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13 May, 2015 - 12:50

Currency and coins are said to be token money because their intrinsic value (the value of paper and metal content) is but a small fraction of the value they represent. They are also called convenience money because they are necessary for small purchases.

The metal or paper content of coins and bank notes could not possibly come even close to the value it represents. If it did, the coin or bank note would disappear as a form of money. It is exactly what happened in the 1960's. Increases in the price of silver encouraged people to hoard quarters or even convert them into jewelry. The U.S. government had to mint new quarters which had but a trace of silver in them.