Money vs. Currency

_{People are taught to believe there is money, but the value only exists in human minds. We go through life believing we are working for money, when in reality we are not.}

_{Since money is unreal, it would be convenient to have something real to represent it. We need something we can get our hands on to use in our daily lives. So, human mind invented currency to represent money.}

_{Most people confuse money and currency as the same thing. Although the two terms are often used interchangeably, there is a difference between them.}

_{Money is often viewed as a tool of economic calculation that enables the communication of value, whereas currency is the medium that facilitates an exchange between participants in a market.}

_{Put another way, money is conceptual, whereas currency is physical – money allows the mental calculation of relative value, whereas currency is the thing that actually changes hands.}

_{Some analogies from our everyday life will help to explain the concepts of “money” and “currency”. Let’s compare art with photographs. A picture painted by an artist is that artist’s unreal conception. It may be of a real subject, but it is nonetheless the artist’s conception, or unreal idea, of what it looks like. Most photographs, on the other hand, are a true representation of the subject. A straight photo tends to be real. So, understanding the idea that money as an imaginary concept should not be too difficult.}

_{Thus, the two concepts can be understood in the following way:}

1. _{Money is unreal, meaning imaginary, intangible. You can not hold money in your hand, not you, not any one else.}

2. _{Currency is NOT money, but merely represents money. Currency is physical. We can not hold unreal money in our hands, but we can grasp and trade real currency that represents our unreal money.}

_{Money exists as an unreal concept to enable us to run our economy easier. Money must only represent the value of human labour (including services) and the natural resources labour touches.}

_{Nonetheless, the importance of money cannot be overestimated. Without money, we would be forced to trade eggs for shoes in the terribly awkward and slow process of barter. Our economy would come to a screeching halt. The imaginary concept of money is very useful in representing values (which are also unreal).}

_{In a modern economy most of the money is made up of deposits at banks and other financial institutions. These institu­tions can actually create money – by making loans.}

_{Thus, money is created, not printed. It is created by the activities of commercial banks and other financial institutions – by all those institutions whose deposits circulate as a medium of exchange.}

_{Of course, it is much too easy to start calling currency money. People get to thinking that printing currency is printing money, but that is far from the truth. Printing currency is just printing ink on paper. Currency is printed on paper or minted from cheap metal.}

_{Basically, currency is the units in which prices are quoted. Examples of such units of currency are U.S. dollars or Ukrainian hryvnia.}

_{Currency is money in any form used as a medium of exchange. The real paper bills and metal coins that we hold in our hands is currency. Checks, money orders, credit cards, and cigarettes if you are in prison, are all accepted mediums of exchange, but they aren’t money either.}

_{Currency was introduced as a standardised money to facilitate a wider exchange of goods and services. It speeds up the process, making it faster and easier. The amount of currency we have depends on the amount of money in the economy. If we are short on money, we run short on currency.}

_{Three criteria must be met in order for something to be money. It must be an accepted medium of exchange, it must be a store of value, and it must be the unit of account. If there were any real money it would meet all three of these criteria.}

_{At the same time, only one criterion need be met for something to be currency. It only needs to be accepted as a medium of exchange. In most cases it is also a temporary store of value, but not a permanent store of value.}