The Essence of Money

Every currency operates in two dimensions: a downside and an upside. The downside refers to how low it can fall—and what determines that? Ultimately, productivity.
The essence of currency is debt. Holding a country’s currency is like holding a bond issued by that nation. It represents an IOU: something you can redeem. As long as there’s something of value to exchange for, the currency has a floor. Value establishes a target price. Despite fluctuations, value will always tend to reassert itself.

The upside is determined by relative scarcity; the downside is determined by value—productivity and resources.