Author name: @nobumei (https://twitter.com/nobu_mei)
In the days when currency did not exist, people mostly bartered, exchanging vegetables, fish, livestock, and other goods. However, because the value of goods differs from person to person, bartering makes it difficult to conclude transactions.
This is where the ‘exchange of value’ function of currency comes in. At first, daily necessities such as rice, salt, oil, and livestock were used in place of currency. These are called commodity currencies.
Commodity money used objects that had value to everyone in that culture, but because they are natural objects, they deteriorate easily and are in unstable supply.
Therefore, beautiful stones and shells began to be used as currency. Later, ores such as gold, silver, and copper, whose quality did not deteriorate, were easier to process, and whose value was more stable, became currency, and the role of ‘value preservation’ was born in currency.
However, the purity of ore varies. It is difficult to use them as they are as currency, and the currency evolved into a cast coin whose size, weight, and purity were determined.
Currency that is not known who minted it is insecure about whether it is properly made. Therefore, the authority to issue currency was concentrated in the hands of those with high creditworthiness and power at the time. As currency with a uniform value circulated in the market, it acquired the function of ‘measure of value’ and came to be used as a measure of the value of things.
Cast banknotes, made from ore, have their own value, but they are heavy and bulky, making them inconvenient to carry around in large quantities. This is where the gold standard came in, with gold vouchers issued as convertible banknotes. From this point on, the "credit" of the issuer, which guarantees that the notes can be exchanged for gold, begins to have value.
The disadvantage of convertible paper money was that it could only be issued on a one-for-one basis between gold and currency, making it difficult to raise money to implement a major monetary policy. When the US experienced a severe recession at home, the Nixon Shock led to the suspension of the gold standard and the creation of fiat money, which is still in use today.
The value of fiat money is 'national credit'. The currency itself has no value and can be freely issued, which makes it easier for states to conduct large monetary policies, but there have been cases where states with weak credibility have been unable to maintain the value of their currency and their notes have been reduced to scrap paper, as in Zimbabwe.
In the case of El Salvador, the country abandoned its unstable currency in 2001 and adopted the stable US dollar as its legal tender, but under this system the country's economy is heavily influenced by the US dollar's monetary policy. To escape this situation, El Salvador adopted the BTC as its legal tender in September 2021. This means that it has decided to stop trusting the US and to trust the BTC.
This can be seen as a shift in the credit used to back currencies from gold to government to BTC, and this trend is spreading from the bottom up, as the weaker the economy and creditworthiness of a country, the more incentive it has to adopt BTC.
The world may now be on the threshold of a gradual transition to a BTC standard, abandoning fiat money based on government credit.
Zimbabwe is known for its hyperinflation. Inflation is the price of things. In reverse, it means that the value of money has gone down. If you have 10,000 yen today and you need 12,000 yen the next day, it means that the value of the currency has decreased.
The decline in the value of money is synonymous with the decline in the creditworthiness of the state.
When a country's credit rating falls, prices rise, especially for imported goods. Hyper means 'short term' or 'sudden', and in the case of Zimbabwe it is said to be as high as $15 million USD for a 10 cent chocolate.
Have you ever seen a picture like this one of a child holding a large bundle of notes? This is what happens when currency loses value.
The true nature of money is 'credit'. 100 dollar bill costs 20 cents to produce, but it is a system that works because everyone believes that the 100 dollar bill is paper money that can be exchanged for something worth 100 dollars .
In the case of Zimbabwe, inflation continues to rise and the price of goods goes up, so it becomes more profitable to hoard a little and sell it. Supply will decrease, so prices will rise even more, but the necessities of life are absolutely essential, so they must be purchased, and the value of goods will rise even more.