Meaning of Debased in Banking [Banking Basics]

The meaning of debased in banking refers to the devaluation of currencies through the direct actions of central bankers.

There are both historical and contemporary examples of currency debasement, which we’ll share below.

This is part of our free series on banking basics, ranging from sending a bank transfer to understanding how the banking system works, which you can access here.

Feel free to use the table of contents to jump ahead to the sections most relevant to you.

Table of Contents

  1. Meaning of Debased
  2. Currency Debasing
  3. Frequently Asked Questions
  4. Do You Want Help Opening Bank Accounts?

Meaning of Debased

Meaning of debased in banking is the resulting drop in the value of a currency (coinage or fiat), due to the actions of central bankers. Importantly, coinage and fiat are debased differently. Coinage is debased when mints mix low-quality metals with higher-value precious metals. Fiat is debased when central banks increase the money supply, which involves “printing” more money digitally or physically.

Importantly, the meaning of debasing is not the most important consideration when exploiting this topic. Instead, understanding the implications of currency debasement is also critical. This is because the debasement of currency has typically led to economic hardship, runaway inflation, and even economic collapse.

With this in mind, let’s explore currency debasing further and discuss several examples from ancient history, modern history, and the present day.

Currency Debasing

Currency debasing is not new. In fact, the debasing of currency dates back to the advent of coinage, with the world’s greatest empires debasing their currencies continuously, from the Roman Empire to the United States. That said, historically speaking, the debasing of currency is widely seen as a contributing factor toward economic collapse.

Commonly cited historical examples include the continuous debasement of coinage by the Roman emperors starting with the reign of Nero, the debasement of the German Papiermark (fiat currency) by the Weimar Republic to meet post-WWI financial obligations and ongoing debasement of the United States dollar.

Of course, debasing a coinage by mixing additional metals and decreasing the intrinsic value of a coin is very different from printing money. In fact, even printing money has changed.

While increasing the money supply used to require printing physical fiat currency, today central bankers can create currency digitally and deposit it into the accounts of large commercial banks.

Thanks to fractional reserve banking, 90% of the deposits made by central banks with commercial banks can then be lent to borrowers at attractive interest rates in order to encourage consumption and spur economic growth. Of course, over a long time horizon, this activity is not sustainable and can lead to high inflation and rapid currency devaluation.

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Frequently Asked Questions

Below are two of the most common questions we receive from people looking into the meaning of debased. If you have further questions you would like to ask our team, don’t hesitate to get in touch.

What Is Morally Debased?

Morally debased refers to the debasement of an individual’s morals, character, or standards, compared to their prior morals, characters, or standards, as perceived by other individuals.

What Does it Mean When a Person is Debased?

When a person is debased, it means that their reputation has fallen as a result of an action that they took. This is similar to the debasement of the currency, which drops in reputation (or value) due to the actions of those controlling the currency, typically central bankers.

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GlobalBanks Team
GlobalBanks Team

The GlobalBanks editorial team comprises a group of subject-matter experts from across the banking world, including former bankers, analysts, investors, and entrepreneurs. All have in-depth knowledge and experience in various aspects of international banking. In particular, they have expertise in banking for foreigners, non-residents, and both foreign and offshore companies.

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