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The Concept of Fungibility through a Very Short Story !!

 The Concept of Fungibility through a Very Short Story !!

By Dinesh K Kapila
I was asked about this recently. On a social media platform for professionals. By a young lady who had just completed her BTech and was preparing for an examination. I just gave a standard sort of answer but found a few others added their bit. It was also like the concept of fungibility was now evolving. And NFTs were in and what was not. We just did not get into the practical side of it. A finer understanding would come from that only.
Simply put, Fungible assets are interchangeable, Fungibility refers to the ability of an asset or good to be interchanged with other assets or goods of the same type. Fungibility implies the same value between assets, as a result, fungible assets simplify the trade and exchange process. Fungibility is the idea that units of money are interchangeable and can be substituted for one another. It's a key principle in economics and is based on the assumption that the value of money is equivalent across all units. Just to understand, Automobiles, precious stones, gems, trading cards, and real estate are not interchangeable and considered non-fungible.
Now to actually understand this more, let us go through this story. A very simple short story. As a simple uncomplicated guy, I stick to simple stories. An American tourist, tall, fair, rugged, visited Kenya and decided to explore beyond the wildlife and reserves. As he was driving around, he came across a small town, dusty, it could be a base to explore further he thought. He stopped at a hotel, he was not to impressed as such but he needed a chilled beer and some food any way and could do with some rest. So he entered the hotel and asked to see the rooms. Well, the owner of the property was at the reception himself and said, do go ahead and explore but I charge two hundred dollars payable in cash to open up the rooms and suites and to look around. You may make up your mind. In any case I will issue you a receipt and I will refund the two hundred dollars immediately in cash if you do not want to stay. That seems a fair deal said the tourist and he slapped down two hundred dollars on the reception counter, took the receipt and went off with a waiter to check the rooms and suites. The owner watched him go and quickly took the two hundred dollars and ran to his supplier. He owed the supplier the equivalent of two hundred dollars and quickly paid him off. The supplier was happy to receive his dues in dollars. The owner came back to the hotel and was relieved to know the tourist was apparently liking the suites. And sitting in one. And that he would have a chilled beer and food. The owner was quietly praying the tourist would stay or else he would have to scramble to refund the tourist. .Meanwhile the supplier went to the butcher cum dairy owner and paid him as part payment two hundred US dollars. And cleared off a part of his dues.
The butcher watched him go and quietly and silently went off to the local “Madame” to clear his debt. The “Madame” acknowledged the payment, she was used to being paid in dollars and kept the money in the safe. Meanwhile, back at the hotel, the American tourist came down from the rooms and said to the owner I am headed for the bar and keep my two hundred dollars ready. I will pay for the food and drinks by my American Express Card only. The owner told his cashier to quickly arrange two hundred US Dollars. In cash. Just then the "Madame" walked into the hotel. She used to hotel for her exclusive customers and owed the owner and placed the two hundred dollars on the counter. With a smile the owner took the money and kept it in the drawer. They both exchanged understanding smiles as she left. Just then the American came up, thumped the receipt on the reception counter and said I want back my two hundred US Dollars in cash. Your food and drinks are fine, but I am not staying here. Fine said the owner promptly reached down, took the two hundred dollars and said, here you are Sir, and let me tear off the receipt in front of you. The tourist took the cash, nodded his agreement and left wearing his hat. End of the simple short story.
Now that is the fungibility of money, practically, simply put. No other explanation required !!
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