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MONEY has always been recognized as an

essential tool in a specialized economic
It indicates clearly that money can no
longer be thought of as a tool of economic
Instead it stands forth as a kind of force
with tremendous powers over economic
good or economic evil.

One may ask why money and monetary

problems such vital part and wield such
power in the economic affairs of mankind.
The answer is found in the dynamic, restless
and changing nature of our economic
The rate of economic activity ebbs and
flows, growing population must be
absorbed, old commodities disappear and
are replaced by new ones and new
inventions and resources must be exploited.

Money is anything used by society as a
medium of exchange, and is widely
acceptable for the payment of good and
services without questioning the integrity of
the person offering it.
In the Philippines, money supply consists of
deposit money that is withdrawable by
means of checks and currency, which
consist of notes and coins.

The primary function of money is to facilitate the

process of exchange, exchange of course could
take place without money, but it would be very
In primitive societies, direct bartering of goods for
goods is common, but there are certain difficulties.
A fisherman wants to exchange his fish for rice, but
finds a farmer who wants meat, in exchange for his
rice. So the fisherman looks for someone who want
fish but who has meat, so that he can make a
preliminary trade with that person before he can
finally get his rice.

BARTER SYSTEM was the first stage of

monetary development.
It is the direct exchange or swapping of
goods for goods, services for services,
goods for services or services for goods.
But society abandoned the barter system
for the following reasons:

1. It was difficult to look for that person who has

the things you need and who also wants the
things you are offering for exchange.
2. There is no common denominator to measure
the value of goods and services sought for
3. Most of the goods traded have unequal values.
4. It is time consuming, cumbersome and very
inconvenient for individuals to use the barter
5. It lacks generalized purchasing power.


The goldsmiths were instrumental in the

evolution of money.
Hundreds of years ago, the goldsmiths develop
the use of money by accepting gold bullions to
be converted into coins.
They also accepted gold deposits for safekeeping, which were returned in another
precious metal of the same weight and
They also helped in the transfer of precious
metal by means of receipts.

These receipts were originally nonnegotiable but later on became a negotiable

instrument because it was a bearer
These receipts were issued to represent the
gold deposits.
The goldsmiths found out that not all
depositors withdraw their gold at the same
time so that some receipts were sold to
people who needed funds.
These receipts were interest bearing.

Originally, a goldsmith was being paid a

storage fee for the gold but when people
came to know that the goldsmith was
making money out of the gold deposited,
they required him to share with them a part
of the interest he earned. This is how
banking started.

Minting of coins when gold bullions were converted

into coins, coins were considered the first type of
modern money.
They were standard form, which is why each
transaction required weighing and testing for its quality.
But because this method became, cumbersome and
interfered with the smooth flow of business, the
goldsmiths, the kings and the bankers stamped the
coins to guarantee its integrity as to weight and
fineness. This is how standard coins came into use.
Today, the sole power of issuing notes and coins lay on
the government of a country.
In the Philippines, we have our security mint, which is
managed by the Bangko Sentral ng Pilipinas that mints
and prints our notes and coins.

It has a tremendous power over economic
Businessmen go into production and trade
because of money profit. When people
deposit their money in banks, and the banks
in turn lend money to borrowers for
productive purposes, this induces
employment, which generates consumption,
thereby encouraging more production, which
leads to a multiplier effect and results to
progress in the economy.

With money income, individuals are

encouraged to work and even specialize on
a particular undertaking, which leads to
division of labor. This characterizes a
modern society.
There are also unfavorable effects of money.

The excessive desire for money profits sometimes

induces businessmen and manufacturers to
sacrifice the quality of their products.
Sometimes management and labor dispute arise
out of claims to a large sum of money incomes.
Money price and money incomes become a
measure for judging people and things.
Society has the tendency of becoming too
The depletion of our natural resources can be a
result of the desire for too much money.

1. As a medium of exchange: As a medium
of exchange, money enables goods and
services to be transferred from person to
person. It is a way of exchange or a means
of exchange.
2. As a standard to measure the value of
goods and services: Money measures the
valued to goods and services. It is used as a
yardstick in the pricing of things. The
monetary unit of the country is used as a
standard of value.

3. As a store of value: Money can be kept

for future use. Since money is widely
acceptable, it enjoys a generalized
purchasing power and cab serve as a store
of value. Such holder of the money can hold
on to it and spend it only when he desires
to. However, storing money may also have
its advantage.

The magnitude of the cost of converting an

asset into money is an important concept
known as liquidity.
By liquidity, we mean the relative core of
which an asset may be converted into
money without significant inconvenience or
loss of time.
Money, which is ready to spend at a
moments notice, is the ultimate in liquidity.

Assets raging from Time Deposits, Bonds,

Treasury Bills to Common Stocks involve
various inconvenience such as interest,
transaction costs and risks, suffer from
various degrees of illiquidity that means
lack of liquidity.
For these reasons some people choose to
hold some portion of their wealth in cash.

There are two ways of keeping money for

future use:
1. By saving and
2. by investing.
We can save money productively and
The productive way of keeping money for
future use is by depositing it in a bank. If you
keep your money in the bank, it becomes
productive since you can earn interest from it.

The bank in turn makes money out of other peoples

money by lending it to others for productive purposes.
Those borrowing form the bank will definitely use it to
produce goods or to help out in the distribution and
sale of such goods.
In the process, they hire more people who increase
their consumption, which will also increase production.
These business activities will later result to a chain
reaction, which will ultimately add up to the
production and growth of the countrys economy as a

Investment on the other hand, can be made

in: 1) business, 2) corporate or government
securities such as stocks and bonds, 3)
money market, 4) real state properties, and
5) jewelries.
Investment in business has three divisions,

INDUSTRIAL BUSINESS is concerned with

the manufacture of goods, the physical and
chemical transformation of raw materials
into finished products, and the extraction of
minerals from the ground and of fishes from
the seas. Examples of these are: mining
industry, oil industry, and fishing industry.

COMMERCIAL BUSINESS is concerned with

bridging the gap between the produces and
the ultimate consumer. It deals with the
distribution of goods. It also includes those
dealing with cargo transport like shipping
companies, freight trucks and planes.

SERVICING BUSINESS is concerned with the

rendering of services such as restaurant,
tailoring shops, beauty parlors, recreation
centers, and banks.

4. As a means of deferred payment: Money enables

people to buy goods on credit. Goods and services
can be obtained at the present time in exchange
for a promise to pay at a future date.
The existence of standard money is very important
not only for daily transactions requiring deferred
Today, there are more commercial transactions
done in deferred payments rather than cash
It would be hard to imagine contracts involving
future payments without the use of money.


1. General Acceptability good money should be

acceptable to everybody in a specific territory. It
refers to the willingness of people to accept the
money in exchange for goods and services.
2. Stability of Value This characteristic is a
prerequisite to general acceptability. Before a
particular kind of money becomes acceptable, it
must first have a stable value. The purchasing
power of money should not change abruptly. If
ever there be changes, such change should be

3. Portability This refers to the quality of

money being easily carried from place to
place. It is important that the material used
as money should conform to these

4. Cognizability The money circulating within a

country can be easily distinguished from other
kinds of money. A face bill can be recognized from
a genuine bill. The best way to determine a
counterfeit bill from a genuine bill is through the
red and blue fibers scattered all over the paper
bill. Try to prick these fibers with a pin and if you
are able to remove them, then this bill is genuine.
Another method of determining fake bill from a
genuine one is through the security design in the
network. This method is only known to experts
who are authorized by the Central Bank.

5. Divisibility The material used as money

must be capable of being divided into
smaller denominations without impairing or
destroying the value of the whole. So a
hundred-peso bill can buy exactly the same
as what five P/20.00 bills can buy or what
ten P/10.00 bills can buy.

6. Homogeneity The material used as

money should not only be capable of being
divided into equal part or smaller units, but
that such equal parts should have equal
weight and fineness, and must be made of
the same material and possess equal value.

7. Elasticity This characteristic refers to the

volume of money being capable of manipulation
by monetary authorities. Money supply can
easily be increased or decreased depending
upon the needs of our economy. Thus, when
there is too much money in circulation, the
Central Bank institutes measures or monetary
policies that would absorb the excess liquidity in
the economy by increasing the discount rates or
the reserve ratios of banks, or by going into
open market operation.

8. Durability This characteristic enable

money to withstand wear and tear. The
paper money used by almost all countries of
the world is made of a special kind of paper,
which has extra strength to withstand

1. Commodity Money This is the type of
money that has a commodity value or a
value of its own. In order for it to circulate,
the commodity value should equal its
money value.
2. Credit Money This is the credit
instrument that is widely acceptable in
payment for goods and services and in the
settlement of existing debts and

There are three types of credit money

backed up by 100% gold or silver reserves.
This money circulates in a country adopting
the full gold or silver reserve.


by partial gold or silver reserve. This kind of
money circulated in the Philippines when
the country adopted the gold exchange
standard. The Philippine government
circulated more money that its gold
holdings. Both representative and fiduciary
paper money are convertible.

The representative paper money and

fiduciary paper money are what we call the
convertible paper money because they can
be converted into gold or silver, either fully
or partially.

BANK NOTES this refers to the promise of a

bank to pay the bearer or holder of the note a
sum certain in standard money upon demand
or upon representation of the note.
Before the establishment of the Central Bank
in the Philippines, there were two banks that
were allowed to issue bank notes; these were
the Philippine National Bank and the Bank of
the Philippine Islands.
Today, the Bangko Sentral ng Pilipinas is the
sole Note Issuer in the country.

3. FIAT MONEY this is the kind of paper

money issued by a government edict or
decree. It is most often issued during a war
whereby the occupying country circulates a
kind of paper money whose money value
has no relationship at all with the intrinsic
It is an inconvertible paper money because
the government holds no reserves to back it

4. LEGAL TENDER MONEY this is the kind

of money that circulates because of its legal
tender power. By legal tender we mean that
the debtor is authorized by law to offer it in
payment of his debt or of his existing

It is the process of making uniform coins from
metals and stamping them with a specific
design as a guaranty of its weight and
fineness and the integrity of the country it
The coin is the product of coinage. It is
defined as a mass of metal cast in some
convenient shape with a definite weight and
fineness, which is guaranteed by the
government and certified by the integrity of
the design impressed upon its surface.

Some authors also define it as a piece of metal of

specified weight and fineness with a particular
designed and denomination intended as money.
Fineness is defined as the ratio of pure gold and
silver to the total weight of the coin. The value of
the Philippine peso in 1934 was 12.9 grains of
gold, 9/10 of which is pure gold and 1/10 of
which alloy.
Mint is a place or a factory where coins are
manufactured or minted. It is usually operated by
the government.

The actual manufacture of coins is done at

the mint. The metals are cast into bars or
sometimes-called INGOTS. The ingots are
made into strips the thickness of the desired
Blank coins are punched out of the strips of
metal. After being punched out, the coins are
rolled to produce their raised edge, which is
called upset rim. This is done under a heavy
pressure. Finally, the design is stamped on
the blank coins.

The silver coins have grooves or reeding on

their edges so it will be evident if any part
of the coins has been shaved off.
Coins are made of metal alloys rather than
pure metal so as to give them durability.
The silver peso issued by the Treasury in
1934 contained 80% silver and 20% alloy.
Denominations from 10 centavos to 50
centavos contain 75% silver and 25% alloy.

The intrinsic value of the metal in the coin is

less than the face value of the coin or the
valued assigned to the coin.

a system where by money metals or metals
may be brought to the government mint
and converted into standard money without
any charge or any expense for minting
except for the delay involved in the process.
BRASSAGE is a kind of coinage where the
fee charged by the government to mint
metals into coins is just sufficient to cover
the cost of minting.

SEIGNIORAGE is a kind of coinage where the fee

charged by the government is more than the cost
of minting so here, the government earns a profit.
LIMITED COINAGE is a system adopted by a
country whereby the government converts metals
into coins, only at its option. Since there is no
privilege of free coinage is such a case, these
coins are the result of what is known as limited
coinage. Such coins normally bear a heavy
seiniorage charge, which means that their face
value is considerably greater than the value of the
metal they contain.


The paper currencies are quite difficult to

counterfeit. Security features have been
incorporated into the design. One of the
best methods therefore, of detecting a
counterfeited bill is to compare it to a bill
known to be genuine.

Listed below are key points detecting

Bangko Sentral Counterfeited Notes and
(1) STUDY the workmanship of each
denomination of know genuine Central bank
notes. (2) Take note of and FAMILIARIZE
yourself with the various characteristics of
the following features:

1. Paper
2. Portrait
3. Watermark
4. Security Fiber
5. Security Thread
6. Background Design
7. Color of each denomination
8. Style and size of serial number
9. Vignette
10. Cleanness of print

1. Even flow of metallic grains
2. High relief of letter and numerals
3. Regularity of reedings and beadings


Examine each note and closely observe the


The fingers can readily feel the

main prints on the front and back
of fairly new notes. This is
brought about by the measurable
thickness of the ink deposited on
the paper, which gives the print
an embossed effect.

Generally smooth. The fingers

can hardly feel the main print
even on new notes. This is due to
offset printing, the most common
process employed by
counterfeiters. Photocounterfeits reproduced by
photographic copying generally
feel slimy; the prints are
mere stains on the coating of the
sensitized paper, which is glossy.

Appears life-like. The eyes
sparkle. The tiny dots forming
the details of the face, hair, etc.,
are clear, sharp and will defined.
Each portrait stands out
distinctly from the background.
This is very noticeable along

Appears dead, dull, smudgy

and poorly printed. The eyes do
not sparkle; the convenience
lines depicting the eyes often
merge into solid printed areas.
The hair strands are not
discernable. The portrait often
blends with the background
design due to lines, which are
thick and rough. The
multicolored prints on genuine
notes are extremely difficult to
duplicate and as a result,
counterfeit notes are usually offcolor and not of right shade or

The watermark is the same as
the colored portrait. This design
is placed during the
manufacture of the paper. Sharp
details of the outline of the light
and shadow effect are
discernable when viewed with
the aide of a transmitted light.
The relief of the features can be
felt by running the fingers on
the design.

Imitation of the portrait is done

on the finished paper. Wax or
other oily medium is stamped to
give transparency to the portion
where the design appears or a
printed outline is placed on the
inner sheet where two sheets
are used or merely a paper
cutout is placed inside. As a
result, coarse or harsh and
occasional irregular lines and
sometimes-opaque areas are
very obvious.

This is a special thread placed
vertically on the paper during

Faked by means of printing a

vertical line on the inner side of
the paper of by insertion of
twine thread.

Red and blue fibers are
scattered at random on both
surfaces and can be readily
ppicked off by means of any
pointed instrument.

Stimulated by printed lines,

cannot be picked off, but can be
easily erased with ordinary
rubber or by agitating with we

The background designs are
multi-colored and are composed
of sharp lines, which are
continuous and traceable even
at the joints.

These background designs are

often blurred, rough, blotched
on the intersection resulting in a
different color scheme making
the general appearance faded or


Generally, there is an irregular
spattering of white spot cause
by non-registry or breaks of the
background tint. Most often,
counterfeit notes lack the
vividness of color inherent in
genuine bills.

Genuine notes have polychomre

background with one
predominant color for each
1000 piso Blue
500 piso Yellow
200 piso Green
100 piso Mauve
50 piso Red
20 piso Orange

The prefix(s) and numbers (six
of them except on replacement
note) are clearly printed. They
have a peculiar style and are
uniform in size and thickness.
Spacing of the numbers is
uniform and alignment is even.

The letter (s) and number are

poorly printed. They are usually
of different style. Most often,
they are not evenly spaced and
are poorly aligned, either too big
or too small, too thick, or too
thin and in certain cases shaded
on the curves.

The lines and dots composing
the vignette are fine, distinct
and sharp; the varying color
tone give a bold look to the
picture that make it stand out
of the paper.

Usually dull and poorly printed.

They appear dirty. The lines are
comparatively thicker with
rough edges. Theres no
variation in color tone so that
the pictures appears flat.


The registry of different printed
features is perfect. The lines are
very clean and sharp. There are
no blurs clung to the sides.

In general, a spurious note

exhibits a second hand look. It
is dirty due to the spattering of
ink on the interior area. Overinked areas are visible instantly.
The shading and ornamentation
of the letter and figures are
think and usually merged.

Genuine coins show an even
flow of metalllic grains. The
details of the profile, the seal of
the Republic of the Philippines,
letterings and numerals are of
high relief, that they can be
readily felt distinctly by running
the fingers on these features.
The beadings composed of tiny
stars on the ABL series and dots
on the Pilipino series are regular
and the reedings are deep and

Most counterfeit coins feel

greasy and appear slimy. The
letterings and numerals are low
and worn out due to lack of
sharpness and show signs of
filling. The beadings appear as
irregular and elongated
depressions. They are not sharp
and prominent as in the