What Makes Money Valuable? Understanding Currency, Trust and Exchange

Money is not simply cash. It is whatever a community accepts as a measure of value and a medium for buying and selling goods and services. Governments usually support an official currency by demanding taxes in it and punishing counterfeiting. Some border towns and tourist centres accept more than one currency. Elsewhere, foreign currencies are generally treated as financial assets and exchanged by travellers and traders. A society can replace its money deliberately, as Brazil did when it changed from the cruzeiro to the real. It can also happen when people lose confidence in a currency during hyperinflation. New payment methods, such as cheques, can also change how money circulates. Gresham's law suggests that people spend less desirable money while keeping more valuable forms. History also shows that almost anything widely accepted can become money, including cigarettes used by prisoners of war for trade.

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