Gold, Fiat and Credit. An Elementary Discussion of Commodity Money, Fiat Money and Credit

48 Pages Posted: 20 May 2004

See all articles by Thomas Quint

Thomas Quint

University of Nevada-Reno, Department of Mathematics

Martin Shubik

Yale University - School of Management; Yale University - Cowles Foundation

Date Written: April 2004

Abstract

In this paper we present a series of models, all within the context of a simple two-good economy, which bring out the distinctions between the different types of money and financial institutions. The models emphasize the physical properties of the economic goods, moneys, and trading systems. In Part 1 of the paper, we covered models in which the money is a consumable storable; here in Part 2 we consider economies using durable money, fiat money, or credit. Under this framework we are able to successfully contrast the role of private money lenders, banks, bilateral credit systems, and credit clearinghouses. We are also able to model the importance of the bankruptcy or default penalty in supporting the use of fiat.

Note: A previous version of this abstract can be found at: http://ssrn.com/abstract=530783

Keywords: Barley, gold, fiat and credit: evolution of money

JEL Classification: C72, E41, E43, E51, E58, K12, P10

Suggested Citation

Quint, Thomas and Shubik, Martin, Gold, Fiat and Credit. An Elementary Discussion of Commodity Money, Fiat Money and Credit (April 2004). Available at SSRN: https://ssrn.com/abstract=546682

Thomas Quint

University of Nevada-Reno, Department of Mathematics ( email )

1664 North Virginia
Reno, NV 89557
United States
775-784-1366 (Phone)
775-784-6378 (Fax)

Martin Shubik (Contact Author)

Yale University - School of Management ( email )

Box 208200
New Haven, CT 06520-8200
United States

Yale University - Cowles Foundation ( email )

Box 208281
New Haven, CT 06520-8281
United States
203-432-3694 (Phone)
203-432-6167 (Fax)

HOME PAGE: http://cowles.econ.yale.edu/P/au/d_shubik.htm

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