Everybody talks about currency, but what does this expression mean? Vague ideas arise in many people's minds. "Currency" seems to have something inscrutable and nebulous about it. It gives rise to fears of price increases and inflation. These fears became especially apparent in the discussions about the euro in recent years. Various interpretations can be given for "currency" which concern the situation in one state or between several states.

1. Firstly, currency means quite generally the medium of exchange legally recognised by the state (see the activities of the central bank). For example, the German currency is the Deutschmark, the Swiss currency the Swiss franc, the American currency the dollar and the European currency is the euro. A currency is quite generally the unit of measurement used by a state for its monetary system measured by the price of goods. A currency is "stable", or hard, if the purchasing power of the monetary unit is stable.

2. A state determines and develops its monetary system. It tries to put its monetary system in order.

It does not leave it to its own devices, but influences it with a wide variety of laws, institutionen and interventions. "Currency" then stands for a country's monetary structure. Continual measures the state takes to regulate its monetary system are called monetary policy.

3. People also talk of "currency" when they want to describe the relationship of the unit of measurement to different monetary systems. Thus suppliers of goods from one country into the USA receive dollars, and the American supplier is paid in francs or Deutschmarks when he delivers to the corresponding countries in Europe. Purchasers obtain such foreign currencies, or foreign exchange, from importers who have to pay for foreign goods in foreign exchange. In this sense, the word "currency" concerns relations on an international level. Each country is integrated into the appropriate international currency system.

Through international agreements a state can transfer its currency sovereignty to a greater or lesser extent to international or supranational organs. When several states form a currency union they hand over their national sovereignty to the supranational institution in the territory of the monetary structure, eg to the European Central Bank.