value of money?

Question

what's the meaning of value of money in business language?someone says it depends upon exports which is a main source of reserves but then why the Japanies Yen is in decimal points even having more exports. I am not asking its spiritual,sociel or psychological meaning that money does not have any value as compare to good faith and love. I am just asking in real business world. Because in the world, currency value of different countries are different from one an others, why?

Answer 1

You obviously appreciate from the wording of your question that money in itself has no value, it is merely a medium of exchange. By this I mean that we are still effectively bartering our goods and services but the direct connections are lost.

When thinking about global finance I like to reduce it to a model where a small isolated village exists with each person making his own tokens which are used as money. (In the coin shortages in the middle of the 17th century many traders did issue their own tokens)

The problem with bartering is that you have to do a direct exchange of the goods or services with someone else. Money enables you to provide service from one person and to receive a service from a third person. The money held is the value of goods and services you have earned where the barter transaction has not yet been claimed. If you want to buy bread and you do not have a token issued by the baker then you could swap with someone who does have the baker's tokens. This swapping models the currency markets.

This system will only work if you are confident that the tokens will be honoured. If one villager is issuing many tokens (by buying lots of things) there may come a time when you feel he will not be able to honour his tokens. You are reluctant to hold these as will try to swap them for tokens issued by someone you trust. Supply and demand will work here and the values of the various tokens will fluctuate.

Similarly countries cannot continually import more than they export or their token will lose their value. It is not quite so obvious but the reverse also applies. In the long run a balance must be maintained.

The situation is complicated by the fact that it is not only goods which are taken into account. Services and other "invisibles", such as insurance, affect the situation. Interest paid on deposits is also a factor as is the amount of taxation levied.

But in the long run it is all down to the confidence that your money will be able to be exchanged for something of value to you.

Answer 2

Value of money changes daily sometimes hourly basically each currency has a value in world bank terms compared to value that world bank and currency values are set example in Australia 10 years ago value of gold was $600 an oz now over $800 an oz value of $a was 86cent US$ bo that means in USA and australian dollar could be exchanged for 86cents now its 92 cents. Does not relate to exports only relats to money owing overseas for imports and loans whole heap of things evem future orders are considered. Why yen is in decimal points don't know but world bank probably do.