I need a genius here or an intelligent person or someone who knows the subject !!?

Question

What gives our money the value it carries. I mean how the currency is determined to carry a certain value depending on countries.

my question is analogous to these analogy :::

A country that has too many poor people can print more money and more people will have more money. why it is not practiced

Why different country have different value for their currency . how this is fixed or determined

What does it mean when it is said that the value of the money for a country is reflected by that countries reserve bank deposit which can also be gold.

well how else our currencies VALUE is measured , valued and set.

insuranceguytx - thats why I say I need a genius here - someone who knows it well and smart enough to quote everything in a simple precise and exact answer, anyway thanks ( I know about supply and demand )

Did I asked a difficult question - I don't think so , then how come not many is giving replies ??!!

righteousjohnso and tryboy -: thank you so much and I belive there are many more answerers with more views and explanations on this - I'll wait

thank you alonso v , your views shed a frontal view with different perspective - especially when you mention about value and trust. Though I'll wait for further more views and elaboration of precise orders of what and how things occur out there.

Thank you again Mister Bryan K .

Answer 1

The value of any free market currency is based on is Gross Domestic Product (or the value of everything a country produces), divided by the total face value of it's currency in circulation. Tht's why just printing more money won't solve the problem. It just dilutes the value of the currency, because the GDP stays the same. Healthy economies will raise currency values, as will reducing the amount of any particular currency in circulation.
The gold reserve provides a measure of how stable a currency is. The more the better. Political stability and economic prosperity both raise currency values, but what messes things up is that some countries don't float their currency values (China for instance). Instead, they just declare what it is worth. When this declared value is understated, then the local population pays too much, and exports are discounted. As a result, export sales will zoom, and the locals will suffer. It's a weird situation, which can't go on indefinitely, because it creates an eventually fatal imbalance between costs and value, but in the short to medium term, it can be quite profitable....right up until the whole thing crashes anyway.

Answer 2

currency first and foremost is only as good as a sellers expectation of future value, meaning I won't sell you a turkey for the cost of a pie if I am going out of town for 2 weeks and won't have time to eat the pie before it goes bad.

Long story short, buyers and sellers give currency it's value.

A variable that can change people's perception of value for currency (or anything) is it's scarcity. When the government prints more money, that money becomes worth less, or another way to look at it, it takes more dollars to buy that widget than it did before the government printed bills. That's called inflation. If a government prints more money and gives it to the poor, it is taking money from everyone who has money by making it worth less. If a government does that too much, sellers will be less likely to accept the currency in the future for fear of it being worth less if the government prints too much again. Loss of credibility in a country's currency is a good way to bring the whole thing to a screeching halt. People would be bartering rather than taking cash.

With regard to currency trading between countries, the US dollar is considered the strongest currency because US government revenues are bigger than any other country. The currency is backed by the assets and taxing power of the government. We have discussed the taxing power, but what about the assets?

Fort Knox. All that gold is held as US assets to use as collateral for borrowing money, issuing currency, and .... I think George W has a gold bar in his office that he uses as a paperweight.

Answer 3

Insuranceguytx was right on the button... supply and demand. In the world there is a finite amount of goods and resources for sale. So there has to be a finite amount of money to keep everything balanced. If a country simply started printing money and giving it out freely, then money loses its value, and items for sale would have to increase in price to return the economy to its original balanced state again.

Lets say for example that a country decided to change its currency to mature oak tree leaves (leaves from no other tree will do, just the oak tree and they must be mature, not new growth). Then suddenly mature oak tree leaves would be as scarce as a $100 bill is today. People would be planting oak trees waiting for the leaves to mature so they can go spend them... just like you and I go out and work and wait for our paychecks to arrive in the mail or to be electronically deposited into our checking accounts.

Supply and demand rules our country and every other country on this earth.
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Answer 4

Well in theory money value is not a reality anymore, money value is based in trust, trust to your country, that's why for example in panama dollar moves more than Balboa because it has no trust or its overvalued.

If too much money is printed then all prices will go up and there would be inflation which is a phenomenon involving the stable climbing of prices in a determinate lapse of time. Inflation reduces adquisiton value resulting in lower demand for products and so in unemployment.

Different currency values depends on many factors which can involve import/exports mostly but also currency trading and speculation too. Imagine yourself buying euros for dollars but in a higher scale just like stock markets, the markets depending on bid and ask will determine the price of a currency against another one. Currencies are determined 1on1, lets say dollar vs euro or dollar vs yen, so it may be devaluated or valued depending on which side you see it, if the dollar devaluates the yen would valuate.

As i said value of money mostly depends on trust, but yes if a country has debt (external debt), which is payed with reserves mostly, then u can say that the value of money depends on your reserves, but it is like fiction, money is valued in trust.

Answer 5

A simple answer :

"ONLY what you give it"

For example : you can ask your girlfriend to give you $10, and she'd rather give you a kiss. Which one is worth more? You have to decide. Bill Gates has all the money in the world, but would you rather have him pay you $1000 to settle or make him drop his pants?

It does NOT take a genius to understand money, it takes common sense and facts. Today's money is fiat currency, it's backed by NOTHING other than your trust in it. If you do not want to trust it, you may choose other forms of currency. This is called bartering.

Answer 6

Supply and Demand

Enroll in several Economics courses. The precise answer is too complicated to present here.