http://en.wikipedia.org/wiki/Currency
In economics, the term currency can refer to a particular currency, for example the British Pound, banknotes of a particular currency, which comprise the physical aspects of a nation's money supply. The other part of a nation's money supply consists of money deposited in banks (sometimes called deposit money), ownership of which can be transferred by means of checks or other forms of money transfer such as credit and debit cards. Deposit money and currency are money in the sense that both are acceptable as a means of exchange, but money need not necessarily be currency.[1]
Historically, money in the form of currency has predominated. Usually (gold or silver) coins of intrinsic value commensurate with the monetary unit (commodity money), have been the norm. By contrast, modern currency, as fiat money, is intrinsically worthless.
http://en.wikipedia.org/wiki/Precious_metal
The best-known precious metals are the coinage metals gold and silver. While both have industrial uses, they are better known for their uses in art, jeweler and coinage. Gold and silver are often seen as hedges against both inflation and economic downturn. Silver coins have become popular with collectors due to their relative affordability, and unlike most gold and platinum issues which are valued based upon the markets, silver issues are more often valued as collectables, far higher than their actual bullion value.
To tie this altogether:
1. Money performs the exact same function as an IOU. You borrow your neighbor’s lawnmower while yours is in the shop. You and your neighbor decide on a fair compensation. ie: 1. You’re responsible for returning it in the same condition that you receive it; 2. You agree to return it with a full tank of gas; 3. You shake hands—no written contract—your handshakes and agreement confirms the legality of the transaction.
2. Currency is used to perform transactions when you leave the country for a vacation. It’s best to go to your local Travel agent and take some of the foreign currency for your cab ride from the airport to your hotel. The Travel Agent will charge you a “processing fee” to obtain the foreign currency and will sell it to you at the “current exchange rate” between the two countries.
3. There are very few (if any) countries that still use precious metals as money or currency. No bank, foreign or domestic, (that I’m aware of) that will exchange money or currency for a comparable amount of any precious metal. The majority (by a huge disparity) is held by “Government controlled” entities
Re: the government IOU (mis-identified as a $1.00 bill or any other denomination including coinage). Very strange: when the copper in a penny became more valuable than the penny, pennies were our last great monetary hope. The government gives you your $10.00 bill without any physical collateral (no lawnmower or sweat from your brow). The government can also produce more and more currency—totally un-collateralized which diminishes the IOU’s you already have. “Paper” US money isn’t paper at all—it’s cotton. It shouldn’t be out-of-the-realm of possibility that you’ll save more money by sewing your own clothes with US paper money or burning it instead of gas, oil, coal or electricity.
Currency is not complicated. In the US, it’s called “Treasury Bills”. During the “Great (luckily it wasn’t referred to as the “Greater” or “Greatest”) Depression, these were “sold” to the US populace as “War Bonds”. The populace considered the highest patriotic privilege to buy “War Bond” stamps at 10 cents apiece until they filled up the “collecting” book and take it to a bank to redeem it for a different piece of paper—a Treasury Bond. I still have some given to me by my grandparents as way to show appreciation of our mighty nation. Now, our national government (Federal Reserve-Bernanke, et. Al) not only can’t sell US Bonds (up until now, has always been the very best and dependable investment) to foreign countries, but can’t even sell them domestically. Bad news: foreign already own the majority of our debt—Good news: it’s only paper and is worthless.
Precious metals will ALWAYS their purchasing power no matter if they are exchanged for money or currency. IF inflation spikes (almost a certainty), 1 oz of gold will be worth the exact same value in relation to money. For instance: A loaf of bread costs $2.00 (I don’t buy the groceries, so this may be way off guess). At current gold price ($1200/troy ounce) it would take about about .025 ounce of gold. If inflation strikes, a loaf of bread goes up to $4.00/ loaf. But gold will have gone up to match the inflation rate, so the same loaf of bread would still cost .025 ounce of gold. Most pundits would have you believe that you can get “huge returns” by investing in gold—that’s probably true but should NOT influence your decision to buy gold. How much physical gold should you own, how to store it (Banks have two very different contacts for lock-box contracts. One allows them free access to whatever is in your box (cheaper), the other disallows the bank to open your safety deposit box (more expensive, but the bank acts as a custodian and cannot lock their doors to separate you from access to your gold—at least that’s the law of the land, at least for today.