until he recouped his investment. A few enterprising members of the Chosen have introduced credit cards, but they haven’t caught on; stores are willing enough to sell on credit to (i.e. settle up accounts monthly with) local customers that this is unnecessary.

Very cool, very thought out, Kingjon.

Interesting, kingjon.... This is cool development. I love it when people take the time to make it complex.

I am confused about one point, however. Is this money that everyone is printing up backed by anything? Or is it simply...well... 'merely a medium of exchange, of little intrinsic value but given its value by the mutual trust of those who give and accept it'? I am not sure if I understood that correctly.

I was wondering, because – * pauses * I think I'll wait til I get your answer to try and work it all out in my head, actually.

One most of my races use medium exchange. One uses coinage, and one barters. (Because a currency is not allowed in their religion)

OH!! So here I discuss what systems of currency could be used within the stories that I write! SO COOL!

So here is an exposition that might make enough sense to enhance somebody's ideas, and if not, you at least got another post on money X) :

Money, in it's most basic form, is simply a rare material which is considered valuable and tradable to the common society. We see throughout history that currency can take on many shapes and forms, the likes of which have only a few common attributes, tradability, rarity, and acceptance. Without any one of these three, the currency used would falter and be replaced, so when inventing a system, the best course to take is to consider the materials which posses these three distinctions. Maybe inventing a new material isn't such a bad idea either, and it might not even need to be material, simply ideas, or work.

I don't know if that helped at all, but that's what I think about when trying to design a currency.

Much like in some periods in our own world's history (such as the times in the U.S. when there wasn't a Bank of the United States), there's not much difference between "currency" and "bearer bonds." "Currency" is used because things that have intrinsic value aren't suitable as media of exchange---gold (which isn't really as "intrinsically" valuable as we imagine---it's pretty, and there are some uses in electronics, and so on, but mostly it's valuable because we think it's valuable ) is heavy; some of the rarer elements are so valuable that a few grains might be worth "a king's ransom"; you wouldn't want to carry sheaves of wheat around while shopping; and so on. So a "5-pound note" issued by J. Q. Engraver is a promise to give 5 pounds of (probably) silver; a seller might accept that at face value if he's well-known for being honest, or even at more than face value if his silver tends to be unusually pure, but might treat it as if it were worth less or refuse to accept it at all if J.Q. Engraver is an unknown person who lives thousands of miles away or if he sometimes has trouble paying his debts.

And note that I said anyone could print money; most people don't bother.

Oh, so your notes are (or ought to be) backed up by something real? * nods * That's what I was trying to clarify. It doesn't really work otherwise. I believe that is where you get inflation...

I had a thought about money, based on reading about how to create a language. It seems that if you look at different cultures and their money systems, it might help with preventing systems from becoming too American (or whatever country you live in).

Just a thought.

Yeah, you can't even get away without research in writing fantasy... Research would be very helpful in this area. I think money systems are one of those areas where you hardly notice you're copying your own culture.

Wikipedia is helpful for most cultural data.

That is a fascinating thought. We do tend to mimic our own culture in some of the "simpler" things.

Coinage is what I mainly use. Barter is also used, though not often talked about in the books.

The outer-lying towns and regions use barter because the have absolutely no use for precious stones or metals.

The greater cities use mainly precious stones and metals (with in the form of jewelry or otherwise) and are even moving into the use of coinage more.

Guess who has more problems with dragons?

Since most races don't interact with human civilization very much, they use barter, although the value of trinkets is acknowledged in their trades.