I often see various blogs and newsletters that have accepted the idea that our current fiat currency systems represent money. However, today I was rewarded for reading from one commentator who clearly understands the difference between currency and money. I’ve not been reading The Sovereign Investor for long, so can’t say much about it. However, most of what I have seen so far has been pretty good stuff.
Today (Sept 8, 2011) Jeff Opdyke provided a rare treat. He defined the difference between money and currency in his article, Gold is the Only “True” Money that Remains. His article is so good at making the point that I really can’t add much to it. But I’ll offer a couple of thoughts that hopefully will complement what he’s said.
Money has intrinsic value. Though there might be some disagreement as to what can be considered money, this one factor is not negotiable. It must have value simply based on what it is. It must be a store of value. And it must be tradable. This would mean some form of transportability as well.
Currency, on the other hand, is simply a medium of exchange. It can be anything, as long as it’s accepted. It can be a promissory note of any kind (such as every modern currency on the planet). It needs no value of its own, but merely has to be accepted as a store of value for trade.
For clarity, money is always a form a currency; but currency is not necessarily money. A one dollar bill is currency. It’s based on a promise that it’s acceptable for trade. But it has no value of its own, other than the fibers that make it up. Sometimes a currency becomes so devalued that it’s worth even less than the materials that make it up. A gold coin is money. While the condition, writing and design on it may add to its value, nothing can take away from its value completely. Its intrinsic value is based on its weight and acceptability for trade. Thus, even if it was melted down, it would still have intrinsic value and still be money.
This excellent quote from The Barbarous Relic, by James Turk, is very helpful (as found here).
Until 1694, currency always had been a tangible asset (mainly gold and silver fabricated into coins). Thereafter, the new paper currency was not money; it was only a money substitute circulating in place of coin. This new currency was no longer a tangible asset; it had become a liability of a financial institution. This difference is as great as that between night and day, or more to the point, between assets and liabilities.
I find it interesting to consider the source of both as well. God created gold and silver (Gen 2:11). In fact, He made it clear early in earth history that they were available and valuable (Gen 13:1). And, as we are so wont to do, man has tried to one-up God by coming up with a complicated system of economics that defies the natural and simple form that God supplied. In doing so, as we always do when we attempt to improve on God’s design, we’ve messed it all up. Many are paying the price in loss of affluence today.
There is another counterfeit in the world today that offers false hope. Every system devised by man will eventually fail. They have no real intrinsic value of their own. But the value of Christ Jesus is invaluable and eternal. He will never fail. He has true worth that is unfathomable for us. He’s the real deal and no other system, person or claims can provide man with what he needs first and foremost; to be in a right relationship with his Creator. So, while the metals of the earth have intrinsic value for us here, Jesus is more precious, more costly and more beautiful than all the precious metals and gems of the world combined. If He is not your true treasure then you’re settling for an idol that can never fulfill what you need most. And it’s resting in this knowledge that helps to make sure you’re not just another average Joe.