Tuesday, November 11, 2008

How Money Works

I am not an expert on money in any way and I have almost no understanding about economics, but I am keen to learn how the global financial system works. In this post I have included some links to websites and videos that I've found informative.

How do governments decide the value of a currency?
The website Kwaves gives a history of how the United States has defined the value of their currency. I think what you learn from reading this article helps explain currency values in general.

  • fiat monetary system
  • hyper inflation
  • fixed gold standard

One rich man's view of current financial markets
An interview with Jim Rodgers. Jim doesn't see an easy way out of the global financial mess. In this interview Jim Rodgers suggests we need to prepare for some global pain.
Daniel Ng in his blog The World I Know, has embedded a video interview with Jim Rodger from an ABN Amro conference in Amsterdam and followed it with a written summary of points from the interview.

Here is my summary of what I've learned so far.
Money is the currency used to exchange value for value. If there was no money, trading would be a lot more complicated. Money is the lubricant in trade, it makes exchanging goods simpler. Money was designed for trade. As a simple way to put a value on something, without having to barter.
The current financial turmoil seems to be caused by too much paper money (i.e no restraint on the amount of money printed). As a result many assets have been over valued. This has lead to the current financial crisis of hyper inflation. Leading us to a period of rebalancing value.

Related Posts

Money Makes the World Turn

Ayn Rand's Capitalism

Related Links

Money as Debt -Full Length Documentary (youtube)