Banknote

Banknote is also known as a bill, paper money or fiat money. Banknote is a note issued by government or bank, which is licensed by authorities and broadly accepted by market participants. Banknotes are called fiat money, as they are not backed by any commodity, as it used to be during the gold standard. Banknote can be used to participate in market activities and exchange the note for goods and services as a method of payment. Different countries have their own banknotes that were issued and legally approved by the government of that country. Banknotes might have different value depending on the economy of the country. Each country has its own banknotes, and not all banknotes of one country are accepted as a method of payment in another country. Banknotes of one country can be exchange for banknotes on another country using currency exchange rate.

History of a banknote

The history of a banknote starts ...

Characteristics of a banknote

Below are presented the characteristics of a banknote:

• Banknote must be authorised, approved and issued by the government, where this banknote will be used as a method of payment.
• Banknote must have a face value that will determine its value.
• Banknote must have national symbols that will allow to differentiate banknotes of different countries.
• Banknote can only be issued by the monetary authorities and national bank of the country.
• Banknotes have no maturity date and can be used as a method of payment, as long as they are approved by the government.
• Banknotes of one country might not be accepted as a payment method in another country.
• The value of the banknote is defined by the economy of the country and supply, and demand on the market.
• Banknotes do not have any intrinsic value and they are not attached to any commodity.

References

• Lannoye V. (2015), The History of Money for Understanding Economics, Vincent Lannoye.
• Solomon D. and Spurling T. (2014), The Plastic Banknote: From Concept to Reality. Csiro Publishing, Australia, Collingswood.
• Wray L. R. (2012), Introduction to an Alternative History of Money. Levy Economics Institute, working paper No 717.

Author: Nikita Shtemenko