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| Thread: End of the Euro? |  This thread is pages long: 1 2 · «PREV |
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ohforfsake
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posted June 06, 2010 11:19 AM |
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Are you certain it works like that? In general when money looses value is it not because the lowest amount of money you can buy a given object for have increased?
Like milk. Let's say milk costs 1 money unit. Now, the one who sell it the cheapests requires 2 money unit, and if this is extrapolated to sufficient many objects then the value of money have decreased right?
But why should the same person still be happy about getting the same of another money unit, which at the current time of the trade still has the same value relative to the previous money unit?
Is it maybe an assymetric system that oscilates a lot and therefore one will see one type of money unit go down while others are stable? Because then it might be quite chaotic, in which sense I mean that if some money units goes down, it's only temporary that other money units don't go down as well as long as the same kind of trade is involved between people of both units of money.
[What I mean is, if Kurt and John uses two different types of money unit, but both of them perform the exact same trade, and only these two guys (together with the people they trade with, who only trade with eachother) uses this kind of money, then in principle they use the same type of money with only some scalar factor in difference, because they go through the exact same types of trades and if one falls in value, so do the other, etc. The only difference when they don't do the same trade, over small times, but do over large times, is that there'll be an assymetri in the change of value of money, but in general when one goes down, it means eventually the other will as well, and vice versa].
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posted June 06, 2010 11:28 AM |
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Maybe in an ideal world, but an ideal world this is not. Money only has the value WE place on it. So if the person selling THINKS one is more valuable then the other, then the one the person selling values will not go down even if the other does. It's all perception. Since money is just pieces of paper, or bits of metal..it only has the intrinsic value that PEOPLE place on it. This is why even though a $50 is made of pretty much the exact same material as a $1 the $50 is regarded as being more value.
Not to mention that we are talking two different governments, not just two people. The seller sees that government A is more stable, pays it's debts on time, and has a large amount of resources..while B does not. He or she will then place more 'faith' in the currency of the government of 'A' then he would in B and thus A's currency would be of more value to him/her.
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posted June 06, 2010 01:10 PM |
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I just simplified it. A lot. There are people who studies this for years and still doesn't know it exactly or can predict it. If we want to explain it all we might as well write a book... or seven.
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mvassilev
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posted June 06, 2010 05:45 PM |
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Ohforf:
It would be as you describe if the velocity of money were infinite. But, because of various causes, it isn't. Prices take time to adapt, and if the money supply of one currency changes at a different rate than another's, buyers and sellers do not find out until the increase reaches them, and it reaches different people at different times. Also, governments place various limits on currencies - limits on how much can be spent abroad, etc. And then there's the expected value of currency, which is why no one accepts the Zimbabwean Dolla.r..
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