Coin

A coin is a piece of hard material, traditionally metal and usually in the shape of a disc, which is used as a form of money. With banknotes, coins make up the cash forms of all modern money systems. Coins are used for lower valued units, notes for the higher values.

Table of contents

1 The Value of a Coin 2 Coin Debasement 3 Features of Modern Coinage

The Value of a Coin

The market exchange value of a coin comes from its historic value, and/or the intrinsic value of the component metal (for example gold or silver).

However, in modern times most coins are made of a base metal and their value comes strictly from their status as fiat money. This means that that the value of the coin is decreed by government fiat rather than agreed by the people, which really makes it less a coin and more a token in the strict sense.

To distinguish between these two types of coins, as well as from other forms of tokens which have been used as money, monetary scholars have defined there to be three criteria which must be met for an object to be a "true coin". These criteria are:

1. It must be made of a valuable material, and trade for close to the market value of that material.
2. It must be of a standardized weight and purity.
3. It must be marked to identify the authority that guarantees the content.

By the above definition, the invention and first known usage of coins comes from the Kingdom of Lydia circa 643-630 B.C. Under three generations of Lydian kings, the money of Lydia gradually moved from being lumps of electrum (a naturally-occurring mixture of silver and gold) to coins of a guaranteed weight and purity, marked with the seal of the King. True coins also developed very close to this timeframe in both India and China. The History of Coins is a long and interesting one.

Coin Debasement

Throughout history governments have been known to create more coinage than their supply of precious metals would allow. By replacing some fraction of a coin's precious metal content with a base metal, a government reduces the value of the coins (thereby "debasing" their money) and would then produce more coins then they could otherwise. Debasement of money almost always leads to price inflation unless price controls are also instituted by the governing authority. Some consider a classic example of this phenomenon to be the behavior of price levels in the United States since 1964 (the last year United States Coins were minted of silver).

Features of Modern Coinage

The milled edges still found on many coins were originally designed to show that none of the valuable metal had been shaved off the coin. Prior to the use of milled edged coins, circulating currency suffered from "shaving", a common problem where members of the public would cut the edges off circulating coins made of precious metals. Circulating unmilled british sterling silver coins were known to be shaved to almost half of their minted weight. This form of debasement in Tudor England lead to the formulation of Gresham's Law. The monarch would have to periodically recall, paying only bullion value of the silver, and re-mint circulating coins.

The front side of a coin, traditionally carrying a picture of the head of a monarch or other authority, is called the obverse, or colloquially heads. The back side is called the reverse, or colloquially tails.

Coins are popularly used as a sort of two-sided die; in order to choose between two options with a random possibility, one choice will be labelled "heads" and the other "tails," and a coin will be flipped or "tossed" to see whether the heads or tails side comes up on top. Coins are sometimes falsified to make one side weigh more.

Some coins are so thin they can only be struck on one side, they are called bracteates.

See also: Banknote, British coinage, Coin collecting, Coinage Metals, Counterfeit, Currency, Euro coinage, Roman currency, United States Coin List of coins.

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To coin a term is to create a neologism; see word coinage.