Metallism is the economic principle that the value of

money Money is any item or verifiable record that is generally accepted as payment for goods and services and repayment of debts, such as taxes, in a particular country or socio-economic context. The primary functions which distinguish money are: m ...

derives from the

purchasing power Purchasing power refers to the amount of products and services available for purchase with a certain currency unit. For example, if you took one unit of cash to a store in the 1950s, you could buy more products than you could now, showing that th ...

of the

commodity In economics, a commodity is an economic goods, good, usually a resource, that specifically has full or substantial fungibility: that is, the Market (economics), market treats instances of the good as equivalent or nearly so with no regard to w ...

upon which it is based. The

currency A currency is a standardization of money in any form, in use or circulation as a medium of exchange, for example banknotes and coins. A more general definition is that a currency is a ''system of money'' in common use within a specific envi ...

in a metallist monetary system may be made from the commodity itself (

commodity money Commodity money is money whose value comes from a commodity of which it is made. Commodity money consists of objects having value or use in themselves ( intrinsic value) as well as their value in buying goods. This is in contrast to representa ...

) or it may use

token Token may refer to: Arts, entertainment, and media * Token, a game piece or counter, used in some games * The Tokens, a vocal music group * Tolkien Black, a recurring character on the animated television series ''South Park,'' formerly known as ...

s (such as national

banknote A banknote or bank notealso called a bill (North American English) or simply a noteis a type of paper money that is made and distributed ("issued") by a bank of issue, payable to the bearer on demand. Banknotes were originally issued by commerc ...

s) redeemable in that commodity.

Georg Friedrich Knapp Georg Friedrich Knapp (; 7 March 1842 – 20 February 1926) was a German economist who in 1905 published ''The State Theory of Money'', which founded the chartalist school of monetary economics, which argues that money's value derives from ...

(1842–1926) coined the term "metallism" to describe

monetary system A monetary system is a system where a government manages money in a country's economy. Modern monetary systems usually consist of the national treasury, the mint, the central banks and commercial banks. Commodity money system A commodity mon ...

s using coin minted in

silver Silver is a chemical element; it has Symbol (chemistry), symbol Ag () and atomic number 47. A soft, whitish-gray, lustrous transition metal, it exhibits the highest electrical conductivity, thermal conductivity, and reflectivity of any metal. ...

gold Gold is a chemical element; it has chemical symbol Au (from Latin ) and atomic number 79. In its pure form, it is a brightness, bright, slightly orange-yellow, dense, soft, malleable, and ductile metal. Chemically, gold is a transition metal ...

or other metals. In metallist economic theory, the value of the currency derives from the

market Market is a term used to describe concepts such as: *Market (economics), system in which parties engage in transactions according to supply and demand *Market economy *Marketplace, a physical marketplace or public market *Marketing, the act of sat ...

value of the commodity upon which it is based independent of its monetary role.

Carl Menger Carl Menger von Wolfensgrün (; ; 28 February 1840 – 26 February 1921) was an Austrian economist who contributed to the marginal theory of value. Menger is considered the founder of the Austrian school of economics. In building his margi ...

(1840–1921) theorized that money came about when buyers and sellers in a market agreed on a common commodity as a

medium of exchange In economics, a medium of exchange is any item that is widely acceptable in exchange for goods and services. In modern economies, the most commonly used medium of exchange is currency. Most forms of money are categorised as mediums of exchange, i ...

in order to reduce the costs of barter. The intrinsic value of that commodity must be sufficient to make it highly "saleable", or readily accepted as payment. In this system, buyers and sellers of real goods and services establish the medium of exchange, independently of any

sovereign state A sovereign state is a State (polity), state that has the highest authority over a territory. It is commonly understood that Sovereignty#Sovereignty and independence, a sovereign state is independent. When referring to a specific polity, the ter ...

. Metallists view the state's role in the minting or official stamping of coins as one of authenticating the quality and quantity of metal used in making the coin. Knapp distinguished metallism from

chartalism In macroeconomics, chartalism is the theory of money that money originated historically with states' attempts to direct economic activity rather than as a spontaneous solution to the problems with barter or as a means with which to tokenize debt ...

(or antimetallism), a monetary system in which the state has monopoly power over its own currency and creates a unique market and demand for that currency by imposing taxes or other such legally enforceable debts upon its people which they can only pay by using that currency.

Joseph Schumpeter Joseph Alois Schumpeter (; February 8, 1883 – January 8, 1950) was an Austrian political economist. He served briefly as Finance Minister of Austria in 1919. In 1932, he emigrated to the United States to become a professor at Harvard Unive ...

(1883–1950) distinguished between "theoretical" and "practical" metallism. Schumpeter categorized the Menger position, that a commodity link is essential to understanding the origins and nature of money, as "theoretical metallism". He defined "practical metallism" as the theory that although a sovereign state has unfettered power to create non-backed currencies (money with no intrinsic or redeemable commodity value), it is more prudent to adopt a backed currency system.

Contradistinctions

Versus fiat monetary systems

Adherents of metallism are opposed to the use of

fiat money Fiat money is a type of government-issued currency that is not backed by a precious metal, such as gold or silver, nor by any other tangible asset or commodity. Fiat currency is typically designated by the issuing government to be legal tende ...

, i.e. governmentally-issued money with no intrinsic value.

Versus chartalism

Historically, the main rival school of thought to metallism has been

, which holds that even in systems where coins are made of precious metals, money derives its value mainly from the authority of the

state State most commonly refers to: * State (polity), a centralized political organization that regulates law and society within a territory **Sovereign state, a sovereign polity in international law, commonly referred to as a country **Nation state, a ...

. Competition between these two alternative systems has existed for millennia, long before the concepts were formalised. At times hybrid monetary systems were used. Constantina Katsari has argued that principles from both metallism and chartalism were reflected in the monetary system introduced by

Augustus Gaius Julius Caesar Augustus (born Gaius Octavius; 23 September 63 BC – 19 August AD 14), also known as Octavian (), was the founder of the Roman Empire, who reigned as the first Roman emperor from 27 BC until his death in A ...

, which was used in the eastern provinces of the

Roman Empire The Roman Empire ruled the Mediterranean and much of Europe, Western Asia and North Africa. The Roman people, Romans conquered most of this during the Roman Republic, Republic, and it was ruled by emperors following Octavian's assumption of ...

from the early 1st century to the late 3rd century AD.

Monometallism versus bimetallism

A smaller disagreement which takes place relating to metallism is whether ''one'' metal should be used as currency (as in

monometallism Metallism is the economic principle that the Value (economics) , value of money derives from the purchasing power of the commodity upon which it is based. The currency in a metallist monetary system may be made from the commodity itself (commodit ...

), or should there be two or more metals for that purpose (as in

bimetallism Bimetallism, also known as the bimetallic standard, is a monetary standard in which the value of the monetary unit is defined as equivalent to certain quantities of two metals, typically gold and silver, creating a fixed Exchange rate, rate of ...

History of metallic monetary systems

Historically, silver has been the main kind of money around the world, circulating bimetallically with gold. In many

language Language is a structured system of communication that consists of grammar and vocabulary. It is the primary means by which humans convey meaning, both in spoken and signed language, signed forms, and may also be conveyed through writing syste ...

s, the words for "money" and "silver" are identical. In the final era of global metal-based money, i.e. the first quarter of the 20th century, monometallic gold use has been the standard.

Zimbabwe file:Zimbabwe, relief map.jpg, upright=1.22, Zimbabwe, relief map Zimbabwe, officially the Republic of Zimbabwe, is a landlocked country in Southeast Africa, between the Zambezi and Limpopo Rivers, bordered by South Africa to the south, Bots ...

has a multi-currency system that recognizes the gold

Mosi-oa-Tunya (coin) The Mosi-oa-Tunya ( English: ''The Smoke Which Thunders'') is a gold coin introduced in Zimbabwe in 2022 in the context of rising inflation. Nomenclature and characteristics ''Mosi-oa-Tunya'' is the Lozi name for Victoria Falls and translates ...

and the ZiG, a digital token backed by gold, as legal tender in parallel with the

Zimbabwean dollar (2019–2024) The Zimbabwean dollar (currency sign, sign: Z$; ISO 4217, code: ZWL), also known as the Zimdollar or Real Time Gross Settlement (RTGS) dollar, was the currency of Zimbabwe from February 2019 to April 2024. It was the only legally permitted curr ...

and the US dollar.

Broad sense of the term

In the broad sense of the term, which tends to be used only by scholars, metallism considers money to be a "creature of the market", a means to facilitate exchange of goods and services. In this broad sense, the essential nature of money is purchasing power, and it does not necessarily need to be backed by metals. Understood in this broad sense, metallism reflects the majority view among mainstream economists, which has prevailed since the early 19th century.

Contradistinctions

Versus fiat monetary systems

Versus chartalism

Monometallism versus bimetallism

History of metallic monetary systems

Broad sense of the term

See also

References

Further reading