Coins play a symbolic role in the economic system of a country. In a commodity money system, a commodity is used as the standard in measuring value that as well as the medium of exchange of goods and services. This exchange of commodities is practiced during the old days. During the Middle Ages, there was only a uniform size for coins called the penny. The penny is composed of silver with a small amount of copper alloy to make the coin harder. There are two primary ways to determine the amount of money that circulates in the economic system. One could be determined through minting and the other is through melting. The increased in stocks of money via minting are approved by the monetary authorities under their own account. Minting could also be done via the private conversion of metals to the mint. The profit of minting money depends on the price of metals. That is; the lower price the price of the metal the more profitable it becomes during minting. Conversely, if price of the same metal rises, it will be more profitable to melt the coins instead (Velde, 2007).
Throughout the course of history, trade and commerce needed silver and gold coins. The maintenance of fixed exchange values between the coins with different sizes and different metals leads to the repeated debasement of copper ratio to make the denomination cheaper. In the 18th century, the penny was made of copper. After a series of experimentation, the gold was adopted in 19th century where the dollar is the main unit. The dollar was in large value of gold coins and it is considered as a fixed amount of gold.
Works Cited
Misra, Santosh K., G. Javalgi Rajshekhar (Raj), and Robert F. Scherer. "Global Electronic Money and Related Issues." Review of Business 25.2 (2004): 15-24.
Whaples, Robert. "TIME TO ELIMINATE THE PENNY FROM THE U.S. COINAGE SYSTEM: NEW EVIDENCE." Eastern Economic Journal 33.1 (2007): 139-46.
