kindof a wierd question

Post Reply New Topic

why does everyone trade with money? yes i know its used by everyone, but why? it has no value exept eveyone wants it. the governemt has a monopoly on it? how much of it is in actual cirrculation? did you know congress has no lawful obligation to pay you social security?

this topic broght to you by this bud

Because money is efficient. Barter economies really suck because they rely on a double incidence of wants to allow for trades, a monetary system allows for efficient transactions. You are right that our money has no value, that is somewhat because it was imposed by fiat, older monetary systems were based upon the use of valuable goods like rare metals or cows because those possessions were so useful that they would be easily acceptable as a way to show wealth.

The government has a monopoly on money for a few reasons: 1) it allows the government to inflate the currency which is valuable when more cash is needed in a flash, this is why the governments often print off a lot of money in wartime conditions 2) to allow for monetary stability which has been the reason for central banking in most nations, a stable control of the money supply fights unnecessary inflation and can help keep market fluctuations down by controlling the interest rates. Certain theorists consider the government control of the money supply unnecessary and harmful but most consider it a necessity for economic stability in a modern economy.

A lot of money is in circulation. The amount of physical cash in our economy M0 is 800 billion, however, more money exists due to various investment aspects of the economy which increase the amount of money to some extent.

Congress will still provide social security, if old people don't get their social security then congress is going out. There is a reason why vocal opposition to the social security programs doesn't exist in mainstream politics. US social security was not well designed and has major problems so it will need a fix at some point.

Last edited by Awesomelyglorious on 06 May 2007, 3:59 pm, edited 1 time in total.

Currency came into use because it is a common standard, unlike the barter system. Under the barter system, you would trade X chicken for X sugar, and then you would trade X sugar for X wheat, ect... Currency (or coinage) is a single standard. There was a time when U.S. currency was backed by gold.

The value of the currency is based on the credit of the backer. In a the past, in times of economic instability, there was pressure to print more currency, or mint more coinage, however this results in inflation.

ADDENDUM: Awesomelyglorious's answer, his expertise on this subject being better then mine, shows it's standard brilliance.

Last edited by jimservo on 06 May 2007, 3:40 pm, edited 1 time in total.

im liking jimservos reply so far

social security is a pyramid scheme, the governemnt cannot pay that by its own imissions by like the year 2000 and somthing. 25

Well, your answer is simpler and easier to read due to your spacing on these things. I tried to take on all of the matter. You did keep in mind the idea that the value of currency is partially based upon the likelihood that one will get payment for it. There is the concern on printing more currency, however, there is also the worry about printing too much so it is pretty much generic stability and fighting deflation and too much inflation of unworthy credit.

That is why some libertarian groups call it a Ponzi scheme. Your criticism of it is not uncommon.

well man. id have some kindof a stoners answer right about now but i cant think! hahahahahahhaha

looks tasty.

I've thought about this question over and over again since I was about 7.

I guess it's one of those unsaid agreements, like trusting people to drive on the correct side of the road. I mean, No-one would want worthless pieces or paper or scrap metal.. they only want it if they know others will play the game and give you stuff for it, too.

It would be interesting to see what happened if people just stopped.

To a great extent yes. As said earlier though, it used to be that these items were valuable things in and of themselves or represented those valuable things, it is very interesting that we have separated money from value and still kept money valuable.

The economy would collapse, like instantly. Those pieces of paper are way way way too valuable to have their utility disappear. I predict that the economic collapse would make the great depression look like a model of success.

look here

http://en.wikipedia.org/wiki/Fiat_currency

btw,


fiat currency is a joke. after a while the math will stop adding up and debts will stopped being ignored and we'll all be screwed.


pretend money with mutually ignored debts doesn't work in the micro, i have no idea why people think it would work in the macro.

Fiat currency is by no means a joke, and some very intelligent monetary theorists have come to conclusions supporting the idea. Well, technically you are denouncing governmental actions involving deficit spending. The debt isn't being ignored, people own that debt and get interest on it. Keynesians tend to see this debt as not entirely bad and parts of it as being good.


The money isn't pretend though. Pretend money doesn't work, money, being real by our belief in it, can never be pretend and used at real money at the same time. Even critics of fiat currency will have to admit that our money isn't pretend, just imperfectly developed. Debts are not ignored though, when you buy a bond you buy a part of the debt, when you trade it in, you get it back. It is not ignored at all though, it exists. Technically speaking debt does work in the micro and the macro, in the micro debt finances growth and in the macro it can do the same. The issue with the macro is that it is a larger scale meaning that deficit taken out has other effects on the economy which might not be as good.