Nonconvertible Currency

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Nonconvertible Currency

A currency that may not be converted into another currency on the foreign exchange market, or that may be converted only in limited amounts. Some countries limit convertibility to prevent citizens from making bad investment decisions in, say, a country experiencing hyperinflation, while a few communist countries issue nonconvertible currencies to protect their citizens from capitalist influences. A nonconvertible currency is generally traded only on the black market. It is also called a blocked currency or an inconvertible currency.
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Gold, silver or any other suitable commodity-type of money is an equilibrium element or numeraire which satisfies the law of general equilibrium (Walras), whereas paper, inconvertible money is a disequilibrium element or anti-numeraire which breaks the law of general equilibrium.