What is the monetary system?

We understand that today a monetary system is the set of mechanisms that a country uses to create and manufacture money and its subsequent regulation. Furthermore, monetary systems are controlled with the presence and intervention of regulatory entities. Such as the Bank of Spain or the European Central Bank.

The mission of these entities in the monetary system is to control the amount of money that circulates and preserve the value of the money. currencywhich is in progress. They must also generate the necessary confidence so that the money that is in circulation has acceptance to be used as a means of payment throughout the world.

Characteristics of a monetary system

Monetary systems are based on three fundamental characteristics that define them:

An instrument to express the price

Monetary systems have an instrument that is used to express the price of services and goods. Usually it is a means of payment that defines said instrument in order to express an economic value.

Means of payment established as valid

In addition, monetary systems have several means of payment. These means of payment are accepted generically by everyone and are the ones that in practice replace what we know as paper money. They include the Bank transfers, payments by credit or debit card or payment by checks or promissory notes.

Money as the basis of the monetary system

The basis of a monetary system is legal tender money. Money serves two functions in monetary systems: first, money enables economic transactions to be carried out, such as payment for purchases and sales. But also, legal tender money is the means to save in a monetary system.

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