Although we often hear about currency, in fact, many people don’t know much about currency and don’t know the nature of currency at all. What is the essential difference between currency and debt? Even many answers are disappointing. They didn’t make it clear about the nature of currency at all, so let’s briefly talk about the nature of currency for everyone. The essential difference between currency and debt.
The nature of money
In its essence, money is a contract between owners on the right to exchange, and different forms of money are essentially unified. In the past, due to people’s unclear understanding of the nature of currency, they mistakenly divided currencies into different categories from different angles. For example, according to the commodity value of currency, it is divided into two categories: debt currency and non-debt currency; The conversion ratio is divided into convertible currencies and non-convertible currencies, etc.
In terms of form, currency can be divided into physical currency and formal currency according to the commodity value of currency. The physical currency itself is a special commodity, containing value, such as sheep, precious metals, etc.; while the formal currency itself has no value, and its value is contractually agreed. Yes, only contract value. The two have different forms, but they are unified in nature, that is, both are agreed as the medium of exchange, and both have contractual value. The purchasing power of currency is determined by the contract value of currency, but the purchasing power of physical currency is also affected by the value of its own commodities. Usually, the commodity value of physical currency is less than its contract value as currency.
Regarding the nature of currency, there have been two different views in the history of Western currency theory: one is the theory of currency metal, and the other is the theory of currency names.
Monetary metalists proceed from the value scale of currency, storage methods, and the functions of world currency. They believe that currency is equivalent to precious metals. Currency must have metal content and substantial value. The value of currency depends on the value of precious metals.
The essential difference between currency and debt
The essential difference between currency and debt is also very clear. Simply put, currency can be divided into many types, which can be classified according to different forms. For example, it can be classified according to the commodity value of currency, which is mainly divided into debt currency and non-debt. There are two kinds of debt currencies, or they are classified according to the exchange ratio of the agreed precious metals, which can be divided into two types: convertible currencies or non-convertible currencies. The value of the so-called debt currency is that what the contract stipulates is only the contract value, which is different in form, but there is no difference in essence. It can be used as a medium of exchange, and there is a contract value.
However, when buying currency, look at the contract value of currency. You cannot buy it blindly, because sometimes the purchasing power of currency may be affected by the value of the commodity itself, because most of the time the purchasing power of currency will be smaller than the contract value of currency. Therefore, currency, as a relatively special commodity, is only a general equivalent. It is only used as a medium in market transactions, and its fundamental role is to assist trade. For example, the current electronic digital currency can be said to be the most used currency in people’s economic interactions. After all, the society has changed and the means of payment have changed, but the currency as a measure of value and the means of circulation still maintain unity. , The concept will never change much, so the currency is becoming more and more digital, and it is becoming more and more like bookkeeping currency.
After understanding the nature of currency and the essential difference between currency and debt, I believe that everyone has a new understanding of currency, and their understanding of currency transactions will become clearer. After all, most trade payments and debt settlements in the market nowadays are done through bank transfers. Accounting currency has become the main form of existence, so currency transactions will also become a major trend.