Chapter 4. Redemption

Redemption, or reflux, is a core concept of monetary mechanics. For monetary instruments to work properly, there must be a way for them to return at par to their issuers whenever bearers request it. Redemption helps maintain the liquidity and purchasing power of monetary instruments. Redemption is not limited, or mainly done, through conversion. Instead, redemption occurs mostly through payments made to the issuer. Banks accept their monetary instruments in payment of debts owed to them; governments accept their monetary instruments in payment of taxes and other dues owed by its citizens. The chapter explains what redemption is and how it sustains the nominal value of monetary instruments, illustrates its relevance with historical examples, and looks briefly at its macroeconomic implications.