March 23, 2018 

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SAVING FUNCTION: The positive relation between household saving and household disposable income. The saving function is commonly presented as the saving line or propensity-to-saving line. The slope of this line is the marginal propensity to save, which is the proportion of any additional income used for saving. The saving function and the marginal propensity to saving play key roles in the multiplier and accelerator concepts. Because consumption is the difference between disposable income and saving, the consumption function is a complementary relation to the saving function.

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Paper currency issued and authorized by the U.S. Department of the Treasury that is, in principle, backed up by, and exchangeable for, an equivalent value of silver. Silver certificates were in circulation as a medium of exchange for the U.S. economy during two periods, 1878 to 1923 and 1928 to 1957. A similar form of paper currency is gold certificates.
Silver certificates are a type of currency that is, in principle, tied to a given quantity of silver safely stockpiled by government, it can be, in principle, exchanged for silver. The certificates merely represent, or give title to, the actual silver. As such, the silver certificates are as good as the silver itself as a medium of exchange. If the silver functions as the medium of exchange, then so too does the silver certificates.

From Commodity to Fiat

Silver certificates, along with gold certificates, represent a transition between commodity money and fiat money. With commodity money the silver or gold metal is used as the actual medium of exchange. This money has value in exchange AND value in use. With fiat money, however, currency has value in exchange but little or no value in use.

Silver certificates, that is the paper currency itself, has little or no value in use, but it can be, in principle, exchanged for the silver that DOES have value in use. In theory, ideally, in principle, the silver with its value in use is the ultimate medium of exchange. However, in practice, in reality, the paper certificates with little or no direct value in use are the medium.

If the general public never exchanges the paper certificates for the metal, if the public loses track of how much metal is actually stockpiled to back the certificates, then the certificates need not be backed fully by the metal. This moves the certificates several steps closer to fiat money.

Two Sets of Silver

Silver certificates were issued and circulated during two periods, 1878 to 1923 and 1928 to 1957.
  • The first period, 1878 to 1923, produced large-sized bills (about 25 percent larger than modern currency) in nine denominations ($1, $2, $5, $10, $20, $50, $100, $500, and $1,000). The designs and faces changed over the decades, coming closer and closer to the look of modern currency. The 1923 $1 silver certificate looks very much like a modern $1 Federal Reserve note. After 1896, bills in denominations exceeding $10 were removed from circulation.

  • The second period, 1928 to 1957, produced small-sized bills that very much resembled modern currency (at least before Federal Reserve notes were redesigned in 1996). This more recent set of silver certificates came in three denominations ($1, $5, and $10). A cursory look shows little difference from Federal Reserve notes that were in circulation at the same time. The differences reflect the name ("Silver Certificate" versus "Federal Reserve Note") and issuing authority (U.S. Treasury versus Federal Reserve System).


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SILVER CERTIFICATES, AmosWEB Encyclonomic WEB*pedia,, AmosWEB LLC, 2000-2018. [Accessed: March 23, 2018].

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     | currency | gold certificates | Federal Reserve notes | monetary aggregates | M1 | M2 | M3 | L | checkable deposits | near monies | plastic money |

Or For A Little Background...

     | money | money functions | money characteristics | fiat money | commodity money | medium of exchange | liquidity |

And For Further Study...

     | money creation | fractional-reserve banking | banking | Federal Reserve System | monetary economics | monetary base | monetary policy | debit card | monetary economics |

Related Websites (Will Open in New Window)...

     | Federal Reserve System | Federal Reserve Education | U.S. Department of the Treasury | The Currency Gallery | Bureau of Engraving and Printing |

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