I live in a duel currency world. I am paid in one currency and it isn't the currency of the country I live in. I routinely (if not constantly) carry 2 currencies and use them to buy goods and services in order to live my everyday life. Here are some random thoughts that come from these experiences.
This is one of the many things that Americans simply do not deal with. An American can live a normal life and just never come into contact with anything but good old US Dollars. America is a huge and powerful country. For a normal persons life in the US there (except paranoia or unorthodox financial transactions) is simply no need to hold anything but dollars.
Many Americans end up going on a trip here or there at some point, if just to Canada or Mexico. These people end up dealing in a foreign currency but often exclusively. They change the dollars they are going to spend on entertainment, dining and shopping into pesos or whatever and just use that currency for the duration of their stay. While dealing in a foreign currency is a novel experience it doesn't compare to dealing with two (or I guess more) currencies on a regular basis to conduct normal transactions.
People will not accept currency they are not used to. If they don't know what it looks like or what it is worth they will not take it. Businesses will deal with currencies that pop up regularly in the hands of intended customers, well that and the owners know what it looks like and is worth. I recall a few years ago some TV blip about how the Dollar was dying (long before the Sub Prime mess) because some trendy shops in NYC were accepting Euro's. A big part of why it made the news was that there were trendy wanna be European (it is a sort of East Coast thing I think) Wankers involved. A more practical example would be a city near the border with Mexico or Canada accepting their currencies or a store in an area with a large immigrant population accepting that currency. Also the theme of a business accepting currency that they know the look and value of which shows up repeatedly continues. In my immediate area a good percentage of businesses will accept dollars, of course as well as euro's. If I drove 25 miles to a little random village they would only accept euro's.
While a wad of "stable" currency could be valuable as an inflation hedge don't necessarily expect the local grocer in Peduke, Iowa or Andersonville, Texas to accept Swiss Franks or Australian Dollars or whatever. If the local currency goes to heck in a hand basket some people may learn more about different kinds of currency. Often people end up using a precious metals shop/ money changer to convert their currency into local money at the current exchange rate to buy whatever they need.
The biggest thing you need to live successfully in a dual currency world is the ability to rapidly make fairly accurate calculations between currencies. This means knowing what the exchange rate is and being able to do some math rapidly. Unless it is making huge shifts don't worry about this one too much the goal is to put the cost of a service or item into terms you can work with. Think about it like converting metric to standard or whatever. Really for average personal transactions a pretty accurate figure is good enough. To put that into perspective 2 percent on a hundred dollar purchase is 2 dollars. When you talk about transactions in thousands or tens of thousands of dollars or more a 2 percent difference matters but for a round of drinks or dinner or such it really doesn't.
You just need to be able to do this to know if a given price is good or too much.
What I am describing is a (relatively) free market scenario. Anybody inclined to do so can carry whatever kind of currency they want. Only my resources, desire and ability to find random currencies limits what I can carry or hold. The key is to see what value you are exchanging for a given good or service. Does it really matter if I pay ten dollars or about 7.60 E for a given item? No it does not because they are worth the same.
The same could be said about precious metals. Does it really matter if you pay for something with $340 or a quarter ounce of gold (lets say the value is the same, I know it is close)? No it doesn't.
Where things get downright crazy is when the system is strongly regulated by a government, go figure! Governments with a weak or essentially worthless currency often try to keep their currency alive through price and wage controls. Also it might not suprise you but this doesn't work real well. At best it works in the most utterly authoritarian and isolated regimes like the former USSR which was also big and resource rich enough to be able to manufacture (at least junk versions) of most things they need. These governments will find a way to trade for essential items they can not produce nationally. Following typical authoritarian priorities this means fancy cars and luxurious stuff for the elites and things to keep the military running to hold down their unhappy population. Not much else gets imported because go figure an appliance plant in a place that doesn't suck has no interest in their worthless currency.
Also these countries at least try to limit possession of and transactions in other more stable currencies or precious metals. Part of this is
Gresham's Law but the bigger issue is (official) exchange rates not being equitable. Getting back to my free market example for a minute. If a nice dinner at a little restaurant/ bar/ hotel costs the equivalent of 10 euro's or 13 dollars (or lets say a half ounce of silver) and I can easily trade between the three at the current honest rate I just pay with whatever is most convenient. Now back to a sucky (generally socialist) country. Their currency is valued way too high. The "official" exchange rate is a joke. Often these governments will (with varying degrees of success) restrict or outright ban the possession of other currencies.
I think somebody said once that when the free market becomes criminalized then criminals will run the free market. People will find a way to smuggle in goods that are otherwise rationed or unavailable (to the non elites). Authoritarian Communist regimes are big on security of their borders. Despite their propaganda it is really more about keeping their people from leaving than anybody from invading.
The thing is that authoritarian communist regimes conscript a large amount of their force and pay is generally quite poor. So unmotivated poorly paid people guard their borders. While I have zero sympathy for corruption in military and government of non sucky countries I understand why it exists in sucky ones.
If I had an equivalent job in a sucky socialist country with price controls I might well be put on border guard. I would likely be in charge of some random intersection and the land around it. I would be poorly paid and my men would be paid worse. If an enterprising individual wanted to bring a truck of black market items across that checkpoint and wanted to make a deal I would be sympathetic. I would get some cash and my guys on guard would get a bottle of Jack Daniels or a carton of Marlboro's or some Levis or whatever. Would we stop spies or shoot at invaders, of course, but a little black market action is another matter.
Sucky authoritarian communist countries have black markets to varying degrees. People smuggle stuff in or steal stuff from work or whatever and trade it. In more extreme cases the local currency might not even be accepted there, but if you have something they want you can trade. Many average and poor people are stuck out of this market in its most narrow meaning because they do not have access to other currency. They may however have a skill or some stuff they snagged from work to swap with a neighbor who works at a place that makes something they need.
This sort of duel currency world is infinitely more complicated. It is often impossible to trade the local currency for a more valuable one. It is often illegal (if just poorly enforced) to possess other currencies or precious metals. Instead of just going to a store and getting what you need it can be a pain.
In conclusion. If you can afford it having a percentage of your resources in an alternate currency or precious metals makes sense. Knowing the value of different currencies and precious metals is prudent. It is essential to be able to rapidly figure out the real cost of goods and services.
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