the true value of money

This will by no means be a definitive study, but simply a commentary as per my usual comments so don’t quote me hey…

If you take out a hundred rand note, what is the value of it? I mean what is the real value….. The only way you would be able to do that today is comparing it against another currency, right? So lets say we put that against the dollar. R100 becomes $13.99 at todays rate which is +- R7.15 for $1. Simple hey. So is that the real value? Maybe, but then we ask again what is the value of the Dollar then? Well the only way to really value that is against another currency. I could go on and on, but sooner or later we come the realization…. Inherently money does not really hold an intrinsic value. Its pretty much a stacked deck of cards isn’t it? Because the whole value is a dependent on comparing one to the other. In other words the real value is a collectively accepted good faith “value” of all parties involved.

Its called fiat money, which means a currency only really has value based on government regulations and so forth.. Thats a very loose definition so finance majors please don’t crit me. And the only definite way to find the value globally would be do what I did earlier and compare the currency of one country to another to find the value of that particular currency. For a more descriptive definition go here.

So why am I talking about this. Well I was thinking the other day. Our money tends to reflect the worldview or belief system of the collective. Don’t agree? Well, fiat money was not always the way. Before we used to have what was known as the gold standard. This was a system which had a constant and an absolute, where all money ultimately had a value that was in physical gold.

Anyway, more on that later. So if you look at it very closely then Fiat money is really a skewed way of determining value because its extremely relative. Its really based on what everybody collectively decides. If the FED in the states decides to devalue the dollar by 1000 points, they can do that and throw the world into a bit of a scare. It also lends itself to a whole lot of manipulation don’t you think? If there are corrupt people in the system ( and we know that government has no corruption whatsoever hey… we know that), well then they can change things for their benefit.

Anyway I am drifting here. To bring it to the point of what I see or suggest we look at. Is that money seems to reflect the belief system that is prevalent at the time.

If we go back to when the gold standard was in, especially in the states, was when the Bible was read openly in schools, religion (in my case I refer to Christianity). There were absolutes.

If we look at culture today, its most certainly not a religious culture. Its extremely non committal. Every body has “their own truth” and everything is relative. Sounds a bit FIATY if you ask me.

Its gets more elaborate than that, but I just thought hey it does seem to make sense.
Another negative of fiat money is the necessity for inflation. I mean if governments are deciding how much a currency is worth then it means they hold the ability to fluctuate that currency which ever way they want.

Gold is Gold and it cannot be changed for what it is. I think there was wisdom in the previous way. With that I mean, where we held Religion as important and involved in every day life even to the point that it was reflected in the economy. And likewise God is God and not based on a collective decision by people as to whether He exists or not. Kind of like gold , don’t you think? Think of how many meetings there won’t have to be if gold is the standard again. No euro zone issues, no debt crisis’s because banks will not be able to loan money they do not have (and they currently do this LEGALLY).

DISCLAIMER

I am not giving investment advice hey. Don’t go out and stock up on gold now and declare the world to be evil (ok maybe it is) and that the money system is from the devil (ok maybe that is too). And maybe gold is a good investment, but I am just saying…..

THO

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One thought on “the true value of money

  1. Pingback: Tweets that mention the true value of money « thehonestone -- Topsy.com

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