THE WORLD'S MAJOR CURRENCIES

Apart from a few misguided misers like Ebermezer Scrooge, no one wants a currency "to have and to hold, until death do you part." Currencies are used to buy goods and services, both at home and abroad. The currencies of the world's major economies have names and backgrounds that are as diverse as the counties themselves.

The dollar, used in many countries including the United States, Canada, and Australia, gets its name from a silver coin minted during the Middle Ages in a small valley, or "Thai," in Bohemia called Joachimsthal. Just as a sausage from Frankfurt came to be called a frankfurter, the coins from Joachimsthal were called "Joachimsthaler" or simply "Thaler," and came to be called "dollar" in English.

The pound, used in Britain, Egypt, and Lebanon among others, refers to the weight used in determining the value of coins, based on precious

286

287

metals such as gold or sterling. The penny has the same origin as the word pawn, found in terms such as pawn shop, #nd originally meant "to pledge." A penny, like any currency, is a "pledge" of value.

In Italy and Turkey, the currency is called lira. The word is based on the Latin libra, meaning "pound," and once Јgain refers to the weight of the original coins.

In Spanish, the word meaning "weight," peso, is used to describe the coins that were based on a certain weight of gold or silver. Originally, there were gold coins called peso de oro and silver ones called peso de plata. In Spain, the currency is called peseta, meaning "small peso." The word peso is used to describe the currency in many Spanish-speaking countries in Latin America.

In Denmark, Norway, and Sweden, the word for crown — krone in Denmark and Norway, krona in Sweden — is used to describe the currency that was originally minted by the king and queen, with royal crowns stamped on the earlier coins. Today, the crown has been replaced by other symbols, but the name remains.

The franc, used in France, Belgium, Switzerland, and other countries and territories, is based on the early coins used in France that bore the Latin inscription franconium rex, meaning "ldflS of the Franks." The coin, as well as the country, took its name from one of the original tribes that settled in the area, the Franks.

The German mark and Finnish markka derive their names from the small marks that were cut into coins to indicate their precious metal content. The German mark, deutsche mark in German, is often called by its shortened name, D-mark.

The riyal, in Saudi Arabia and Qatar, and the rial in Iran, are based on the Spanish word real — which, in turn, was derived from the Latin regal(is) — referring to earlier "royal" coins. The dinar, used in Iraq and Kuwait among others, derives its name from "denarius," a Roman coin that was worth "ten bronze asses," an item of considerable value in days of old. In India, Pakistan, and other countries 0? the subcontinent, the currency is called rupee (in Indonesia, rupiah)? based on the Sanskrit word rupya, meaning "coined silver."

The ancient Chinese word yiam meant "round," or "small round thing." The name of the Japanese currency, the yen, and the name of the Chinese currency, the yuan, both derived frorfl th| old Chinese word, refer to the round shape of the original coins.

It used to be that a currency's value was fixed by its government or was linked to some item of value. This is not necessarily the case today. In the United States, for example, dollars held by foreigners could be

converted into gold until 1971. This gold standard was meant to guarantee that currencies would always have a fixed value, determining by the amount of gold in each country's vault.

The value of the major world currencies — such as the U.S. dollar, the Swiss franc, and the Japanese yen — is no longer fixed but is allowed to fluctuate freely on the world's foreign exchange markets. Just like a concert ticket on the night of a sold-out performance, a freely floating currency's price goes up when it is increased demand.

Currencies are "scarce" commodities subject to the laws of supply and demand, as long as governments do not start printing too much money. When everyone wants to buy much French wine, for example, the "price" of the franc tends to increase. The franc's value will rise as importers around the world buy francs — with dollars, yens or D-marks — to pay for it. Likewise, if Danish should decide to buy the latest Japanese stereo systems and video games, the krone will lose value as it is sold on the foreign exchange market to buy yens.

The free-floating system still does not keep governments from trying to influence the value of their currency by buying or selling on the open markets. The present system, sometimes referred to as a "dirty float," is based on periodic central bank intervention to keep currencies from changing its value too quickly or from moving out of a predetermined range, such as those periodically fixed in the European Monetary System.

However, like trying to reverse the flow of water, it is very difficult to intervene in the international currency markets. Because of the enormous amount of currencies traded every day on the foreign exchange (forex) markets, interventions by the central banks usually succeed in only slowing down a freely floating currency's inevitable rise or fall.