Monetary unit

The official currency that is current and circulating in a specific nation or country is described as a monetary unit, it is in foreign lands and is exchangeable for gold or foreign currency, an example of this would be: the bolivar in Venezuela, peso in Mexico, sterling pound in Trinidad and Tobago or the dollar in the United States. Being then the monetary unit the main base that sustains the economy of a nation; The main condition that must be fulfilled is that it must be distributed according to its different fractions, therefore a coin must not have a value neither too high nor too low, because the number of bills will vary according to this rule.

The way to indicate or decide in the choice of a monetary unit allows to identify two types of economic thoughts:

  1. Monometalism: which base their ideals on the only idea, where it is stated that the coins must be made of gold or silver, avoiding the conjugation between the two, only one of these must circulate legally.
  2. Bimetallism: These on the contrary indicate that the use of both metals is totally indispensable for the economy of a country; It states that if there is a displacement of any of these, one can run the risk of a long-term economic crisis, mainly because its natural source is unique and when it ceases there would be a shortage of currency.

When a country prevents the circulation of a currency other than the one offered by its sovereignty, it is then called “Forced course”; Many important figures have debated this ideology, indicating that it is a monopoly created by the government with the purpose of manipulating only the state entity the currencies that enter it, thus forcing all tourists to exchange their money for the monetary unit of the country in question (example Venezuela), more than all this is applied in countries where they have an unstable economy. On the contrary, there are countries (Peru or Panama) that accept the circulation of national and foreign currency, this model is known as: monetary competition.