What do you think? What makes paper bills valuable? — Purple Pond
The foreign exchange market doesn't do that?an absolute value on any denomination is futile in assesing. — Posty McPostface
What do you think? What makes paper bills valuable? — Purple Pond
perhaps we should first ask what makes commodities valuable? — bloodninja
And let's not forget that money is also legal tender, backed up by law. This makes it different from example the so-called crypto-currencies and other debt issuance. And as governments have the ability to tax people, we believe that they can uphold the value of the money (and not going into a money printing frenzy).What is it about pieces of paper that make them valuable? I can think of a few reasons. — Purple Pond
Modern Monetary Theory (MMT or Modern Money Theory) is a macroeconomic theory that describes and analyzes modern economies in which the national currency is fiat money, established and created by a sovereign government. The key assertion of MMT is that sovereign governments that are the sole supplier of national currency can issue currency of any denomination, and in physical or non-physical forms. Consequently, these governments have an unlimited ability to pay for the things they wish to purchase and to fulfill promised future payments. MMT claims that these governments also have an unlimited ability to provide funds to other sectors, and that because of this, it is not possible for a government that issues its own currency to be bankrupt.
Government can always “afford” to spend more (in the sense that it can issue more currency), but if it cannot enforce and collect taxes it will not find sufficient willingness to accept its domestic currency in sales to government.
Put simply, the population will find it does not need additional domestic currency if it has already met the tax liability the government is able to enforce (plus some accumulation of currency for contingency purposes). In that case, raising taxes would increase demand for government’s currency (to pay the taxes), which would create more sellers to government for its currency.
Until government can impose and collect more taxes, its spending will be constrained by the population’s willingness to sell for domestic currency. And that, in turn, is caused by a preference for use of foreign currency for domestic purposes other than paying taxes. While this is not a big problem in developed countries, it can be a serious problem in developing nations.
money has value because a government says so — LD Saunders
ne can only pay their federal taxes with US currency — LD Saunders
You are correct that it explains our current system, especially the US situation. I'm not sure how well it explains smaller countries or Third World countries, which even MMT followers admit are a bit different. Argentinians might trust a little less the stability and the long term purchasing power of their currency: an Argentinian of my age has seen 4 different monetary regimes of the Argentinian currency in his or her lifetime. Inflation is now in the +30% range in the country.MMT does the best job of explaining the current economic system IMO, and I truly wish everyone would become acquainted by it. Every time I hear about we are leaving this deficit to our grandchildren it is like nails on a chalkboard. The amount of political gain each side gets out of the economic ignorance of the public is astounding. — Rank Amateur
You mean MMT?it only applies to a country with a fiat currency that there is confidence in - believe that is by definition — Rank Amateur
Commodities are valuable things. They have value by definition. — Purple Pond
There's a discourse that promotes this view and the so-called "perma-bears" have told this for decades. I read a lot of these similar things in the start of this Milennia in the 2000's, but then I started thinking.This system will eventually collapse because you can't go on inventing fictitious money forever. It's like adopting leaves as currency, eventually there will be so many leaves in circulation that they will become worthless. It is vital therefore that our wealth, large or small, is held in physical assets and not as a fictitious number in a computer system. Turn your "money" into gold, silver, housing or other valuable assets to protect yourself from the inevitable collapse. — Pilgrim
The unrecognized nation of West Cupcake has a very small population, produces ugly root vegetables that nobody wants (West Cupcakers don't want them either, but that is all they have to eat). The Parliament of Cupcake decides to issue paper currency so they can buy something better -- beets, maybe. Or even parsnips. A small press in Thailand prints up a batch and sends it off, but keeps enough to pay for the printing.
What will happen to this currency? Nothing. The money will not become worth anything to anybody because there is no production leading to an accumulation of wealth in any form. They dig up their ugly roots, eat them, and then plant some more. That's it for economic activity.
Suppose the West Cupcakers discover that they are sitting on a pile of rare earths, gold, excellent petroleum, and an extra thick rich seam of copper, tin, and zinc. The ill-fed Cupcakers pick up their shovels and start filling bags of product to ship out of their previously unused harbor. Business is brisk.
Now, because they have something that everybody wants, they are able to trade for apples, bananas, pork chops, and cheese. They never eat another ugly root vegetable. And they now have to pay taxes to support the governments efforts to control the now burgeoning mining industry.
It gets value from what it represents, which is ultimately human labour. — bloodninja
perma-bears — ssu
Sure. For the government to get tax income there has to be income that can be taxed. It's so simple.Isn't this the necessary support for MMT? Real business? — Bitter Crank
I'm not so sure about that. Currencies might collapse, money in general to collapse is a peculiar idea. In fact, a currency crisis isn't at all an end of the World. Life, even economic life as we know it hasn't stopped in Argentina or even in Zimbabwe. After all, the international monetary system was indeed on the brink of collapse during the financial crisis. Had it collapsed, the consequences wouldn't have been actually so dire. The Fed could have secured the bank savings of the people and rearranged the whole US banking system as could have the ECB done. The US administration has the ability to intervene in the markets equivalent to declaring martial law. It just hasn't had to do it (and likely won't do as rich people control the US).The trouble with all schemes for surviving the collapse of money is that no representative commodity, be it gold, diamonds, silver, or any thing else, will survive the collapse. — Bitter Crank
The trouble with all schemes for surviving the collapse of money is that no representative commodity, be it gold, diamonds, silver, or any thing else, will survive the collapse. — Bitter Crank
I'm not so sure about that. — ssu
one could ask, what makes gold valuable — Relativist
And just how realistic is the Mad Max -scenario? It's great for Hollywood, but I think the catastrophy-movies and zombie-movies aren't the most likely reality (although the movie Hotel Ruanda about the genocide in that country has some scenes right out from a zombie movie).I should have been clearer. The situation I was thinking of was farther out than the collapse of currency. I was thinking more along apocalyptic lines, the demise of the central state, anarchy, survivalists, etc. — Bitter Crank
Gold as an investment is totally fine, but the survivalists (and some tea-party Republicans) give it an odd status. Yet to think that gold, silver and diamonds wouldn't have value is very strange. I think you underestimate the adaptability and durability of people, the society and commerce.Survivalists don't buy my argument that gold, silver, and diamonds just won't be worth anything after this grand crash, because you can't eat them, keep warm with them, and so on. They have a belief that there is "essential value" in gold that transcends everything else. It doesn't, of course. — Bitter Crank
I think you underestimate the adaptability and durability of the society and commerce. — ssu
Gold as an investment is totally fine — ssu
Actually got into a heated debate about this issue in this Forum. Because the politically incorrect truth is that even a nuclear war likely wouldn't ruin everything as there would be parts of the World like Africa and South America that are extremely unlikely targets in any possible confrontation. Not even Russia and the US would be literally destroyed as pockets of smaller urban areas in the middle of nowhere would avoid being targeted. After all, in the US there are over 19 000 cities while Russia has bit over 4 000 nuclear weapons.And I actually don't expect any sort of grand social meltdown without a nuclear war--and if the nuclear war is thorough, we won't be around to worry about it afterwards. — Bitter Crank
Not many do that, actually. Remember the cryptocurrency thread in this Forum? I put that to be the final indicator for the top and the bubble to burst as people interested in philosophy would start talking about investing in cryptocurrencies. Now when nobody's interested, well...As long as you buy low and sell high. — Bitter Crank
a nuclear war likely wouldn't ruin everything — ssu
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