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Paper money was borne out of the need to find some medium that was acceptable to all, easy to carry, can be stored, and can be measured. The government of each country had gold and silver stored in their vaults, and, based on these, would issue paper money. The value of the paper money each country has was then based on how much gold and silver the country owned.

This was when world economies were using the gold standard as basis for determining relative values of currencies of countries engaged in the exchange of goods and services (or simply, world trade). The rate of exchange between and among these currencies was thus determined by the prevailing value of gold.

In 1945, right after World War 2, the victorious countries met in Bretton Woods and collectively decided to use the US Dollar as the international currency of exchange. At that time, the countries agreed to base the value of one US Dollar to $35 per ounce of gold.

Since then, most countries, including the Philippines, have pegged their currency to the US Dollar. This means that even if we trade with countries other than the US, we have to use the US Dollar as the basis for our payment to them.

FRANCISCO J. COLAYCO is an entrepreneur, a venture developer and financial advisor. He has over 40 years of experience that covers service contracting in the Middle East, manufacturing, trading construction, shipbuilding, management consulting, banking and financial services. He is the Chairman of the Colayco Foundation for Education (CFE) and the author of bestsellers: Wealth Within Your Reach (2004 National Book Award for Business and Economics), Making Your Money Work (Nominated in 2005, National Book Awards Business and Economics), Pera Palaguin Workbook and Money for Kids. The books are available at National Bookstore, most other bookstores or directly from CFE. He joins our website blog to share with ordinary income earners, Overseas Filipino Workers (OFW) and students the simple principles to "Save what you earn and grow what you save." CFE conducts talks, seminars, and workshops. “Managing Personal Finances For The Future” a seminar-workshop developed in partnership with the Ateneo Graduate School of Business, Center for Continuing Education. June 21, 2008, Saturday, 9:00 am to 6:00 pm. For registration and inquiries, please call Marleth Calanog at 830-2050. CFE is also the producer of the PISObilities DVD series, available at your favorite audio-video shops in May 2008. Learn more about the advocacy at http://www.colaycofoundation.com/, email info@colaycofoundation.com, via SMS +63917-8537333 or through (632)637-3741.