Agio is an added value, the difference between the nominal and market values of coins, banknotes, and stocks. In some cases, agio is the difference between the price of coins and banknotes of the same nominal value, for instance, when prices on metals that coin was made of have grown or when a coin is valuable for collectors.
Agio can also be the rising selling price of a financial asset over its buying price. This difference may be caused by:
- money transfer from one form to another;
- exchange of one type of currency to another;
- higher real value of stocks over their nominal selling price;
- higher bank interest rate over the deposit rate, etc.
We would like to remind you that the RESERVEUM Analytical Group is working on creating a protocol of an effective currency, and one of its main characteristics is going to be its ever-growing agio.
Agio partly makes up the income of banks, exchanges, and other financial institutions that are working with speculative changes of currency and stocks rates.
The influence of agio on the economy may be either positive or negative. Let’s take an example when the rate of government bonds grows, the effect of agio would be positive since it attracts investors who give a new impulse to the economic growth.
With national currencies, agio, vice versa, becomes an obstacle, because higher currency prices lower the export profits if the exporter country receives payments in its national currency. To fight it, Central banks of export-oriented countries often come up with currency interventions – in other words, they deliberately lower their country’s currency rate.
With Gold Standard, the term “agio” is also applied to characterise inflation. With higher inflation, paper money lose value compared to coins with the same nominal value because coins are made of precious metals and cost more than paper banknotes: agio is added to their nominal value.
If you are interested in inflation, we have some fascinating articles for you – “Why Do Cheeseburgers Always Become More Expensive” and “Structural Inflation or Why Do US Petrol Prices Grow”.
Regarding national currencies, agio is a variable that depends on many economic factors, such as:
- production volumes in the country;
- export and import volumes;
- financial system stability;
- national reserve of gold and other precious metals;
- fluctuations of precious metals prices, etc.
In other words, agio depends on the state of the economy, and, quite logically, when the economy develops naturally and normally, agio must grow. But in fact, we can see that currency rates are not stable most of the time.
It involves export, rivalry between the world’s leading economies, and of course, the speculative part that all the financial instruments are susceptible to.
We decided to look into the phenomenon of agio because developing an effective currency requires considering all the advantages and disadvantages of the current money system, and it is important to use any experience, both positive and negative.
Now we are working on eliminating all of the fiat money system faults from our protocol. The problem is that the RESERVEUM currency of the future should follow the law of the constant growth of agio. It means that the coin price would always surpass the price of assets reserved to back up the currency, and the gap should grow over time.
It is possible to reach such dynamics with the added and real value that would surpass the reserve value. It is possible when the currency is transparent, decentralised, and trustworthy, and its emission is regulated with a smart contract that considers the economy money needs.
If you have any ideas on how to create a protocol of an effective currency that would guarantee agio growth, send us an e-mail to Info@reserveum.org. The best offers will be published and used for developing the RESERVEUM protocol.
According to the analysis group findings: reserveum.org