Understanding Currency vs. Money

$50 bill We deal with cash on a daily basis and most of us never truly understand exactly what it is or what true value it has. In this important discussion we found most of us think currency is money. It is not. An example would be when you receive some cash you think of it as money. However, cash is simply a currency or a medium of exchange that you can use to pay for something of value.

Robert Kiyosaki explains in Rich Dad’s Increase Your Financial IQ, currency is derived from the word current. A current must keep moving or else it will die (think electricity). A currency does not store value in and of itself. Rather it is a medium whereby you can transfer value from one asset to another.

Ask yourself if the $50 bill in your wallet is really worth $50. Of course it’s not. The bill represents that the money backing that bill is being held somewhere else. Or at least it used to be until we went off of the gold standard and even gold and silver certificates.

Money has value in and of itself. Unlike currencies that come and go throughout history, money is always a currency. By money we are referring to undisputed champions of history, gold and silver. Every civilization for the last 3,000 years starts out by using gold and silver as money. A form of government eventually takes hold and in the process of taxation for public protection and infrastructure, a fiat currency is introduced. At first every piece of currency is backed by Gold and Silver, but eventually wars break out the governments start issuing more currency that they have money. Sound familiar? It is the same cycle over and over again no matter what empire you consider.

Currently here in the United States, we are printing more money than ever before. Every new dollar they print dilutes the current money pool making our hard saved currency less valuable. As the dollar continues to weaken, this results in gold and silver rising. When gold and silver values rise as they are currently, experts relate this to faltering capitalism. When capitalism stumbles, everybody loses. History also tells us that rising gold and silver prices indicate a certain rise in inflation. Again, this means that our cash simply does not buy what it used to. The cost of gas, food and other items we need to survive become more expensive.

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This ultimately means that we are due for the largest transfer of wealth in history. The victors being those who had the foresight to put their faith in real money as opposed to a fiat currency based on IOU’s that our government is obviously destroying.

This discussion is not to scare you, yet it is to inform you on the facts of the cycles of currency. Most likely if you are reading this article then you are a coin collector or investor of sorts. You probably already have a head start in preparing for what’s to come. Be glad your hobby consists of collecting actual money, and not putting faith into collectibles with an expiration date.

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