A history of currency and monetary exchange rate systems

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Do you get confused by currencies? Why and how do they move? What is the role of Governments? Knowing a brief history of currency exchange rate systems can help you understand today's three vexing questions which are, will:
1) the US dollar retain it's status as the world's reserve currency?
2) the Euro collapse within the next 5 years?
3) the China remninbi (yuan) be a potential challenger to replace the US dollar in the future?

Take the US dollar for instance... each 10, 20, 50 and 100 dollar note assures you, the cherished owner, the right to redeem it for…5, 10, 20, 50 and 100 dollars respectively. It's purchasing power today should not be confused with its intrinsic value (the amount of collateral it's backed by).

Is this just a simple “I-give-it-to-you-so-that-you-can-give-it-back-to-me” manoeuvre or are there other odious forces involved you are not aware of?

Let's take a look at this graphic which does a quick roundtrip of this quirk and recounts the evolution of currency systems from 1821 to the present day.

As it turns out this history is far more exciting than is usually let on (think political thriller as opposed to economic textbook!). For a rivetting exposé, I recently read and recommend a book by James Rickards (an American economist and 35+ years Wall Street investment banker), author of the New York times bestseller published in 2011 Currency Wars.

 Infographic: hat tips to greshams-law.com and goldmoney.com