Why does money have value?

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FatHobbit's avatar

FatHobbit

Senior Member

8,651 posts
I get that we can trade it for things and that makes it easier than trading things, but why exactly does money have value? Why is 1 euro worth $1.40? How the hell is that determined?
May 20, 2014 10:24pm
sleeper's avatar

sleeper

Legend

27,879 posts
The short answer is the market determines the price of currency. The long answer, you'll have to ask someone who works in the FX market because I have no clue how they determine the exact value of each currency relative to any other.

Mostly I just want BoatShoes to come in here and tell us money is only electrons on a computer and the Fed can make the value of the dollar anything it wants without any consequences.
May 21, 2014 9:41am
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queencitybuckeye

Senior Member

7,117 posts
sleeper;1618298 wrote:The short answer is the market determines the price of currency. The long answer, you'll have to ask someone who works in the FX market because I have no clue how they determine the exact value of each currency relative to any other.

Mostly I just want BoatShoes to come in here and tell us money is only electrons on a computer and the Fed can make the value of the dollar anything it wants without any consequences.
Me too, I'd like the two who regularly hijack threads for multiple pages to show the size of their economics dicks to take over. Odd that those so knowledgeable about these theories come off as "big hat - no cattle" types IRL.

The short answer, OP is that Sleeper is correct. Money has value because collectively, we agree that it does.
May 21, 2014 10:07am
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gut

Senior Member

15,058 posts
sleeper;1618298 wrote:...you'll have to ask someone who works in the FX market because I have no clue how they determine the exact value of each currency relative to any other.
Differences in interest rates, to rather over-simplify.
May 21, 2014 12:02pm
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jmog

Senior Member

6,567 posts
Decades ago money (at least in the US) had value because of the gold standard. We literally only printed enough bills for the value of the gold the country had in vaults.

Now, like said above, it has value because we all agree it has value.
May 21, 2014 5:02pm
HitsRus's avatar

HitsRus

Senior Member

9,206 posts
Mostly I just want BoatShoes to come in here and tell us money is only electrons on a computer and the Fed can make the value of the dollar anything it wants without any consequences.
...quoted for truth!
May 21, 2014 9:34pm
M

Manhattan Buckeye

Senior Member

7,566 posts
As others have said, it is simply a contract. Physically it is a piece of paper, but the value is in the government backing it up.
May 22, 2014 12:41am
believer's avatar

believer

Senior Member

8,153 posts
Manhattan Buckeye;1618742 wrote:As others have said, it is simply a contract. Physically it is a piece of paper, but the value is in the government backing it up.
That's the scary part.
May 22, 2014 4:12am
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BoatShoes

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5,703 posts
FatHobbit;1618133 wrote:I get that we can trade it for things and that makes it easier than trading things, but why exactly does money have value? Why is 1 euro worth $1.40? How the hell is that determined?
Supply and Demand for money. Money is unique because the supply of money is not determined by the market because central banks/the government have a monopoly over its supply.
May 22, 2014 12:40pm
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BoatShoes

Senior Member

5,703 posts
sleeper;1618298 wrote:
Mostly I just want BoatShoes to come in here and tell us money is only electrons on a computer and the Fed can make the value of the dollar anything it wants without any consequences.
You basically said the same thing yourself. The only difference is that you failed to point out that the Central Bank controls the supply of money and not the market. Hope this helps.
May 22, 2014 12:41pm
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BoatShoes

Senior Member

5,703 posts
queencitybuckeye;1618325 wrote:Me too, I'd like the two who regularly hijack threads for multiple pages to show the size of their economics dicks to take over. Odd that those so knowledgeable about these theories come off as "big hat - no cattle" types IRL.

The short answer, OP is that Sleeper is correct. Money has value because collectively, we agree that it does.
Sigh. Some of us enjoy debating in an online forum set aside for debating. That is only a dick measuring contest to the perpetually insecure who add nothing but insults to the discussion. And, you keep saying that phrase "big hat - no cattle". Takes one to know one I guess?
May 22, 2014 12:44pm
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BoatShoes

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5,703 posts
jmog;1618572 wrote:Decades ago money (at least in the US) had value because of the gold standard. We literally only printed enough bills for the value of the gold the country had in vaults.

Now, like said above, it has value because we all agree it has value.
There is a specific reason why everyone agrees that the government's money has a base minimum notional value....and that is because it is the only thing that the sovereign will accept to eliminate tax liabilities. Boatshoes IOU's are worthless unless I can get a greater fool to take them whereas Federal Reserve IOU's always have value because it's the only thing Uncle Sam will accept to pay your taxes.
May 22, 2014 12:46pm
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BoatShoes

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5,703 posts
HitsRus;1618684 wrote:...quoted for truth!
I've never said that misuse of the Federal Government's currency monopoly cannot have bad consequences. I simply have pointed out that they are not the bad consequences that deficit scolds think they are...i.e. that the U.s. government can go bust lol....and that we have much greater policy space than the current debate imagines.
May 22, 2014 12:48pm
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BoatShoes

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5,703 posts
believer;1618756 wrote:That's the scary part.
I'd rather own IOU's from an institution with 5,000 nuclear weapons and the greatest Navy in the history of the world than claims on worthless pieces of shiny metal.
May 22, 2014 12:49pm
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queencitybuckeye

Senior Member

7,117 posts
BoatShoes;1618920 wrote:Sigh. Some of us enjoy debating in an online forum set aside for debating. That is only a dick measuring contest to the perpetually insecure who add nothing but insults to the discussion. And, you keep saying that phrase "big hat - no cattle". Takes one to know one I guess?
No, the productive can easily spot the unproductive. They spew theory from books and websites as opposed to putting any knowledge to practical use.
May 22, 2014 1:32pm
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BoatShoes

Senior Member

5,703 posts
queencitybuckeye;1618940 wrote:No, the productive can easily spot the unproductive. They spew theory from books and websites as opposed to putting any knowledge to practical use.
LOL.
May 22, 2014 2:20pm
Q

QuakerOats

Senior Member

8,740 posts
Money has no real value; it is a medium of exchange facilitating trade, and represents a potential claim (which does have value) on goods, property interests, or the productive labor/services of .......................you guessed it, the productive.
May 22, 2014 3:04pm
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gut

Senior Member

15,058 posts
Well, to put it simply, money has value because people agree it does. That's true of any fiat currency, and also true of gold.
May 22, 2014 5:57pm
ptown_trojans_1's avatar

ptown_trojans_1

Moderator

7,632 posts
FatHobbit;1618133 wrote:I get that we can trade it for things and that makes it easier than trading things, but why exactly does money have value? Why is 1 euro worth $1.40? How the hell is that determined?
Take a Macro Econ course....
May 23, 2014 9:58pm
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gut

Senior Member

15,058 posts
ptown_trojans_1;1619383 wrote:Take a Macro Econ course....
careful now....education apparently qualifies as dick-waving around here.

I honestly forget, but I thought money/FX was like FIN301. :)
May 23, 2014 11:05pm
ptown_trojans_1's avatar

ptown_trojans_1

Moderator

7,632 posts
gut;1619395 wrote:careful now....education apparently qualifies as dick-waving around here.

I honestly forget, but I thought money/FX was like FIN301. :)
Exchange rates, floating vs. set, etc all Macro 101.
May 24, 2014 11:45am
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queencitybuckeye

Senior Member

7,117 posts
gut;1619395 wrote:careful now....education apparently qualifies as dick-waving around here.
When it's used for no purpose than a failed attempt at trying to prove you're the smartest kid in the room, that's exactly what it is.
May 24, 2014 4:13pm
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gut

Senior Member

15,058 posts
queencitybuckeye;1619471 wrote:When it's used for no purpose than a failed attempt at trying to prove you're the smartest kid in the room, that's exactly what it is.
LMAO...it's a discussion forum, you can participate in the thread or not read at all. You're quite bent out-of-shape about it.

If you're going to debate something like economics, theories and fundamentals are going to tend to come up. IMO pointing out trivial banality or outright ignorance falls well short of dick-waving. And P-towns comment about taking a macro course is a great example, by the way - explaining cross-rates is not a particularly easy thing to do if someone doesn't first understand some basic concepts.

And in case you haven't noticed, I quit debating the lost-causes here quite some time ago.
May 24, 2014 5:01pm
BGFalcons82's avatar

BGFalcons82

Senior Member

2,173 posts
BoatShoes;1618926 wrote:I'd rather own IOU's from an institution with 5,000 nuclear weapons and the greatest Navy in the history of the world than claims on worthless pieces of shiny metal.
As long as the IOU's are the worlds's currency, it's all good.
May 24, 2014 6:55pm
FatHobbit's avatar

FatHobbit

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8,651 posts
ptown_trojans_1;1619383 wrote:Take a Macro Econ course....
This is a great suggestion. I honestly don't know the difference between micro, macro, etc... or even where to start. If I didn't have a schedule that would easily permit taking classes is there a decent book to read? Or should I just look for whatever book the local college is using as their text?
May 25, 2014 11:41pm