The Real Meaning of Currency?

The concept of currency is very simple. It took me 25 years to understand the real meaning of currency. The answer to this question in one line is - currency is the medium to exchange our services with each other.

Let me explain in detail.

Relation of Money and Service :

I am a teacher. I give private tuitions. For one month, I get INR 10000. My friend is a polish officer. His one-month salary is about INR 75000. My father is a farmer. He earns INR 15000 per month on average (It depends on crop yield). My younger cousin-sister is not yet working. So she borrows money from her parents.

So I get my currency as my service points 0f 10000, my friend 600, and my father 200 per month in India. Now we can exchange these points to buy anything from anyone who too has the same kind of currency (service points).

The number of service points earned by someone in a country depends upon the type of work someone is doing. But the value of the token is independent of the type of work.

This means the service points earned by a doctor and a milkman for the same amount of time can vary drastically. For 1 hour operation, a doctor can charge INR 50000. But to earn 50000, a milkman works for more than 300 hours per month( if he works 10 hours daily).

But INR 1 earned by any of the two has the same value.

So when I buy milk - I am giving my 1 service point ( INR 1) to the milkman. The 'milk' is the service of milkman. In return the milkman is getting 1 service point (INR 1) for his service. Milkman will use this service point to buy grass for his cows. And that 1 service point will be trasfered to the grass seller. this will continue...

Now my younger sister is not working yet, so she is borrowing the work of her parents. So every time she is buying something she is using the service points of her parents. For every wish she makes, her parents have to work for her too.

This is the reason families with more no-earning members are mostly poor. Because only one person is collecting all the service points for all the family members.

Different Country- Different Token Value

The value of tokens is different for each country. It is determined by the government of that country for their people.

For example, Let say there are two countries X and Y. Minimum pay for milking cows in X is $10 and in Y it is $5. So for same work ,workers in X are getting two times more currency (service points) compared to Y. (This example is an over simplification of the process)

This is the reason we can not use currency from country-X in country-Y. As every different currencies (tokens) have different value. We need to calculate the relative value of these tokens. Like 1 USD = 75 INR.

Conclusion

Currency is the token for exchanging our services. The value of tokens depend the type of work.