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Value … what is it?

by Mustang

Joe Average wakes up in the morning and goes to work.  In exchange for his labor, his employer pays him some money.  Joe uses that money to put a roof over his family’s heads, a car in the garage, food on the table, and clothing on everyone’s back.  Joe can increase his household income if he sends his wife, Josephine, to work, too — but it won’t be the same as doubling his income.  Women don’t make the same amount of money as men.

Joe & Josephine Average don’t bring all their money home, though.  The federal government taxes their income to subtract its “fair share” of Joe & Josephine’s labors.  Depending on where they live, the state and city may also help themselves to a share of Joe & Josephine’s labors.  And each will have to pay their Social Security/Medicare taxes.

Whatever amount of money the averages take home is called their disposable income.  They are allowed to spend it on whatever they choose.  Of course, the people they owe money to get their share “right off the top.”  Landlord or mortgage holder, utilities provider, and so forth.  Note that in addition to income taxes, the government also taxes them on the value of their property.

The Average family also has a car payment (debt), car insurance payments, gasoline payments (usually in credit cards), and occasional repair bills.  They must also pay their credit card bills (debt) and other borrowed money.  They may also have medical bills.  After paying those bills, the family can purchase necessities like food and clothing.  After that, the family can consider other expenditures, such as a new refrigerator, stove, washing machine, etc. Typically, a family will incur additional debt for large items like televisions and refrigerators.  It’s a dog-eat-dog world.

If the Average Family wants to sell their home, as much as they may wish to make a fortune on it, their actual proceeds will depend entirely upon how much a home buyer wants to spend on a house.  The real value of a house is not the price it was listed for but the amount of money it was sold for.

So, the actual value of their home is what someone else decided to pay.

What is the value of money?  The value of money is what some unidentified person in the Federal Reserve thinks it is worth — and not another red cent.  This means that our entire economy depends on someone else’s opinion; whatever it is, we must live with it.  Pull out a one-dollar bill from your wallet and look at it.  Now realize that even though the paper does say one dollar, it is only worth around eighty cents.  Fair or not, that’s the way it goes.  And that isn’t the worst of it.

Our monetary system is based on fiat currency — a currency NOT backed by a commodity, such as gold or silver.  Fiat currency wasn’t created with the consumer in mind; it was made so bankers could have greater control over the economy and how much money was printed.

The problem with fiat money is that such things as printing money become a political issue, and when a country’s politicians are morons, like here in the United States, an increase in printed money causes inflation and lowers the value of a dollar.

The ONLY value of a fiat currency is whatever the government decides that value is.  And, because fiat money is not linked to a commodity, such as gold or silver, it loses value over time due to inflation. Usually, this fact explains why having an interest-bearing savings account is essential — to help retain the value of savings.

The more money is saved, the more interest is earned — but note that bankers have conspired to reduce, as much as possible, an individual’s interest-earning capacity.  The average bank pays a measly .58% annual percentage yield (APY = (1 + r/n)^n – 1 where r = interest rate and n = the number of compounding periods).  Unless a saver is putting aside a lot of money each month, they aren’t making much interest on their savings.

The value of fiat currency depends on the general population maintaining their faith in it, but the fact is that fiat money has no intrinsic value.  It is only a piece of paper containing numbers and symbols, and this is how the Federal Reserve can get away with telling currency speculators that the “real value” of a $1.00 bill is eighty cents.

It is almost laughable when the government tells you, on the one hand, that the dollar is backed by the full faith and credit of the U.S. government, acknowledges that the bill is worth less than its face value, and all the while, the government is $34 Trillion in debt.

The preceding also explains why commodity traders, such as those selling gold and silver, are doing a brisk business.  People who have lost faith in fiat money — and U.S. legal tender — purchase gold and silver and hold onto it “just in case.”  Just in case of what, I’m not sure.  Perhaps these brokers are hedging that the money one makes on selling gold or silver will somehow compensate for the lousy interest banks pay.  The only place anyone can sell gold or silver is to a commodity broker — and I’m not sure they are any better than bankers.

Before the 20th century, most countries utilized some gold standard or backing by a commodity.  However, as international trade and finance grew in scale and scope, the limited amount of gold coming out of mines and as depositories in the vaults of the central banks could not keep up with the new value created, causing severe disruptions to global markets and commerce.

Switching to fiat money gave governments greater flexibility to manage their currency, set monetary policies, and stabilize global markets.  It also allows for fractional reserve banking, which allows commercial banks to multiply the amount of money on hand to meet demand from borrowers.

Would it be an improvement to return to a system of weights and measures where one gram of gold equals a week’s worth of groceries?  Maybe not.  Whether we are talking about the value of a George Washington Quarter or a gram of gold, who is it that decides what that quarter is worth or how many groceries can be exchanged for a gram of gold?

Answer: the bloke owns most of the quarters or controls most of the gold.  No matter how you look at it, Joe Consumer is at someone else’s mercy.  We never see the face of that “someone else” and have no idea who they are… all we know for sure is this: no matter who it is, they are so rich that they don’t care about the value of a quarter or the weight value of a gram of gold.