When you see a US dollar bill, you automatically think of it as money. Any kind of bank note is considered money. Why? Because it has a purchasing power. It can buy you a commodity or service.
It's money because it allows you to purchase something. But did you know that "purchasing power" is only a fleeting characteristic of money? Yes, money has to purchase something but it needs to retain it's value over a long period of time.
Anything that purchase something for a limited amount of time is called currency. The purchasing power depends on its "current value" that is constantly changing.
Here are the exact differences between the two:
image source: www.goldsilver.com
Medium of exchange: you can exchange it for goods and services
A unit of account: a measure of real value or cost
Portable: handy; you can carry it anywhere
Durable: it can withstand wear, pressure or damage
Divisible: you can make a change from it
Fungible: a dollar in your pocket has the same value as all the dollars in existence
MONEY has to be:
- A store of value for a long period of time: it means that your dollar today must have the same purchasing power 20 or 40 years after.
Bottom line, what we are spending and working for is not real money, but currency. If you save your currency income today, its value will diminish over time due to inflation.
The only real money that has been recorded in the history is GOLD due to its limited supply.
It posts a question that cryptocurrency is also created in LIMITED SUPPLY. Could it qualify as real money?
Find out in my next episode as I unravel the changes that we are facing today in our monetary system