Another example: the reason Japanese yen is valuable is because it allows me to trade English teaching for ramen, train rides, beer, housing, anything! Can gold do that?
It is backed by the Government/Army/JapaneseEconomy and is traded against other currencies. The purchasing power of Yen does not come from it being a unit of exchange, and the less ->
It is backed by the JapaneseEconomy - exactly. It is "backed" by the fact that lots of people are constantly giving and receiving valuable goods and services via Yen.
-> people use YEN to trade/exchange for stuff, and the more they hoard it/save it/set it aside, the higher the purchasing power per YEN will become all other things being equal.
But I will grant your point that for you as a user of YEN, the value for you comes from the easy of which you are able to get rid of the YEN in exchange for what your really want.
