Creating a currency

Question

I have been given an assignment for creating my own currency in economics. I am curious what one should know when doing this. It doesn't have to be too elaborate but I would like some advice. I know the complicated procedures regarding making sure counterfeiting is hard. But how the currency should be backed, and what it should look like and its form. Etc...

I know this assignment is very unrealistic because it would require me to somehow put a value on the currency and have it be adopted by a government, however unlikely. Just keep it basic.

Answer 1

What about creating a new currency and pegging it to the actual currency of your country (e.g. Euros)?

In order to become credible, you would need to give the public some assurance that you will convert back any of your notes into Euros, whenever some ask you to do so. Maybe signing a contract stating that you back the currency with your life would work, as backing it with your assets might not be enough (unless you are super rich). Government backs their currency simply because they have the monopoly of collecting taxes.

Some examples in the UK, which are backed by local councils are the Bristol Pound and the Exeter Pound. The key for this to work is, in my view, (i) parity with a local currency (so it does not fluctuate locally and it is easy to adopt), (ii) backed by a state authority, (iii) hard to counterfeit.

Answer 2

In fact, currency doesn't need to be "approved" by any government. In fact, currency is just a trade medium, in some scenario, it becomes commodities, viable for speculation.

A game like "Monopoly" already introduce its own currency. Players mutually agree on the currency "collection" and price on the market. Just imagine, if the game issue extra $200 to first player, I can assure that nobody going to play the game.

Historically, there is worst market situation, where enclosed society controlled by monopolies may "enslaved to use something like Company scrip .