Kinds of Money and Near-Money

Money has taken different forms as economies evolved, and understanding these forms clarifies why some assets are treated as money while others are only 'near' it.

• Commodity money — an ordinary, everyday commodity (cattle, grain, salt, shells) accepted as a medium of exchange in early societies because it had intrinsic use-value of its own.
• Metallic money — coins struck from gold, silver, or other metals, whose value came from the metal content itself (full-bodied coins) or was backed by a promise from the issuing authority (token coins).
• Paper money — currency notes issued by the central bank (the Reserve Bank of India, for India), accepted purely on the strength of legal sanction and public confidence rather than any intrinsic value of the paper itself. Paper money that a government declares must be accepted in settlement of debt is called legal tender; a creditor cannot refuse it.
• Credit money — money that exists as a bank record rather than physical currency: demand deposits transferable by cheque, and increasingly, digital/electronic money moved through NEFT, RTGS, UPI, and similar systems. …