Our Concept Of Currency

Posted by Allison on 5 April 2009, 10:46

No matter what country you live in or what currency you happen to use, everyone has a different opinion of what their currency is worth and what it can do for them.

It's not surprising that we spend so much of our time thinking about money in some way, given the fact that we invented it in the first place and the amount we have (or lack thereof) can have a real effect on our lives.

But whatever we think of money there is no doubt that we all have a relationship with it in some way.  Our feelings and fears about the currencies we are used to come from our experiences with money in our childhood, and also how our parents handled it.  That hasn't changed much at all over the centuries since money was first invented, and it's nice to know that in some ways mankind hasn't changed at all.

Unfortunately that can be a bad thing.  You might think that the elite band of people who try and forge currencies for a living nowadays are a thoroughly modern entity, but in fact forgery is as old as money itself.  It is human nature to always want more money, and we will go to some ridiculous lengths to get it at times – even if those lengths aren't always legal or ethical.

But a lot of us also have misunderstandings about currency as a whole.  It certainly seems the world of money has become inherently more complicated over time; the fact that there are a couple of hundred different currencies in use around the world testifies to that fact.  Unless you are involved in dealing with different currencies or trading on a daily basis, you are unlikely to even be able to name more than perhaps half a dozen or a dozen currencies in total.

It's true that currency really does make the world go round.  Look at what happens when inflation takes hold and a particular currency is devalued in a matter of days.  No country can cope without currency and the strength of its own money can greatly influence how well it can compete on the world stage.

Our own concept of currency is much more important to us on a personal level however.  Different people look at their banknotes in different ways and while one person may see a value in a ten pound note, for example, another person might see it almost as loose change.  And our opinions about money don't necessarily stem from how much of it we earn either.  Very rich people can be miserly with money, while people who earn the national average or below can still live comfortably with no worries at all.

It's only when you really examine your beliefs and feelings about currency as a whole that you start to see the bigger picture.  For example, think about how you feel about handling a different currency when you go on holiday each year.  Although most currencies are made of a similar material and therefore have a similar feel to them, to many of us an unusual currency feels more like play money than anything else and we can end up spending more than we would otherwise because of it.

Many of us also tend to have a very limited view of what inflation means.  We that goods in general go up in price over time, but we don't always have a good idea of what that means to us over the long term.  Because inflation is something that generally happens slowly, we forget that what seems like a lot of money now essentially won't be worth as much in perhaps a year's time, and certainly not in the future.

That is why we have trouble believing we would need to save so much every month to provide for our pension years.  The key point to remember here is that a hundred pounds won't buy anywhere near as much in thirty years time as it will now (that's always assuming we aren't using the Euro by then of course!).

On a very simple level however, we like to feel as though we are in control of the money we have.  In this sense the psychology surrounding our feelings and fears about whatever currency we use is the same in between different countries.  The more money we have, the safer we feel – although this is relative between different people.  Even millionaires can feel insecure.

Speaking of millionaires this throws up another interesting point.  How relevant is the word millionaire anyway?  Depending on which currency you are using, you might actually be a millionaire and still not have that much money.  Inflation has led to some currencies becoming devalued and while a million dollars might make you a millionaire according to the current way of thinking, a million bahts from Thailand would mean you had no more than around £16,000.  As you can see, even being a millionaire is relative!

But perhaps the most intriguing example of how we can fool ourselves about currency can be seen in our opinion of the humble banknote.  Now coins used to be made from precious metals such as gold and silver, therefore they were actually worth something and you could see that when you looked at them.  Banknotes on the other hand are made of paper, or perhaps cotton.  That has no real value in our society, and yet we look at our high value banknotes as if they are worth thousands.  People steal them, rob for them and squirrel them away for the future, but in reality they are only worth what a particular country's government says they are worth.

Could it be that the currencies we are so used to having around today won't last into the future?  While it may seem strange to think about it, this is a distinct possibility.  Virtually every fiat currency (which is the type of currency we use today) in the world has ended at some point or another, and the most recent examples aren't that long ago either.

If you start exploring this aspect of currency you will no doubt come across a photograph of a German woman stuffing her life savings into a furnace to burn them.  Is this an extreme measure?  It may seem like it at first, but in reality it is far from it.  Her money is so worthless by the time the picture was taken that it wouldn't have been enough to buy something else to heat that furnace with.

It's an alarming picture, but if there is one thing we have all learned about currency over the centuries it is that it never stays the same.  It is a constantly changing landscape, which is probably why some of us look at it with suspicion.  How will the world of currency look in a hundred years from now, when we are all gone?  How about fifty years from now?  There have certainly been some profound changes up until now, and there is no reason to suppose – especially with the current turmoil in the world markets – that we won't see further huge changes to currencies as a whole in the next few years as well.

And that could change our concept of currency forever.