what is currency

To understand currency,
We much first understand economy of a nation.
Similar to a person A nation earns by trade, trading with other nations. Something of value that
the citizens of that nation create. In order to get something of value that the citizen of that other
create. The difference between the value of the two products or services is the profit.. Citing an
example. Oil rich nations of Middle East sell something that their nation produce (oil) to USA
that needs it in return for dollars. Since oil is of much higher value to US than the dollar is to
Middle East, so USA has to pay more and more and more dollars to make up for the loss in
value for them ( not due to loss of value of dollar, but the fact that they can sell oil to anyone
for value, world is heavily oil dependent economy. So we (world) has to pay more and more
dollars to make it a attractive enough proposition for them we need oil not them.)
Onto second point. Imagine a cake of value, which has been cut in some pieces. And imagine a
second cake of value that is also cut in some pieces. You both trade. To make a profit you want
to make sure you give less value and get more value in return. The difference between the two
trades is profit or loss.
USA left the gold standard in 1970’s ; most of the countries had left that standard in 1930’s
that means that each dollar bill used to be a certificate of gold. Meaning you could get a
specific amount of gold in weight with every dollar. But insufficient gold in the world forced
them to abandon it, and then they took the oil standard which also proved to be insufficient,
after that they have been supporting the dollar with products and services.
It’s hard to think but currency is really a scarce commodity. Coz just about enough of it is
created / printed. The price of the currency depends on the supply, a currency is essentially the
part of a nation’s value, so more profitable a nation = more valuable a currency because a
nation is basically getting more value than he is giving.
So foreign market exchange (forex) is basically evaluating a nation’s economy in relation to
the world and the particular two countries in question.
Simplifying it. Suppose everyone wants to buy German cars, then the price of mark would go
up, because importers in Australia to Africa to Asia have to use their currencies to buy German
marks to pay for German cars.
A German car costs 2000$ to create and it sells for 5000$. That difference of 3000$ is the
profit.
And unbelievably, if you want to know real state of economy of a nation if it’s profitable or
loss making, just see it in relation to gold and other currencies. Coz whether or not we admit it
gold is still the world standard of value. You can calculate anything in relation to gold, almost
all the world’s products and services are connected to gold in subtle yet firm ways.
Suppose a gram of gold bought 10 kg’s of copper a hundred years ago, it still buys 10 kg’s of
copper today no matter in which country you live or which currency you use.
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It is not an investment; it merely, practically ensures that whatever you have today in economic
value, if it’s held in gold you’ll have it in a hundred years regardless of inflation or currency or
political problem
GOLD is the unofficial unit of economic value of the world.