- Personal Finance»
- Managing Credit Cards & Payment Options
Currency is anything that is used as a medium of exchange; most commonly known as monetary unit (money). The value of one's currency is determined by its economic power, its GDP (Gross Domestic Product) which represents the total dollar value of its goods and services produced over a period of time and the trade value of a nation. The higher a countries currency is the more expensive its exports will be and its imports cheaper in foreign markets. For lower currencies their exports will be cheaper and imports more expensive in foreign markets. All inclusive to a countries determining factors are a countries military status, its credibility and its power. Who ever holds the power holds the value.
" The government issuing flat currency takes the primary responsibility in setting its value. When a government prints fiat money, it is acting as a creditor in the sense that it promises the money is worth something. If a government does not back the value of its currency through an appropriate level of taxation, the money loses value. This is why budget deficits, national debts and central bank interest rates have an impact on what a currency is worth. Strong backing on the part of the public, strong economic performance and a healthy private banking sector can all mitigate this, however." - ehow
There are seven major currencies: The USD (US Dollar), The British Pound, The Australian dollar, The Swiss franc, The Canadian Dollar, The Japanese Yen and The Euro. The USD (United States Dollar) is the World's Reserve Currency. The US dollar and the Euro make up 90% of assigned reserves globally. The United States Dollar established itself as the Reverse Currency in July of 1944; In the midst of world War II, where it is said that 44 allied nations came together for the United Nations Monetary and Financial Conference. There they signed what was called "The Bretton Woods Agreement", this agreement ensured that each country adhered to a monetary policy that maintained the exchange rate of its currency in terms of value and in terms of gold.
A Reserve Currency is currency that is acceptable as a medium of international payments and that is therefore held in reserve by many countries. Over the course of time the USD has crippled unequivocally. Currently, the most valuable currency to date is The Kuwaiti Dinar. Followed by the Bahraini Dinar, The United States Dollar, The Australian dollar, The British pound, The Yen, The Canadian Dollar, The Hong kong Dollar and The Swiss Franc.
For many, many years, investors from all over the world have looked to Switzerland and opened Swiss bank accounts; mainly because the Swiss Franc has been said to have one of the safest Currencies World Wide, with no inflation, where its currency has almost half its backing with gold reserves.
Furthermore, over the course of history and in current years the world has experienced enormous recessions and economic set backs, whether we would like to believe it or not; leaders, common people and many nations have stated that the "Flat Money" (the paper dollar) is completely worthless. According to many sources the USD is produced at zero cost, which classifies it as a zero-cost good, zero interest rate. So investing in such things as Gold and Silver is extremely vital. Buying Gold and Silver can protect you from experiencing devaluation in currency and it is recognized globally and in most cases worth more than you can imagine. So It is important to know how and where to invest your funds; but the real key is becoming aware of the world economically.
There is more to learn about Understanding "World Currency" in part 2.