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Money v Currency - Jigsaw Puzzle Piece
Most people, myself included, use the terms “money” and “currency” more or less interchangeably, but technically they are different, and so, shouldn’t really be confused.
The most important difference between money and currency has to do with store of value – money has an intrinsic value. It has a worth in it and of itself.
Precious metals such as gold and silver are considered money because they have the aforementioned store of value. Gold and Silver are referred to as monetary metals. They have been used as the medium of exchange and a store of value for millennia - through the ages and also across different cultures. This persistence over such long periods of time and also the cross-cultural aspect are points which are, to my mind, very telling.
Currencies, on the other hand, have all the characteristics of money, but crucially, they do not have the all-important store of value. This is their fatal flaw.
“The Gold Standard” is the name given to the backing of a currency with Gold.
With a Gold Standard, a currency can become money – or rather, I should say, a currency can assume the status of money. It will never be money because it lacks the store of value.
The expression “as good as gold” has often been used in respect of currencies because currencies which are backed by gold can be used in trade to buy products as if they were gold.
Backing a currency with gold gives the currency a value than it would otherwise not have. After all, currencies don’t have any real, intrinsic value. In and of themselves, they aren’t worth much. They are just digits on a computer screen, or paper - pretty, printed pieces of paper. Or with regard to coins, shining bits of coloured metal.
While we’re talking about such things, I should mention, “paper money”, the physical form of cash. “Paper money” - or “paper currency” as it should be properly called - isn’t a new phenomenon. Bank notes, or Promissory notes - have been around an awfully long time - since the Han Dynasty in China circa 118 BC. But the 17th Century is time period when paper currency began to really began to become predominant in Europe – more’s the pity.
So to recap … Gold and Silver are considered as being money, real money.
Currencies are not money. They might masquerade as money, but the truth is they’re not money and never will be. Currencies are “fake money”, “false money”, “phoney money”, “funny money”, or whatever terms you want to use. They pretend to be money, but they aren’t actually money.
Even with a Gold Standard, a currency is still only a currency. It’s not real money and it will never be real money. And it shouldn’t be considered as being real money.
I realise that I’ve laboured the point a little, but the difference between money and currency is incredibly important. It might seem like a trivial thing but, I can assure you, it isn’t. It most certainly is not inconsequential.
Why is this so important (you might be asking yourself)? Well, because unfortunately cur
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