What is the belief system behind money?

[Czcibor]

That's ridiculous. Back in 2000 or so MILLIONS of people all believed that internet stocks were valuable even though most of the underlying companies had absolutely no way to make a profit and the ones that did, did not have any way to make the profit that would have substantiated their stock valuations. Did you see how that worked out?

Badly.
The problem is that in economics is a bit tricky determining mythical true value, while we are usually happy with using market value as good enough approximation. (maybe it would be a better term instead of objective) Especially that with when we're dealing with discounted future values, the future cash flows are just more or less informed guess.

What about treating usage of money as Nash equilibrium? You have to choose whether to consider a currency seriously. Rational decision for you is based on others people decision, and when you see that they believe in it, behave as they do.

 

[Stephen Tashi]

A final suggestion, before I hit the sack... If monetary value was objectively defined, no transactions would ever occur. The buyer always places more "value" in the commodity that he is purchasing than the sum that he pays, or he wouldn't make the purchase. The seller always places greater "value" in amount received than the commodity sold, or he wouldn't make the sell.

That illustrates the difference between "value" and "price". A seller who lives in a small apartment may not place much "value" on a huge antique sideboard compared to a buyer who owns a large mansion. The seller sells because he "values" the cash (or whatever good he gets in return) more than the good being sold. The buyer buys because he prefers the good being bought to keeping the cash. However, both the buyer and seller agree on a "price".

 

[Feeble Wonk]

Well, the seller was also involved so we should say the price was set by the interaction of your opinion and the seller's. Perhaps the interaction between the subjective opinions of several people to establish a price for something is regarded as a process that has an "objective" outcome.

I suppose that you could say that the "sale price" of any specific transaction might be "objectively" determined by the confluence of subjective effects at the moment of the individual transaction. However, I would argue that the overall "value" of the commodity would remain "subjective" both before and after the transaction.

That said, I fully concede that this discussion is largely semantic in nature. My initial argument was that monetary value might very well be considered "real" in the sense that it is established by societal convention, and has a causative effect in societal function. But, it is not "ontologically" real.

 

[SardanaS]

What drives the intrinsic value of currencies. I understand that Gold was the basis of currency valuation. But the benchmark value itself is a variable, so what is a constant in the business of money. If it is USD, than why?

 

[write4u]

IMO, money is merely a convenient method of exchange. I remember a presidential candidate suggesting we should pay our dentist with chickens! "Mrs. Jones, this gold cap will cost you 150 chickens. Payment is due on delivery of services."

The difference from past transactions is that we no longer deal with an exchange of necessary items, "I'll trade you a knife for that blanket."

Today we buy a $6000 watch. What should we bring in exchange? 1500 chickens? Unless I am a chicken farmer, where do I obtain 1500 chickens and how do I pay for them when the chicken farmer demands a $6000 watch in exchange for his chickens.

 

[phinds]

I think Nick's suggestion that you referenced was largely sarcastic. I'm thinking he would agree with your assessment, which is the point he was trying to make.

Based on his infantile posts in another thread (all of which were deleted by the mods) I did not make that assumption.

 

[Evo]

Woowoo and response (which tried to stop the woowoo) deleted. Sorry, thread closed.