Debasement

Posted in Finance, Accounting and Economics Terms, Total Reads: 308
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Definition: Debasement

The practice to devalue/decrease the value of money is defined as Debasement of money. It is also mixing another inferior metal to a coin to reduce its value.


Explanation

The government in order to increase the amount of money can debase its value. As by decreasing the amount of silver or any other commodity used in the manufacturing of silver this way more coins can be produced at a given value.


In India of you get a chance to look at coins of pro-independence era you’d find that those coins are of silver and first the weight decreased and then the materials quantity and quality. These are the actions taken by government in order to control economic problems.


Another meaning is to reduce to value of a coin by adding some other metal to the coin, which is of inferior quality. The inferior quality of the coin is melted with the original melt, thereby reducing the overall value of the coin but maintaining the same net weight.

 

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