The Value of Money

 The Value of Money....

This question is so very difficult to answer. If you go with the literal answer, then the value of money is whatever denomintaion is printed on the paper. But even this is questionable...who are we relying on to uphold that value? After watching the Zeitgeist film I began to ask myself some of the same questions as the director. If we all are relying on the United States government and the Federal Reserve to honor the value of the money in our pocket, what would happen if they decided to stop? Worse, what would happen if the american people stop believing in the perceived value? 

I have often thought about the actual value of money.Two basic questions need to be answered: (1) What are the fac­tors that originally afforded value to money, and (2) What are the factors that effect changes in the “objective exchange value of mon­ey” or its purchasing power? It would seem logical to say that like any other goods and services, money would be subject to the laws that govern supply and demand. Why is money more valuable than the paper on which it is printed? Monetarists link the value of money to its supply and demand, believing the latter depends on the total value of the commodities it circulates. According to Prabhat Patnaik, this logic is flawed. In his view, in any nonbarter economy, the value we assign to money is determined independently of its supply and demand. Patnaik's theory of money, is also a theory of imperialism, and he concludes with a discussion of the contemporary international monetary system, which he terms the "oil-dollar" standard. I am inclined to also follow this train of thought. If the value of money were indeed tied to the same supply and demand system that other goods and services are, what accounts for the stability of money over long stretches of time? We don't see the same extreme up and down fluctuations as we do with other commodities. I attribute this to the fact that uncertainty in the nations monetary system results in extreme uncertainty in the population and can cause extreme over reactions to events. As a result, the government exerts tight controls over this system. In doing so, I find it very difficult to believe that there is no impropriety going on. I am not willing to go as far as the Zeitgeist film did, but on the surface it did raise questions that I myself have asked.