All forms of international liquidity may be classified as either commodity reserves or fiduciary (fiat) reserves.
Commodity reserves are those which have some intrinsic economic value quite apart from their value as money; the most prominent example of course is gold.
Although in the past, other precious metals have also served as international reserves.
Technically, commodity reserves also include paper assets that are generally accepted as international liquidity because they are based on and freely redeemable in a commodity or commodities of some kind.
Fiduciary reserves, by contrast, have no intrinsic economic value apart from their value as money: their general acceptability as international liquidity rests upon the confidence of governments rather than upon any promise or redemption in commodities.
Prominent examples of fiat reserves include national currencies that are formally or informally inconvertible into precious metals such as gold.
Special Drawing Rights are also fiat reserves.
Alternative possible mechanisms for the creation of international liquidity--- also known as 'standards'--- are distinguished by the type of reserve asset(s) that each would employ.
Pure commodity standards include the gold standard and the so-called 'commodity reserve-currency' standard.
Commodity reserves are those which have some intrinsic economic value quite apart from their value as money; the most prominent example of course is gold.
Although in the past, other precious metals have also served as international reserves.
Technically, commodity reserves also include paper assets that are generally accepted as international liquidity because they are based on and freely redeemable in a commodity or commodities of some kind.
Fiduciary reserves, by contrast, have no intrinsic economic value apart from their value as money: their general acceptability as international liquidity rests upon the confidence of governments rather than upon any promise or redemption in commodities.
Prominent examples of fiat reserves include national currencies that are formally or informally inconvertible into precious metals such as gold.
Special Drawing Rights are also fiat reserves.
Alternative possible mechanisms for the creation of international liquidity--- also known as 'standards'--- are distinguished by the type of reserve asset(s) that each would employ.
Pure commodity standards include the gold standard and the so-called 'commodity reserve-currency' standard.
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