What is a dollar? What defines worth?

[SPLogan]

Lately, I've been interested in the stock market, investing etc...

Because I'm a thinker but not an economist, I can't help but try and figure out what the heck a dollar really is and what it represents. Honestly, I don't know.

What gives value to currency? I mean, if every one cashed in all their investments and put all the cash in a big pile somewhere and burned it, would we really lose anything? We'd still have food, jobs, houses, etc., and because money would no longer exist, everything would be worth $0 (zero dollars), right?

Further suppose that we ground all of our gold, silver, and platinum into a microscopic powder and evenly distributed it across the Pacific Ocean. How would we then define our individual worth? How would we exchange goods?




...just pondering. What do you think?

 

[Darkdale]

Supply & Demand.

 

[SPLogan]

Supply & Demand.

so...
the best investments are always the ones that represent the least supply and the greatest demand?

 

[Sunstone]

Besides supply and demand, the value of the dollar can also be said to have much to do with how people perceive its value. That is, with the aggregate of millions of individual perceptions. Do people think it's valuable? As long as millions of individuals think it's valuable, it is in demand, and therefore valuable.

 

[michel]

so...
the best investments are always the ones that represent the least supply and the greatest demand?

In theory, yes. Though investments are a minefield.......there are so many ways to artificially create the appearance of demand outstripping availability.

Besides supply and demand, the value of the dollar can also be said to have much to do with how people perceive its value. That is, with the aggregate of millions of individual perceptions. Do people think it's valuable? As long as millions of individuals think it's valuable, it is in demand, and therefore valuable

Very true; how much is one filmstar's hour's work worth ? - compare that to that of a doctor, and it makes no sense. Everything has the monetary value of the price some fool is prepared to pay for it.

 

[Terrywoodenpic]

value is what people are prepared to pay.
Auction prices are real on the day.
Dollars Pound and Euros have their value manipulated, and should be bought when they are cheap, not when you want to use them.

Like any commodity buy low sell high.
Mony not goods is the most traded commodity in the world.

Terry____________________________
Blessed are the merciful, mercy shall be shown unto them.

 

[Darkdale]

so...
the best investments are always the ones that represent the least supply and the greatest demand?

Investments? In what context? For business? Families? Societies? Governments? what?

 

[Scuba Pete]

You know, friends and I hike together from time to time. We all carry a single $100.00 bill. There are times where we have to "buy our way" out of a pickle. Run out of water? Fork it over! Can't get over a log? Fork it over! Can't find your flashlight? Fork it over!

Now this is a friendly thing and by the end of the trek we all have our crisp $100.00 bill back! So what's a buck worth? Depends on how BADLY you need it?

 

[SPLogan]

Investments? In what context? For business? Families? Societies? Governments? what?

I really had no particular context in mind. Does the supply/demand equation vary depending on the context?

business: high demand for product + scarcity of product= highly valuable product
families: high dependence on/love for family + scarcity of family members= highly valuable family members? (I'm not really sure about that one yet)
societies: ? (not sure how that works out)
governments: high demand for a particular governing system + scarcity of that system= revolution (loss of life)? (I'll need to think about that some more too)

hmmm...

 

[SPLogan]

governments: high demand for a particular governing system + scarcity of that system= revolution (loss of life)?

OH! I just remembered. We have some UK people here. Perhaps "loss of life" isn't a necessary expense in revolution.

 

[Yerda]

OH! I just remembered. We have some UK people here. Perhaps "loss of life" isn't a necessary expense in revolution.

Curious. Are you maintaining that until some people are killed it isn't a revolution?

....The US$ used to be tied to the exchange rate of gold (and all others related to the dollar), I think the guy before Reagan (or the guy before the guy) had that changed.

Right now I think Darkdale is correct. It leads to an odd business of currency itself being a commodity for purchase i.e. I'll give you 1 I.O.Us from my national banking system in return for ten of your equivalents. Since the US$ is the international reserve currency (for now) it maintains high demand and value (and aids US financial hegemony greatly).

Some economists (e.g. Leitaer) propose an international currency based upon an exchange basket of commodities (so many X or so many Y, Z - meaning prices could drop but the currency value won't).

 

[Shadow Wolf]

A dollar is much better than bartering. You will know for sure that a book will be 15 dollars using currency. If you were to barter, one person might think the book is worth a particular CD of yours, someone else might think it is worth a jar of peanut butter.

Defining the actual value of the dollar depends on how many of them there are. If everyone were to be givin a million dollars, the dollar would have little worth, since everyone would have one million of them, thus inflation, or price increases would occur. There are more variables than that, such as how many people need the dollars, and the cost of living, but the total amount of money is basically it.