Definition
Specie is physical money that has intrinsic value. This term is most commonly associated with coins made from precious metals such as gold and silver. Unlike fiat money, which has value mainly because a government decrees it as legal tender, specie has value because of the metal content itself. Specie used to be the standard medium of exchange before the adoption of fiat currency systems.
Examples
- Gold Coins: Historically, gold coins like the American Gold Eagle and the South African Krugerrand have been used as a form of specie.
- Silver Coins: Examples include the Morgan Silver Dollar and the Silver Britannia.
- Historical Specie: Coins such as the ancient Greek Drachma and the Roman Denarius were made of precious metals and served as the primary form of money in their respective eras.
Frequently Asked Questions
What is the primary difference between specie and fiat money?
Specie has intrinsic value due to its metal content, while fiat money has value because a government declares it to be legal tender.
Why did societies move away from specie to fiat currency?
Fiat currency is easier to produce, more flexible for monetary policy, and does not rely on the availability of precious metals.
Can specie still be used in modern transactions?
While not common, specie can still be used in transactions, especially in niche markets such as collectibles and bullion trading.
How is the value of specie determined?
The value of specie is determined primarily by the market value of the metal from which it is made (e.g., the current market price of gold or silver).
What are the advantages of using specie?
The main advantages are intrinsic value, durability, and resistance to inflation.
Related Terms
- Fiat Money: Currency that has value because a government has ordered that it is an acceptable means to pay debts.
- Bullion: Precious metals in bulk form, typically gold or silver, which can be cast into bars or ingots.
- Legal Tender: Money that must be accepted if offered in payment of a debt.
- Intrinsic Value: The actual value of an asset based on its physical components rather than external factors like market demand.
- Medium of Exchange: An intermediary instrument used to facilitate the sale, purchase, or trade of goods between parties.
Online References
Suggested Books for Further Studies
- Money: The Unauthorized Biography by Felix Martin
- The Ascent of Money: A Financial History of the World by Niall Ferguson
- Gold: The Once and Future Money by Nathan Lewis
- The History of Money by Jack Weatherford
- Precious Metals Investing for Dummies by Paul Mladjenovic
Fundamentals of Specie: Finance Basics Quiz
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