Coin Currency

Coin Currency

Coin currency is made of precious metals, and was first used as money around 600 BC in ancient Lydia (present-day Turkey). They had a standard weight and value, which meant they could be traded more easily than other commodities such as grains or livestock. This ease of trade helped to increase their popularity. Over time, coins were produced in many different shapes and sizes. They may be round, polygonal or shaped with wavy edges. Coins can also have holes in them, which were originally designed to permit them to be strung together so they could be carried on cords and worn as necklaces.

The value of a coin is determined by its metal content, its condition and its historical significance, rarity, beauty of design and general popularity with collectors. However, the vast majority of coins presently in circulation are not made of precious metals. Instead, they are made from base metals and their value is derived from their status as fiat money, which is not backed by the metal itself. These types of coins are often called bullion coins, although they can be minted with a face value less than the value of the metal in them.

Historically, debasement of coins has occurred for several reasons. One purpose was to allow the coining authority to produce more coins than their supply of precious metal would otherwise support, by replacing a small fraction of the coins’ precious metal content with base metals such as copper or nickel. This reduced the intrinsic value of each individual coin, but increased its usefulness by reducing wear, and allowed the coining authority to profit from the difference between metal value and face value. This was called Gresham’s law.

In modern times, it is more usual for countries to have a central bank that issues paper notes and mints coins. This is done to ensure a uniform standard of currency across the country or region. It is also easier for the government to monitor counterfeiting and other irregularities with paper money than it would be with coin.

Federal Reserve Banks supply money to financial institutions, including commercial banks, savings and loans, credit unions and community development corporations. They do so by printing bills, receiving and distributing coin and supplying cash to depository institutions. See Cash Lifecycle (Off-site) to learn more about the Fed’s role in this process.