A Chinese Virtual Currency Challenges the Yuan 183
Radon360 writes "A Wall Street Journal article reports that China's fastest-rising currency isn't the yuan. It's the QQ coin — online play money created by marketers to sell such things as virtual flowers for instant-message buddies, cellphone ringtones and magical swords for online games. In recent weeks, the QQ coin's real-world value has risen as much as 70%. It's the most extreme case of a so-called virtual currency blurring the boundaries between the online and real worlds — and challenging legal limits. A Chinese Internet company called Tencent Holdings Ltd. designed the payment system in 2002 to allow its 233 million regular registered users to shop for treats in its virtual world. Virtual currencies are in use in many countries — but nowhere have they taken root more deeply than in China."
You haven't been to Canada have you (Score:4, Funny)
Re:You haven't been to Canada have you (Score:5, Interesting)
It is fact that in the U.S. just about anyone can print currency as long as it's in Dollar denominations and $1 of your dollars is valued/redeemed at $1 USD. The fact that the Federal version of the Dollar is the one most widely accepted doesn't mean that another currency can't be valuable.
I wonder what US courts will decide when it comes down to treating virtual currency in regard to actual currency. Should you be able to buy $200 worth of virtual currency for $20 USD? Or will it have to have a redemption value ratio of 1:1?
This is obviously not the case in China.
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to say that virtual currencies are not and will never be traded on a currency market is wrong. The point of the article is that informal currency markets sprung up to deal with the QQ. More than that, I find it very unlikely that there will *never* be a virtual currency traded on some sort of official currency market, it seems a bit of a naive assumption that things will remain as they are.
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If the currency is unregulated; ie, no scarcity and unlimited printing, it's essentially a pyramid scheme. It wont be redeemed, and whoever is stuck with the assets in the end have the value of what they can sell the screenshot of their balance for...
If the currency is regulated, ie, central bank, regulated rates, fixed availability based on incoming and outgoing goods, funds and services, sure, but then it's a real actual curr
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Just to point out that the QQ dollar is worth what people will pay for it. Big deal if it isn't officially traded - the market is there and it's already being traded.
Since the virtual currency will never be traded on an open market, its impossible to value your assets correctly
Not true - it may trade at a discount because it's traded in a subordinate market, but that doesn't mean it's imposs
Is anyone else here thinking about Tulips? (Score:3, Insightful)
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If it's going to happen somewhere, it's going to be in the places where the government is having trouble keeping up with what's going online. China is the perfect place. With all the "internet addiction" hospitals, it's clear that the powers that be aren't able to address/get their minds around what the citizens are doing online. Soon enough, a critical mass of people will have so much invested in what theyr'e doing in virtual worlds, that the gov't will have no choice but to adapt to the people... or ju
Not likely. (Score:4, Insightful)
Clearly, the barrier to development of this virtual currency market is that the Chinese Government (or any other government for that matter) doesn't want it. There are a few reasons, but the most obvious are loss of control, dilution of "real" currency, and inadequate backing of the currency. For example, the Chinese government has control over the supply of yuan (they print it), and back the yuan's value. QQ coins on the other hand, are only "real" in the sense that Tencent allows you buy things with them. While the Chinese government will always support the yuan, Tencent can't guarantee the QQ will always have value. If Tencent went bust, or had an employee suddenly issue billions of QQ dollars, the value of the currency would plummet.
Given the above, this currency will never be allowed to exist peacefully with the yuan. It will never be used for big business to business transactions, so we'll never see specialized markets for lending or futures.
tap the vein (Score:3, Insightful)
Re:tap the vein (Score:5, Interesting)
What's hilarious is that after you buy it, it's still in the game which actually makes it property of Blizzard, residing on their servers. Wouldn't it be an interesting world if this took off and you don't even own your own money anymore, and essentially have to use "disney dollars" for purchases. A nice way to go back to the Erie Canal model. I'm not saying this is what's happening, but it's an interesting concept.
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What? You don't reminisce about online adventures? Well, you must not be playing the right games. We'll still bring up playing Quake, Doom, Duke Nuke'em when they first came out or some exploring, killing & dying we did in mmorpgs. And of course there are the exploits & getting stuck in a "corner".
It helps to game with friends you see outside of the game. Kinda like the camping story is better if more pe
Someday... (Score:5, Funny)
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Re:Someday... (Score:4, Funny)
I, for one, welcome the new Slashdot cliche eradication squad, although i don't envy the size of your task.
Obilg. (Score:4, Funny)
In a sense... (Score:5, Insightful)
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Virtual Value is very similar, but in the case of
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No currency has intrinsic value; when it does, it ceases being currency and instead becomes a commodity (rare coins, gold pieces, etc).
Not so. There is no distinction, other than whether you can physically hold it in your hand. These "standard values" you are talking about don't exist -- it's t
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I already replied to someone else along the same vein, but what the heck. US banks don't have to have physical money to back up 100% of their deposits. The Fed sets a fraction of reserves that they must hold. So this means there's more money in the US economy than paper and coins to represent it. So would you say some of that money exists (be
Who matters, not What (Score:3, Insightful)
In many ways I only deal with virtual currency by using my debit card. Virtual in the sense that I never actually saw that amount of federal reserve notes. However, I will not, ever use any virtual currency that is not backed by a real government with a sound monetary policy.
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money, fiat or specie, is pretty much worthless without goods to trade. one example i could give was the late roman empire - with so few goods and services being produced, money (which was already debased coinage) was of little use to anyone and roman tax collectors preferred to collect taxes in kind - as grain, meat, or whatever goods and services they could squeeze out of the peasantry.
in fact, real wealth in economic terms is land, labor, and capital (or at least the abi
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The US Dollar is essentially a promise to pay by the US Government. Its not backed by anything other than trust in the government. This isn't as silly as it sounds, since the government can raise funds in hundreds of different ways, from raising taxes to printing more money.
Borrow "funds" then print and payback + interest (Score:4, Insightful)
If that doesn't shake your faith in US currency, nothing will.
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Gold Standard (Score:4, Insightful)
No. It doesn't have to be.
Post World War 2, Gold standard was replaced by the Bretton
Wood Monetory system, which was also based on Gold Reserves.
However, the US (under Nixon) totally shut off gold based
currency in 1971. Very few currencies are gold backed
currently.
Re:In a sense... (Score:5, Insightful)
Sarcasm, I assume? Modern currencies generally are not backed by precious metals at all. And in history, things besides gold have been used: the UK's pound used to be backed by silver before it was backed by gold (before it stopped being backed by anything at all), and there were gold-vs-silver debates (the details of which I've forgotten) in American history too.
Really, what's the significance of gold? What good would it do you or anyone else? Why does it have value? It's just mutual agreement and the faith that it has a value that gives it its value.
I could even imagine some sort of public-key cryptographic scheme used to assign value to magic numbers... Think Cryptonomicon.
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Because there is a finite amount of Gold, attempts to make [wikipedia.org] gold (until recently it seems) have always failed, even though the possibility of making gold is now feasible it is cost prohibitive.
This is why there wasn't a sand standard, or water standard... Precious metals are finite (without space exploration at least).
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Gold was valued in ancient days because it had a lot of properties that were not available otherwise. With the advent of plastics and alloys, that is not true anymore.
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One advantage of fiat money (I am not saying there aren't disadvantages) is that if suppliers of a few commodoties agree it has value, it essentially becomes backed by all of them. With a standard based on rare metals, you are subject to market collapse on discovery of large amounts of the ore. This happened som
Re:In a sense... (Score:5, Informative)
That's correct. It's part of the reason why they eventually went to a fiat system, actually. The thing is, the whole "gold-vs.-silver" argument was idiotic from the beginning. Their problem was simple: they tried to fix the price (exchange rate) between gold and silver (bimetallism). As an inevitable consequence you would rarely see both gold and silver used in exchange simultaneously. Whenever you have a fixed (or otherwise arbitrary) exchange rate "bad money drives good money out of circulation"; i.e. if 16 ounces of silver is worth one ounce of gold on the open market, but the law mandates an exchange rate of 20:1, then no one will pay for anything in gold (and visa-versa). This was a well-known principle at the time, since the same effect had previously been observed in Britain under similar circumstances. The decision to enforce a fixed exchange rate was strongly politically motived, and (as I recall) mainly driven by the silver manufacturers.
If they had just left the exchange rate "floating" according to the demand for gold and silver the most likely result would have been the use of silver for small transactions and the simultaneous use of gold for larger ones, which is emminently practical considering the relative "value densities" of silver and gold. At present prices, for example, silver becomes cumbersomely large when dealing with more than, say, $35 worth (about two troy-ounce coins in coin form, each about twice the diameter of a quarter), whereas gold becomes cumbersomely small for anything under about $55 (1/10 ounce, about the size of a dime). Amounts in the $35-$55 gap can be easily handled by simply making change in silver from a 1/10-oz gold piece according to the store's advertised exchange rate.
Of course it would be even more likely, given today's technology, that people would simply use some sort of electronic exchange system similar to our debit cards. Existing exchange networks, such as e-gold, permit online transfers of as little as 1/10,000-oz. (~$0.055), which tends to eliminate the need for multiple currencies. For such a system gold would probably be considered preferable for its small size (and thus ease of storage).
There are a number of industrial uses for gold: corrosion-resistant plating, wiring in integrated circuits, etc.; its use in jewelry, too, is partially due to its material properties (including appearance) and not just its price. It can even be formed into an aerogel and employed in supercapacitors and some kinds of filters.
In monetary terms gold has value (apart from its marketability) both because it has a naturally limited supply and because its alternate uses tend to set a floor on its value. Fiat currencies can be devalued without limit; their scarcity is purely artificial and they have no significant uses besides exchange.
The only reason we have a fiat system in the U.S. is that at one point in our fairly-recent history the government confiscated (stole) all the privately-owned gold (at that point the primary medium of exchange), banned its use, and replaced it with paper notes. People didn't really have a choice; they could either use the notes or revert to a primitive barter system. The ban on gold ownership/use was eventually lifted (within the last 35 years, I believe), but at that point the damage was already done -- and the stolen property was never returned. It remains to be seen whether the fiat system will remain now that it's no longer legally mandated; it took a few thousand years to develop the system we had before, and short of forcing everyone to switch yet again I wouldn't expect things to go back to normal in just one or two generations.
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The key value in monetary terms is wide acceptance. Trust is key in trade, when governments started making currency used gold backing to get people to trust and therefore accept it.
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I just had the idea of just being honest about what our money is made of. Let's label the coinage x quantity of y metal.
I just was looking at
http://en.wikipedia.org/wiki/American_Gold_Eagle [wikipedia.org]
and most of those were in troy oz which isn't a unit of measure that I'm familiar with.
I was thinking you could have many different
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That is not true, but I think I know where you're getting the idea. You should look up the "Gold Standard". Very few currencies (if any) are currently on a Gold Standard.
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As others have pointed out, no modern national currency is backed by gold, or any other tangible good. Now that there is nothing at all constraining governments' ability to debauch their currencies, everybody now thinks that constant, ongoing, year after year inflation is normal. The U.S. dollar today is worth what 20 cents was worth in 1971, the year the United States went off the last vestiges of the gold standard.
The dollar is only valuable because people think it's valuable. Of course the same is la
Perfect for MMOs (Score:2)
Virtual game.
QQ coin. [urbandictionary.com]
It's perfect for those chinese gold farmers.
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Behind the times? (Score:2)
Isn't all currency virtual? (Score:5, Insightful)
So, except for the legislative issues, is there really a fundamental difference?
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Almost no corporations are built to benefit the people, they are built to benefit the managers and owners.
Someone, at some point, will get greedy.
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Difference between MMO money and real world money is that there is nothing physical backing the MMO money. I admit, one could argue real world money is poorly backed itself, but at least they got some amount of gold stashed away somewhere.
Virtual money though? It's nothing but a mysql column.
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Somewhat.. (Score:2)
It's
Nope! All currency is a commodity... (Score:5, Informative)
You see if currency were really a medium which symbolised value, it wouldn't change much. Bread, coffee, gold etc would pretty much always cost the same, they would always have the same value throughout time. Instead what happens is that over time, everything becomes more expensive, inflation. What's happening is that the currency is losing it's value. It does that because there's more of it; supply and demand. When the government('s bankers) print money, all the existing money in circulation decreases in value because there is more of it around.
So, no, there's no fundamental difference between real and virtual money, just as there's no fundamental difference between real money and a kg of coffee.
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Actual stuff is different than money. If I am marooned on an island, I can eat bread. The money is useless.
What does "commodity" mean to you here? I understand that there's a market for money and there's a market for money, both of which are affected by supply and demand.
Why can't there be a market for a "medium to symbolize value"? What property of a commodity makes this wrong?
Re:Nope! All currency is a commodity... (Score:5, Insightful)
The intrinsic value of money is it's market value, which is why people get so confused over it's nature. It's still a commodity.
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What is it about being a commodity implies money cannot be a medium to symbolize value?
As you've discussed, printing more more doesn't create value. Creating more coffee does create value. So in some way these items are in different categories of items. One of them is *stuff and the other is stuff.
I'm arguing, but I'm doing so in an effort to understand your point.
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What is it about being a commodity implies money cannot be a medium to symbolize value?
OK... It can symbolize anything you want it to. It can symbolize good/evil/philanthropy or whatever, you can make anything a symbol of anything but that's meaning which you are applying to it, it isn't meaning which is inherent in it's nature.
Money isn't inherently a symbol of value, the symbolisation of it in that way is something people add, and are encouraged to add by governments and banks. It's basic nature is that of a commodity; If everyone has a million dollars, then a million dollars is worthless.
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I have a feeling you cannot be convinced, but I'll give it a shot. The nature of currency is its representation of value. Money is nothing else but that. What reason can you assign to valuing money other than as a means of purchasing goods or services? It has no intrinsic value - its only use is to exchange it
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That's just plain stupid. Coffee has intrinsic value, money does not. Just because the "value" of money fluctuates, does not make money a commodity.
A currency is only as strong as the government that issued it. When the government that printed your money collapses, it instantly loses all its value and becomes paper again. It makes sense that nowa
Re:Nope! All currency is a commodity... (Score:5, Informative)
http://www.rampantscotland.com/know/blknow_money.
http://en.wikipedia.org/wiki/Banknotes_of_the_pou
Have a read:
http://www.mises.org/money.asp [mises.org]
Originally almost all money was privately issued, governments acquired the process because it allows them to create and spend money without having to tax the populace. Doing so devalues the existing currency and so is a subtle form of taxation. You've been taken in by your local government's propaganda over the nature of money.
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The "market value" of a bank note only exist because you have a reasonable certainty that someone will accept it at that value (usually a government provides that certainty). The intrinsic value of a bank note is the amount of paper and ink needed to produce it - usually much lower than the market value. I didn't say that only governmen
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The "market value" of a bank note only exist because you have a reasonable certainty that someone will accept it at that value (usually a government provides that certainty)
You think they do? I suspect that government is largely irrelevant to the maintenance of the value of a currency, perhaps even counter productive. Other than limiting the amounts they print, which anyone is capable of doing.
he intrinsic value of a bank note is the amount of paper and ink needed to produce it - usually much lower than the market value.
Ok, I know I should have used utility. There's really no such thing as intrinsic value.
I'm not sure what you are arguing. How does my understanding of economics allow the government to profit from my deception?
http://en.wikipedia.org/wiki/Seniorage [wikipedia.org]
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Interesting. Brings me back to my question about the value of a Czechoslovakian crown (or a deutschmark, or a French franc, for that matter).
Ok, I know I should have used utility. There's really no such thing as intrinsic value.
Yes, there is. You can boil your 1 kg of coffee and then drink it; it has value, and in that it's different from money. Are you freaking kidding
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You are asserting that the value of money is its value. That is a circular argument. It has value because we assign it value. Yes, its value is its value, but that value is arbitrary and not intrinsic. If it were intrinsic, you wouldn't have to resort to a circular argument.
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You are asserting that the value of money is its value. That is a circular argument. It has value because we assign it value. Yes, its value is its value, but that value is arbitrary and not intrinsic. If it were intrinsic, you wouldn't have to resort to a circular argument.
Yes ok, I should have said that the utility of money is it's market value. There's no such thing as intrinsic value. And no, we don't assign it value. It gets it's value from the supply/demand, in the same way as any commodity.
The value of money isn't arbitrary. If it were, then you could say a loaf of bread is 1 dollar, and it would stay one dollar until the end of time, or until the government decided to give bakers a raise and say it cost 2 dollars. Not the case. 1 dollar today will buy you 1/20th of wh
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Odd, when I go to the store, they have items marked on the shelf at $2.00. I presume this means they assigned the value to the dollar of 1/2 the item. Yes, it is more common to think of it the opposite way for how things are valued, but it is the backwards valuation that causes the confusion. The value of the dollar is assigned for each and every transaction. If you watch a car salesman through the day, buyers assign different values all the time. Some think of their
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Odd, when I go to the store, they have items marked on the shelf at $2.00. I presume this means they assigned the value to the dollar of 1/2 the item.
Sure they attempt to give the item that value, but if you don't buy it, then it doesn't have that value for you. If you don't buy the item then the dollar is worth more than half the item and the item is worth less than 2 dollars. This is why you can't assign the value of a dollar. The value is different for each and every person.
ok reading the rest of your post I think we're arguing over the scope. I'm not talking about individuals assigning a value I'm talking collectively.
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I've got a difference for you, I can have real money stuffed under my mattress. However, where exactly can I put virtual money? (I know I set myself up). But it is true, think about it. If all money becomes virtual, then only selected "trusted" servers will be able to deal in it. How are you going to be able to even have your own personal stash of mo
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I thought the Treasuries around the country kept tabs on the circulation of the money out in the wild and when there gets to be too much, they remove some from circulation and if there's too much put some back into circulation.
Yeah..... Maybe if the politicians didn't get involved that might actually happen. The bankers take money out by increasing interest rates... Which makes the economy tank because there's less money around. Which makes politicians look bad. You see our monetary system is based on debt, the national debt to be precise.
And of course the bankers make money from lending money so the more they have to lend the more they make... I'll leave it up to you to decide how wise it is for them to be left in charge of the
And that would be even more embarrassing (Score:2)
So, what would be even more embarrassing then our economy hitting a brick wall because the Chinese are pulling all their
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p.s. They have Europe, Japan and are developing their internal market.
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http://en.wikipedia.org/wiki/List_of_countries_by_ current_account_balance [wikipedia.org]
is not totally accurate, I am sure, and does not totally cover all the intricacies of different economies, but on the face of it, it seems that many European countries are doing pretty well for themselves. Many European countries have large surpluses (Germany is #3), and even the EC countries that have deficits (United Kingdom, and Spain, for example), have deficits that are smaller, both in total terms and per capita.
It'll become worthless (Score:2)
Not surprising. (Score:2)
It would be like saying every 1 US dollar is now worth 2 US dollars and then gaging the growth of the EU currency as a sign of how stable and capable the EU is when their currency adapts to this force. When If they were all val
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Personally I think its a very poor currency policy, but there you have it.
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But yea, I see the point now, It is undervalued instead of overvalued when comparing it to real world real attributes.
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But with the comparison being limited to a single item, it has even more effect compared to that item. Now, if the yuan was worth more then it is going for, then it makes sense that a virtual currency finding it's real value reaches that a
This could be HUGE in a few years! (Score:2)
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Virtual drug money, Virtual Terror support (Score:2)
The real issue with this will come when there's a big scandal about terrorists (or drug smugglers) using a game to transfer large sums of money.
"Cry more" currency (Score:2)
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under, not over, valued (Score:4, Informative)
I think your comment on the stock markets is just a troll, but they're not overvalued either. The Chinese market is one of the fastest growing markets in the world.
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Fair enough, the Chinese stock market are volatile and have been growing at tremendous rate for the last few years. Clearly there is the chance that speculation may be causing a bubble which means the market is overvalued. I was wrong about that in my original post. That said, the Chinese stock market isn't simply a hollow shell being propped up by the Chinese government, which was implied by the GGP. There is real strong growth in the country.
I still stand by my statement
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Re:Aren't most currencies virtual these days? (Score:5, Insightful)
The main difference being (Score:3, Insightful)
Scarcity is relative. (Score:2)
We could make currency out of anything from jewelry to beanie babies, and it could be just as easy a standard as gold with the right belief behind it.
If you can hoard it, if it's rare, and if it's a means of exchange, it's currency. That's all there is to it.
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Gold, silver and the like were (and still are) valuable because they're shiny. I know that sounds silly, but it's nonetheless true; wealthy and powerful people, from kings to merchants, wanted gold for appearance sake. If iron pyrite were the pretty mineral of choice instead, we'd b
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Here was a currency of a government (Saddam's) that didn't even exist, yet the currency still held up its value even with foreign trade and exchange. Although admittedly since the government that created the currency no longer existed, there is a natural scarcity that only improves with time... driving up the value of the money.
From what I understand, this money is still widely used
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