How does Currency work ?

US paper money isn't really paper. It's cloth.

In fact, 200 years ago people repaired torn bills with a needle and thread.

Bob Marley's last words were "money can't buy life"

Counterfeit dollars can actually be too good. In fact, fake bills are quite often detected because they look too real.

The first pennies were 100% copper

Today, they are 95% zinc

But one penny still costs 2.4 cents to manufacture

Their central banks have enough money in their foreign currency reserves to control how much their currency is worth. To keep the exchange rate fixed, the central bank holds U.S. dollars. ... If demand for its currency rises, it does the opposite. The Chinese yuan used to be a fixed currency.

The value of money is determined by the demand for it, just like the value of goods and services.

There are three ways to measure the value of the dollar. The first is how much the dollar will buy in foreign currencies.

That’s what the exchange rate measures. Forex traders on the foreign exchange market determine exchange rates.

They take into account supply and demand, and then factor in their expectations for the future.

For this reason, the value of money fluctuates throughout the trading day.

The second method is the value of Treasury notes. They can be converted easily into dollars through the secondary market for Treasuries.

The third way is through foreign exchange reserves. That is the amount of dollars held by foreign governments.

The more they hold, the lower the supply. That makes U.S. money more valuable. If foreign governments were to sell all their dollar and Treasury holdings, the dollar would collapse. U.S. money would be worth a lot less.

No matter how it's measured, the dollar's value declined from 2000 to 2011.

That was due to a relatively low fed funds rate, a high federal debt, and a slow-growth economy.

Since 2011, the U.S. dollar has risen in value despite these factors. Why?

Most of the economies in the world had even slower growth.

That made traders want to invest in the dollar as a safe haven.

As a result, the dollar strengthened against the euro. It made travel to Europe very affordable.

The value of money affects you every day at the gas pump and the grocery store.

That's because demand for gas and food is inelastic. Producers know you have to buy gas and food every week.

It’s not always possible to delay purchases when the price rises. Producers will pass on any of their extra costs.