What is Currency?

Written on any denomination of dollar bill.

“THIS NOTE IS LEGAL TENDER FOR ALL DEBTS, PUBLIC OR PRIVATE”

What does it mean?

So when you pay that money, you are demanding a favor (debt). The favor being some kind of service somebody or something will do for you.

Of course, so if you have lot of money, you can keep demanding favors. Hmmm...... You are the master and people who are being paid are the servants.

It is all fine, as this is the system (and alternative is communism).

But, what does it do? Puts so much power in currency? The power is in the hands of people who commands these currencies.

Bernanke, Greenspan, Trichet and the list goes on....

Since you can exchange favors with currency, the currency itself is just an accounting mechanism about the relative prosperity, where that relativity is determined by central bankers.

The system supposedly works as the central bankers are supposedly impartial.

What if they are misguided. What if, they want to get reelected. Would they make rational decisions? Your money (hence assets) will be in the hands of these people. Would you keep your money in cash (so they can decide its fate), or in Gold (while being precious metal, it is still driven by demand/supply) or something else?

Food for thought.

PS: Whenever I think of the above, I let my kids buy that additional tennis lesson or that additional..xyz.... Because, otherwise I am leaving junk behind for them.... Yes money left behind is junk!