If the entire globe adopted the same currency overnight, two things would happen: the trillion dollar-a-day foreign currency market would vaporise, along with the profits of thousands of banks and investment firms. Currency swings in values have got our attention again lately when in a rather rapid deceleration, the British pound and the euro came off their highs this summer.

Reasons for these changes are numerous and in the following articles we will explore currency, its use, reasons for holding more than one type, choice complexities, assessing changes in value and its effect on investment products.

Money makes the world go around, the world go around. The buying and selling of currency is a fiercely competitive business, similar to other components of the investing world. For you see, we individuals, charities, foundations, governments, and businesses large and small have to have the means to convert wants and needs into the appropriate monetary format for purchase or sale.

One medium of exchange simply won't do (or be accepted) elsewhere. It's a business that never sleeps, rotating purchases and sales between one currency and another in nanoseconds, 24 hours a days, seven days a week. The value of one currency against another can change on a whim, uncertainty, perception, political manoeuvring, slow down or ramp up in industrial production, wars, dictatorships, strikes and so on.

In the beginning, there was barter, then gold or other prized commodity possessions that demarcated wealth. See history chart. Can you imagine walking around with a wheelbarrow of gold bars? Or, sitting in your store room playing dress-up with many jewels, pearls, metals?

Precious metals, particularly gold, were used to fund wars, and great explorations, later backing a country's paper currency. Eventually, through history's march, with not enough real gold to go around and other complex economic reasons, the backing of a nation's currency by the gold standard was abandoned. Still implicit within a currency market is the underlying value of the country(s) of origin. Underlying value — how is a currency value determined?

You have to start with a countries ability to pay using their reserves and other mediums of exchange, known as hard-backed by hard assets: oil, copper, precious metals, competitive profitable industrial complexes, etc. If that were only the case though, when one looks at a countries such as Zimbabwe, so incredibly rich in people, natural resources to ask, why are these failed states — failing their own people?

On the edge of virtual collapse, according to The Economist (July 19, 2008, A Worthless Currency), "Zimbabweans now spend huge amounts of time and energy preventing their meagre cash reserves from completely evaporating. With inflation at 2.2 million percent per year, paper money is scattered in the street, walked on and ignored.

Twenty billion Zimbabwe dollars equals 70 US cents. Currency prices are changed upwards several times a day; cab drivers change their fares three times or more a day into hard currency. Local dollars are spent as fast as possible, losing value each second. People shun banks; they aren't allowed to take out more than $1 a day anyway. Using cash has created an informal economy where anything but paper money may have a greater value and everything costs a great deal." This is a sad example of an economy gone terribly wrong.

And what of the euro? What determines that underlying value? A smorgasbord of nations, many of whom have been bitter enemies since Cave Age times? We will carry on next week.

Martha Harris Myron CPA -NH1929, CFP® -67184 (US licenses) TEP — Society of Trust and Estate Practitioners. She is a Senior Wealth Manager at Argus Financial Limited, specializing in comprehensive financial solutions and investment advisory services for individual private clients and their families, business owners, endowments and trusts. DirectLine: 294 5709 Confidential email can be directed to mmyron@argusfinancial.bm The article expresses the opinion of the author alone. Under no circumstances is the content of this article to be taken as specific individual investment advice, nor as a recommendation to buy/ sell any investment product. The Editor of the Royal Gazette has final right of approval over headlines, content, and length/brevity of article.