Foreign Money Values

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There are two different types of values when it comes to foreign money:
1. Currency exchange rate value
2. Collector value

There are also two types of currency:
1. Currently circulating money
2. Obsolete money

The two types of values

Notes:
An exchange rate is when one American dollar is officially worth a fixed amount of foreign money at a given time. Example: One American dollar equals ten Mexican pesos, or one American dollar equals 1.25 Canadian dollars, and so on.

Legal tender means that a bill has the power to pay off a debt the moment it is handed to the provider of the goods or services. Legal tender also means that the provider of the goods or services is obligated by law to accept the bill as full payment, provided the denomination of the bill covers the amount of the transaction. Examples of denomination are: one dollar, five pesos, ten pounds, twenty rubles, fifty yen, 100 rupees, and so on.

Collector value
It applies to both currently circulating money and obsolete money, because there are collectors of every type of money.

The two types of money

Obsolete money
It is the type that is most often collected around the World, especially after it has been completely withdrawn from general public use. It is also the kind of money that is no longer serving in a country or region as a means to pay for anything.

Obsolete money has been discontinued permanently and, consequently, it has been retired from circulation for the last time. In most countries, obsolete money has also ceased to be legal tender, as a result of laws that are passed following economic or political transitions. Obsolete bills can no longer be used as cash anywhere, and that is precisely why they instantly become highly sought after as collectibles. Very soon, they turn into nostalgic reminders of an era in history that has come to pass.

Note: In the United States of America, American bills withdrawn from circulation never lose their legal tender status or their capacity to pay off any type of financial debt. Money from the Confederate States of America is no longer legal tender anywhere, not even in the states that once formed part of the Confederate States of America.

Most countries around the World periodically replace their money with entirely new designs, and shortly after the new bills have been distributed at the banks, the older designs are completely devalued, to the point where they become obsolete. Obsolete bills no longer have any purchasing power for things and services in everyday life, but they can be quite valuable to a collector nonetheless.

There are two types of devaluation:
1. Partial devaluation
2. Total devaluation

Partial devaluation is when a bill loses some of its power to acquire goods or services, making it more costly for a consumer to budget expenses. Many different currencies around the World experience partial devaluation, to varying degrees. Due to the nature of finances, this is sometimes inevitable. In some cases, partial devaluation eventually leads to total devaluation. Inflation over time can erode the value of the currency in any country, to the point where entirely new money may have to be created.

Total devaluation happens after a law is passed to void a certain type of bill. Such events are routine in most countries, for many possible reasons: the board of directors of a national bank wants a different portrait on the bills, a new government may have seized power, the ruling party of the country may have adopted a new policy or ideology, the design of the bill could simply be outdated or inappropriate, etc. In fact, total devaluation of the bill can be due to any circumstance, and it can be either progressive or sudden.

Progressive total devaluation can be either intentional or unintentional. When there is intentional progressive total devaluation, government banking authorities always give the general public a grace period to turn in their bills for the new designs. Unintentional progressive total devaluation is due to inflation, as explained earlier, but a grace period also may be afforded to anyone holding the devalued bills.

Sudden total devaluation could take place in some countries as a drastic measure of last resort, following a major traumatic event in the destiny of a nation. When sudden total devaluation occurs, there is no grace period to redeem any of the bills, and the general public loses all the liquidity they had: instantly, all wallets become empty and all bank accounts nationwide are brought down to zero balance.

In the United States of America, old bill designs will forever be redeemed by the United States Government at their full face value, even though the general public may or may not accept it as payment for goods or services. If the bill is really old, someone may decline to accept it simply because they have never seen one like it before, and not because it may be obsolete. In the United States, there are no obsolete American dollar bills with the words United States on them.

Obsolete money is usually worth more to collectors than simply the face value or exchange rate it once had, if it is in collectable condition.

The better the condition of the bill, the higher its collectible value. Collectors seek bills that are intact, clean and crisp, so that the intricate details and color on the money can be viewed and enjoyed fully. Collectors prefer brand-new, straight-off-the-bundle bills, without any smashed corners, teller counting creases, or folds.

Old bills are not necessarily more desirable to collectors simply because they are old, unless they are also scarce and in near-mint condition. Many old bills are common and they also exist in very large quantities. In order for those types of bills to be worth any significant amount, they must be in mint condition.

Values of obsolete money can also go up or down, and in cycles, according to the interaction between supply and demand. Prices for collectible currency can sometimes change drastically, in a very short period of time. Still, the general rule is that obsolete money increases over time because the supply usually stays pretty much the same, while the number of collectors is constantly growing.

Obsolete currency is historic and highly collectable, and as a consequence, it will always have value. The hobby of collecting both obsolete and current money bills is growing around the World at a very fast pace.

In order to estimate the value in American dollars, of any type of currency, it is necessary to inspect the bills in person. Only a qualified, properly trained, and experienced currency specialist who is thoroughly familiar with foreign money, can realistically approximate the value of collectible bills. Most likely, a teller or clerk at a foreign currency exchange bureau will have no experience with collectible currency, and very little reference material relating to collectible bills. Keep in mind that value is ultimately dependent on the availability of a buyer and the extent of his or her resources.

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