Standard Of Deferred Payment

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Definition: Standard Of Deferred Payment


Standard Of Deferred Payment


Full Definition of Standard Of Deferred Payment


A standard of deferred payment is the accepted way (in a given market) to settle a debt. For example, while the gold standard reigned, gold or any currency convertible to gold at a fixed rate constituted such a standard. As of 2003, the US dollar or Euro is the most generally accepted standards for international settlements.

While for certain kinds of transactions (such as for illegal goods like narcotics or weapons) gold or diamonds may be preferred as the medium of exchange, there is no recourse in case of counterfeit currency being used, there is rarely any deferral of payment, and if there is, it will most likely be stated in dollars.

This is distinct from the store of value function which relates to the saving, storing, and retrieval of value, and from the unit of account function which requires fungibility so accounts in any amount can be readily settled. It is also distinct from the medium of exchange function which requires durability when used in trade, and a minimum of opportunity to cheat others – as the diamond or gold example makes obvious.

When a currency is stable, money can serve all four functions. When it isn’t, or when complex and volatile forms of financial capital are involved, it becomes important to identify a single standard of deferred payment to avoid cheating by selecting a denominator of debt that one knows is dropping in value.

Deferred payment is based on the enforceability of debts and the rule of law, and therefore is not utilised or is used sparingly when debts are unlikely to be collected. For certain types of transactions (such as those involving illegal goods such as drugs or weapons), gold or diamonds may be preferred as a medium of exchange, with no recourse in the event that counterfeit currency is used, and there is rarely any deferral of payment: if there is, it will almost certainly be stated in dollars.

Historically, there have been many times when creditors have had to hide from debtors to avoid being paid off in near-worthless currency.

Time-based currency such as Ithaca Hours establishes fixed amounts of human labour as the only standard of deferred payment.


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Definition Sources


Definitions for Standard Of Deferred Payment are sourced/syndicated and enhanced from:

  • A Dictionary of Economics (Oxford Quick Reference)
  • Oxford Dictionary Of Accounting
  • Oxford Dictionary Of Business & Management

This glossary post was last updated: 7th January, 2022 | 0 Views.