No, it does not necessarily collide at all with church teaching.
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stinkcat_14
Guest
It that what it means in scripture when Jesus said: “whatever you do to the least, you do to me?”No, it does not necessarily collide at all with church teaching.
T
Texas_Roofer
Guest
2434 A just wage is the legitimate fruit of work. To refuse or withhold it can be a grave injustice.[220] In determining fair pay both the needs and the contributions of each person must be taken into account. “Remuneration for work should guarantee man the opportunity to provide a dignified livelihood for himself and his family on the material, social, cultural and spiritual level, taking into account the role and the productivity of each, the state of the business, and the common good.”[221] ***Agreement between the parties is not sufficient to justify morally ***the amount to be received in wages. - catechism
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CPA2
Guest
If gold is not real money, then what is real money? Fiat currencies, like the dollar and the euro, are a joke.In 1987 the price of gold was $447, that price would fall and not return to that value again until 2006, so one can certainly see gold does not always store value well. But more importantly fiat money derives its value from future taxes. That is why currency problems exist once people believe the government may lose the ability to tax (coup) or inflation will render future tax returns below current values, a mass exit occurs in the currency. That mass exit may actually change the value to zero or near zero.
nma.org/pdf/gold/his_gold_prices.pdf
How many dollars can you buy with an ounce of gold? Yes, the dollar, like every thing else, has a price on it.
“Remember the Golden Rule!!! He who has the gold, makes the rules.”
My favorite assumption is the monetary unit assumption. All accounting information is disclosed in dollars. However, a dollar is not a valid measuring tool because a dollar is changing in size. We do not have that problem with inches, pounds or ounces of gold. Even a little inflation adds up. In 1946 the average income was $2,500, a new car costs $1,125 and a new house cost $5,600. What happened to penny candy? What happens to the monetary unit when inflation is 180% or 800%? Some accountants came up with the idea of a unit of purchasing power in the 1970s, a period of 20% inflation. However, the idea was quickly abandoned when the media called it “pooh-pooh” accounting.
How does one compare a financial statement from the 1950’s with a financial statement today? I asked myself that question the other day. I was looking over some financial data from my father’s company. The reports were from the early 1950’s. Did the family company do better in 2000 than in 1950? The numbers were bigger in 2000 than 1950. What does that mean? The monetary unit for both financial statements was U.S. dollars. However, I felt like I was comparing New Zealand dollars with United States dollars. I was comparing apples and oranges. How sad.
Inflation hit double digits in the 1970’s. Accountants went into a tizzy. History may repeat itself. Accountants may again try to define a unit of purchasing power someday. Of course, the ideal unit of purchasing power already exists. It is gold. Gold has that psychological quality of confidence. Gold is a store of value. A grain of gold in Egypt in 1000 B.C. is the same grain of gold today. Gold is the ideal monetary unit. It is reliable. An ounce of gold is an ounce of gold. Contracts have been, and can be, written in ounces of gold. Even the SEC recognizes this point.
Con 5 mentions ounces of gold and purchasing power! “Also, preparation and use of financial statements is simpler with nominal units than with other units of measure, such as…units of a commodity (for example, ounces of gold). However, as rates of change in general purchasing power increase, financial statements expressed in nominal units of money become progressively less useful and less comparable.” CON 5 says it succinctly!
As I said.2434 A just wage is the legitimate fruit of work. To refuse or withhold it can be a grave injustice.[220] In determining fair pay both the needs and the contributions of each person must be taken into account. “Remuneration for work should guarantee man the opportunity to provide a dignified livelihood for himself and his family on the material, social, cultural and spiritual level, taking into account the role and the productivity of each, the state of the business, and the common good.”[221] ***Agreement between the parties is not sufficient to justify morally ***the amount to be received in wages. - catechism
even a .01 / hour wage does not necessarily conflict with church teaching.
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Texas_Roofer
Guest
Salt was equal to gold as a form of money, bought any salt lately? Just as salt lost its value so may gold. Today gold is expensive and thus high in risk. Bottom line is money is any easily traded intermediary. If gold is too high or too low it does not qualify, same for currency, or salt. Inflation calculators are readily available to convert 1950’s money value to the 2010 money value. If you apply the inflation calculators to minimum wage you see some interesting things, it does not appear minimum wage has any detrimental affect on the US economy.If gold is not real money, then what is real money? Fiat currencies, like the dollar and the euro, are a joke. …CON 5 says it succinctly!
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stinkcat_14
Guest
My issue is: who decides what real money is? Some have made the claim that gold is the only real money, but we have to make clear, that is simply an opinion. Nothing more, nothing less.If gold is not real money, then what is real money?
Fiat currencies, like the dollar and the euro, are a joke.
And of course, gold itself has a price. The amount of gold you can buy with a given set of dollars will vary from time to time. Sometimes gold sells for less than $300 per ounce and sometimes gold sells for over $1,000 an ounce. It’s price tends to be quite unstable.How many dollars can you buy with an ounce of gold? Yes, the dollar, like every thing else, has a price on it.
Surely you don’t suggest that this was meant literally?“Remember the Golden Rule!!! He who has the gold, makes the rules.”
The dollar changes slowly enough in value to be a reasonable measure for financial statements. If we used ounces of gold, we would see major variations in revenues and assets over time because the value of gold fluctuates so much over time.My favorite assumption is the monetary unit assumption. All accounting information is disclosed in dollars. However, a dollar is not a valid measuring tool because a dollar is changing in size. We do not have that problem with inches, pounds or ounces of gold.
And of course, if inflation is 10% and nominal incomes increase by 10% the average household is no better or worse off, assuming that there are no long term contracts fixed in nominal terms.Even a little inflation adds up. In 1946 the average income was $2,500, a new car costs $1,125 and a new house cost $5,600. What happened to penny candy? What happens to the monetary unit when inflation is 180% or 800%? Some accountants came up with the idea of a unit of purchasing power in the 1970s, a period of 20% inflation. However, the idea was quickly abandoned when the media called it “pooh-pooh” accounting.
Economists have never had a problem comparing financial performance over time.How does one compare a financial statement from the 1950’s with a financial statement today? I asked myself that question the other day. I was looking over some financial data from my father’s company. The reports were from the early 1950’s. Did the family company do better in 2000 than in 1950? The numbers were bigger in 2000 than 1950. What does that mean? The monetary unit for both financial statements was U.S. dollars. However, I felt like I was comparing New Zealand dollars with United States dollars. I was comparing apples and oranges. How sad.
And of course gold fluctuates greatly in value, so a car might cost 20 ounces of gold today and 10 ounces of gold next month and 5 ounces of gold in 6 months. Your salary in terms of gold is likely to change from day to day because no employer will be able to predict what he will have to give up to get gold.Inflation hit double digits in the 1970’s. Accountants went into a tizzy. History may repeat itself. Accountants may again try to define a unit of purchasing power someday. Of course, the ideal unit of purchasing power already exists. It is gold. Gold has that psychological quality of confidence. Gold is a store of value. A grain of gold in Egypt in 1000 B.C. is the same grain of gold today. Gold is the ideal monetary unit. It is reliable. An ounce of gold is an ounce of gold. Contracts have been, and can be, written in ounces of gold. Even the SEC recognizes this point.
Who is Con 5?Con 5 mentions ounces of gold and purchasing power! “Also, preparation and use of financial statements is simpler with nominal units than with other units of measure, such as…units of a commodity (for example, ounces of gold). However, as rates of change in general purchasing power increase, financial statements expressed in nominal units of money become progressively less useful and less comparable.” CON 5 says it succinctly!
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TenBobNote
Guest
Texas, I’m sorry but this is nonsense. Salt may have been chosen as a currency for a period in time just as many things have been. However, to compare gold to salt?? Gold has been chosen as a currency for more then 2000 years because gold is stable, the amount of gold mined does not increase current gold reserves around the world much at all, and the amount it does raise, is consistent. Salt, as money may have been stable for hundreds of years, but when the harvesting of salt became easy and common, societies would have moved away from salt as a currency because of inflation. Gold has not ever done that.Salt was equal to gold as a form of money, bought any salt lately? Just as salt lost its value so may gold. Today gold is expensive and thus high in risk. Bottom line is money is any easily traded intermediary. If gold is too high or too low it does not qualify, same for currency, or salt. Inflation calculators are readily available to convert 1950’s money value to the 2010 money value. If you apply the inflation calculators to minimum wage you see some interesting things, it does not appear minimum wage has any detrimental affect on the US economy.
Gold has real value because it is real, that is why it is real money, it has real value.My issue is: who decides what real money is? Some have made the claim that gold is the only real money, but we have to make clear, that is simply an opinion. Nothing more, nothing less.
And of course, gold itself has a price. The amount of gold you can buy with a given set of dollars will vary from time to time. Sometimes gold sells for less than $300 per ounce and sometimes gold sells for over $1,000 an ounce. It’s price tends to be quite unstable.
The dollar changes slowly enough in value to be a reasonable measure for financial statements. If we used ounces of gold, we would see major variations in revenues and assets over time because the value of gold fluctuates so much over time.
And of course gold fluctuates greatly in value, so a car might cost 20 ounces of gold today and 10 ounces of gold next month and 5 ounces of gold in 6 months. Your salary in terms of gold is likely to change from day to day because no employer will be able to predict what he will have to give up to get gold.
To say that when people claim gold is real money an opinion is only true when your government makes the use of gold for money illegal. If the government did not make gold for money illegal, people would refuse to use fiat money (because of inflation) and use only gold backed currency. Government fiat money like America’s, and most of the world’s for that matter is not real money, it is backed only by the faith and credit placed on that country.
Your explanation of gold losing value is quite absurd. Gold prices rise when the dollar is inflated. You are not seeing the value of gold go up, you are seeing the value of the dollar going down.
Please read Economics in One Lesson by Henry Hazlitt
C
CPA2
Guest
Gold has gone up 400% and it is still cheap! Gold is a monetary metal, not an industrial metal.Salt was equal to gold as a form of money, bought any salt lately? Just as salt lost its value so may gold. Today gold is expensive and thus high in risk. Bottom line is money is any easily traded intermediary. If gold is too high or too low it does not qualify, same for currency, or salt. Inflation calculators are readily available to convert 1950’s money value to the 2010 money value. If you apply the inflation calculators to minimum wage you see some interesting things, it does not appear minimum wage has any detrimental affect on the US economy.
The G-20 nations may propose devaluing all currencies, including the dollar and the euro. **This government move is theft! **What is the difference between a thief stealing 50% of our money or the government devaluing your money by 50%?
Franklin Roosevelt devalued the dollar by Executive Order #6102 by confiscating gold and raising its price 69.3%. **FDR stole from my grandfather! **His action was also unconstitutional. Expect more of the same in our time. Led by higher gold prices, debts become a fraction of re-inflated asset prices. On that basis alone, I would never buy bonds, especially government bonds!
If people do not buy bonds, there will be no economic recovery, ever. Communist China has been selling our government bonds for the last 4 months and they have been buying gold.
I lost confidence in most government statistics many years ago. A prime example is the CPI (Consumer Price Index). I think that the Bureau of Labor Statistics uses something called the “hedonic factor”. They actually try to calculate the increased “productivity” of computers to calculate the CPI. I call this the “fudge factor.” **Beat the data until it confesses! ** As a consumer I only look at the price at the gas pump and at the food store. That is my CPI.
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CPA2
Guest
You understand your economic history! I love Henry Hazlitt.Texas, I’m sorry but this is nonsense. Salt may have been chosen as a currency for a period in time just as many things have been. However, to compare gold to salt?? Gold has been chosen as a currency for more then 2000 years because gold is stable, the amount of gold mined does not increase current gold reserves around the world much at all, and the amount it does raise, is consistent. Salt, as money may have been stable for hundreds of years, but when the harvesting of salt became easy and common, societies would have moved away from salt as a currency because of inflation. Gold has not ever done that.
Gold has real value because it is real, that is why it is real money, it has real value.
To say that when people claim gold is real money an opinion is only true when your government makes the use of gold for money illegal. If the government did not make gold for money illegal, people would refuse to use fiat money (because of inflation) and use only gold backed currency. Government fiat money like America’s, and most of the world’s for that matter is not real money, it is backed only by the faith and credit placed on that country.
Your explanation of gold losing value is quite absurd. Gold prices rise when the dollar is inflated. You are not seeing the value of gold go up, you are seeing the value of the dollar going down.
Please read Economics in One Lesson by Henry Hazlitt
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CPA2
Guest
It sounds strange to say that a dollar has a price. However, it is true. Supply and demand determine the dollar’s price. “…The value of currencies in the foreign exchange market is determined by market forces. Just as the forces of supply and demand determine other prices, so do they determine the exchange-rate value of currencies in the absence of government intervention (Gwartney, Stroup, Sobel).”
When looking at the foreign exchange rates, we can say that the dollar price of the pound is $1.50. The inverse is also true, the pound price of the dollar is 0.67 pounds.
The American dollar is the reserve currency of the world; therefore, the price of gold is in terms of American dollars. If gold was the reserve currency of the world, a financial commentator might say, “Today the price of the dollar dropped by 1/10 of a dwt.” It all depends on what you are use to hearing.
“Why gold has been accepted as money for several thousand years cannot be appreciated without looking at the unique role performed by gold as money and the alternatives to gold….Ancient gold coins were widely accepted in primitive times because of the weight of gold they were known to contain. It was the physical qualities of gold, the known content of gold of a particular fineness, the fact the coinage could not easily be expanded in supply or debased and counterfeited, the durability of gold, that made gold universally accepted (Sutton).”
Milton Friedman, Nobel Prize-winning economist, had this to say about the American dollar: “…each accepts them because he is confident others will. ** The pieces of green paper have value because everybody thinks they have value, and everybody thinks they have value because in his experience they have had value.** Paper money “is a social convention which owes it very existence to the mutual acceptance of what from one point of view is a fiction.”
I return to CON2 and the qualitative characteristic of accounting information, reliability. Does the monetary unit, the American dollar, “faithfully represent what it purports to represent?” My answer is no. The American dollar changes in value everyday. It is not a store of value. On the other hand, gold is a store of value. “Even in ancient times, with primitive communications among vastly different peoples and customs, gold coins generated worldwide confidence…Recognizing the essential requirement of confidence, ancient empires kept the value of their money constant for long periods without debasement (Sutton).” Gold is a reliable monetary unit. Governments cannot create more gold by fiat.
References
Friedman, M. & Schwartz, A. (1963). A Monetary History of the United States, 1867-1960. Princeton: Princeton University Press.
When looking at the foreign exchange rates, we can say that the dollar price of the pound is $1.50. The inverse is also true, the pound price of the dollar is 0.67 pounds.
The American dollar is the reserve currency of the world; therefore, the price of gold is in terms of American dollars. If gold was the reserve currency of the world, a financial commentator might say, “Today the price of the dollar dropped by 1/10 of a dwt.” It all depends on what you are use to hearing.
“Why gold has been accepted as money for several thousand years cannot be appreciated without looking at the unique role performed by gold as money and the alternatives to gold….Ancient gold coins were widely accepted in primitive times because of the weight of gold they were known to contain. It was the physical qualities of gold, the known content of gold of a particular fineness, the fact the coinage could not easily be expanded in supply or debased and counterfeited, the durability of gold, that made gold universally accepted (Sutton).”
Milton Friedman, Nobel Prize-winning economist, had this to say about the American dollar: “…each accepts them because he is confident others will. ** The pieces of green paper have value because everybody thinks they have value, and everybody thinks they have value because in his experience they have had value.** Paper money “is a social convention which owes it very existence to the mutual acceptance of what from one point of view is a fiction.”
I return to CON2 and the qualitative characteristic of accounting information, reliability. Does the monetary unit, the American dollar, “faithfully represent what it purports to represent?” My answer is no. The American dollar changes in value everyday. It is not a store of value. On the other hand, gold is a store of value. “Even in ancient times, with primitive communications among vastly different peoples and customs, gold coins generated worldwide confidence…Recognizing the essential requirement of confidence, ancient empires kept the value of their money constant for long periods without debasement (Sutton).” Gold is a reliable monetary unit. Governments cannot create more gold by fiat.
References
Friedman, M. & Schwartz, A. (1963). A Monetary History of the United States, 1867-1960. Princeton: Princeton University Press.
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CPA2
Guest
Con 5 = Concepts Statement No 5 - FASB: Financial Accounting Standards BoardMy issue is: who decides what real money is? Some have made the claim that gold is the only real money, but we have to make clear, that is simply an opinion. Nothing more, nothing less.
People decide what money is, not governments. Gold has been money for over 5,000 years.
And of course, gold itself has a price. The amount of gold you can buy with a given set of dollars will vary from time to time. Sometimes gold sells for less than $300 per ounce and sometimes gold sells for over $1,000 an ounce. It’s price tends to be quite unstable.
You got that upside down. It is fiat currency, like the dollar and the euro, that are very unstable at this point in time. A dwt. of gold in ancient Egypt is still a dwt. of gold today. **A dollar in 1950 is not **the same dollar today.
Surely you don’t suggest that this was meant literally?
Yes, I do. See my post on the price of the dollar. Everyone else in the world knows the price of the dollar in their currencies.
The dollar changes slowly enough in value to be a reasonable measure for financial statements. If we used ounces of gold, we would see major variations in revenues and assets over time because the value of gold fluctuates so much over time.
** The dollar has lost 37% of its value in the last few years.**
And of course, if inflation is 10% and nominal incomes increase by 10% the average household is no better or worse off, assuming that there are no long term contracts fixed in nominal terms.
**
How about hyper inflation?**
Economists have never had a problem comparing financial performance over time.
**Economists are not accountants. **
And of course gold fluctuates greatly in value, so a car might cost 20 ounces of gold today and 10 ounces of gold next month and 5 ounces of gold in 6 months. Your salary in terms of gold is likely to change from day to day because no employer will be able to predict what he will have to give up to get gold.
Gold, in terms of purchasing power, has been very stable over the last 5,000 years.
Who is Con 5?
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CPA2
Guest
Void
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Texas_Roofer
Guest
We can look at Mr Hazlitt later, what you are referring to is intrinsic verses extrinsic value. Salt has a higher intrinsic value than gold! Salt lost value even with a higher intrinsic value due to supply and demand. As you say “harvesting”. So what is gold’s intrinsic value? Transporting electricity, jewery, but does jewery have intrinsic value? It would seem the value of gold does change for examples what is the amount of gold equal to …( 40 hrs labor)…(automoible)…(one acre of land)… ? So when it is x ounces of gold = one acre of land which one changes over time?Texas, I’m sorry but this is nonsense. Salt may have been chosen as a currency for a period in time just as many things have been. However, to compare gold to salt?? Gold has been chosen as a currency for more then 2000 years because gold is stable, the amount of gold mined does not increase current gold reserves around the world much at all, and the amount it does raise, is consistent. Salt, as money may have been stable for hundreds of years, but when the harvesting of salt became easy and common, societies would have moved away from salt as a currency because of inflation. Gold has not ever done that.
Gold has real value because it is real, that is why it is real money, it has real value.
To say that when people claim gold is real money an opinion is only true when your government makes the use of gold for money illegal. If the government did not make gold for money illegal, people would refuse to use fiat money (because of inflation) and use only gold backed currency. Government fiat money like America’s, and most of the world’s for that matter is not real money, it is backed only by the faith and credit placed on that country.
Your explanation of gold losing value is quite absurd. Gold prices rise when the dollar is inflated. You are not seeing the value of gold go up, you are seeing the value of the dollar going down.
Please read Economics in One Lesson by Henry Hazlitt
T
Texas_Roofer
Guest
So are you buying gold today? How did owning gold workout for your grandfather? In 1980 gold was $615 and nineteen years later it was $294 so how good a store of value is that? ( nma.org/pdf/gold/his_gold_prices.pdf)Gold has gone up 400% and it is still cheap! Gold is a monetary metal, not an industrial metal.
The G-20 nations may propose devaluing all currencies, including the dollar and the euro. **This government move is theft! **What is the difference between a thief stealing 50% of our money or the government devaluing your money by 50%?
Franklin Roosevelt devalued the dollar by Executive Order #6102 by confiscating gold and raising its price 69.3%. **FDR stole from my grandfather! **His action was also unconstitutional. Expect more of the same in our time. Led by higher gold prices, debts become a fraction of re-inflated asset prices. On that basis alone, I would never buy bonds, especially government bonds!
If people do not buy bonds, there will be no economic recovery, ever. Communist China has been selling our government bonds for the last 4 months and they have been buying gold.
I lost confidence in most government statistics many years ago. A prime example is the CPI (Consumer Price Index). I think that the Bureau of Labor Statistics uses something called the “hedonic factor”. They actually try to calculate the increased “productivity” of computers to calculate the CPI. I call this the “fudge factor.” **Beat the data until it confesses! ** As a consumer I only look at the price at the gas pump and at the food store. That is my CPI.
There is a bigger problem in the post for *“Gold is a monetary metal, not an industrial metal.” *would mean gold’s value is fiat!!!
hope that helps
T
Texas_Roofer
Guest
Ironic, that Friedman’s work resulted in an increase in fiat money!It sounds strange to say that a dollar has a price. However, it is true. Supply and demand determine the dollar’s price. “…The value of currencies in the foreign exchange market is determined by market forces. Just as the forces of supply and demand determine other prices, so do they determine the exchange-rate value of currencies in the absence of government intervention (Gwartney, Stroup, Sobel).”
When looking at the foreign exchange rates, we can say that the dollar price of the pound is $1.50. The inverse is also true, the pound price of the dollar is 0.67 pounds.
The American dollar is the reserve currency of the world; therefore, the price of gold is in terms of American dollars. If gold was the reserve currency of the world, a financial commentator might say, “Today the price of the dollar dropped by 1/10 of a dwt.” It all depends on what you are use to hearing.
“Why gold has been accepted as money for several thousand years cannot be appreciated without looking at the unique role performed by gold as money and the alternatives to gold….Ancient gold coins were widely accepted in primitive times because of the weight of gold they were known to contain. It was the physical qualities of gold, the known content of gold of a particular fineness, the fact the coinage could not easily be expanded in supply or debased and counterfeited, the durability of gold, that made gold universally accepted (Sutton).”
Milton Friedman, Nobel Prize-winning economist, had this to say about the American dollar: “…each accepts them because he is confident others will. ** The pieces of green paper have value because everybody thinks they have value, and everybody thinks they have value because in his experience they have had value.** Paper money “is a social convention which owes it very existence to the mutual acceptance of what from one point of view is a fiction.”
I return to CON2 and the qualitative characteristic of accounting information, reliability. Does the monetary unit, the American dollar, “faithfully represent what it purports to represent?” My answer is no. The American dollar changes in value everyday. It is not a store of value. On the other hand, gold is a store of value. “Even in ancient times, with primitive communications among vastly different peoples and customs, gold coins generated worldwide confidence…Recognizing the essential requirement of confidence, ancient empires kept the value of their money constant for long periods without debasement (Sutton).” Gold is a reliable monetary unit. Governments cannot create more gold by fiat.
References
Friedman, M. & Schwartz, A. (1963). A Monetary History of the United States, 1867-1960. Princeton: Princeton University Press.
D
Darkbloom
Guest
Government interference in the market is a bad idea. Thanks for illustrating my point.Remember it is illegal for the hamburger flipper to do the brain surgery EVEN IF HE CAN DO IT BETTER!!
The market rate he takes in, or better yet the adjusted average for those in his field, position, etc, would be more than enough info.Let me ask; I have 3 bosses, one is an idiot, how do I separate his “quantitative difference in wealth generated” from the rest of us and thus show his negative effects?
If his opportunity cost truly was zero - which is clearly a ridiculous premise - then he would do quite well on $0.01/hr. It also would not collide with Church teaching, for to have a nil opportunity cost he would have to live in a world where $0.01 has a fantastic buying power.So if his opportunity cost is zero is it morally acceptable to offer $0.01/hr ? That would collide with Church teachings
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Darkbloom
Guest
If gold is unique in being a nearly universally accepted medium of exchange (which it is), then it has intrinsic value as money.So what is gold’s intrinsic value? Transporting electricity, jewery, but does jewery have intrinsic value?
Transporting electricity has no intrinsic value. It only matters because it makes human life easier. Same goes for a ready form of currency.
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CPA2
Guest
Milton Friedman argued against using gold as money.Ironic, that Friedman’s work resulted in an increase in fiat money!
Gold is too scarce for everyone in the world to own gold.
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CPA2
Guest
Functions of Money
One of the functions of money is a medium of exchange. If governments do not create money, people will invent money. A medium of exchange makes trading so much easier and efficient. Everything traded will be denominated in terms of the medium of exchange (i.e. money).
Barter is inefficient and time consuming. When POWs first open their Red Cross packages and begin to trade, multiple barter prices are formed for the goods. The number of barter prices that may exist when n = # of barter goods is n(n-1) /2. Wow! There are too many different prices to remember. Money appears in the POW camp when individual POWs recognize that other POWs are trading to obtain the same commodity that they for in the effort to make their trading easier to do. The POW prisoners usually choose cigarettes as their money. Deflation in a POW camp is caused by POWs rapidly using up the supply of cigarettes. Deflation results in decreases in the cigarette prices of goods. Inflation is caused by a new shipment of cigarettes by the Red Cross. Inflation results in an increase in the cigarette prices of goods. “Clipping” in the POW camp consists of reducing the tobacco content of a cigarette.
Today the American dollar is money and gold varies in price everyday. If gold were money, the American dollar would vary every day. When I was in Japan, the American dollar was worth .92 cents one day, .93 cents another, and .97 cents just a few days later.
One of the functions of money is a medium of exchange. If governments do not create money, people will invent money. A medium of exchange makes trading so much easier and efficient. Everything traded will be denominated in terms of the medium of exchange (i.e. money).
Barter is inefficient and time consuming. When POWs first open their Red Cross packages and begin to trade, multiple barter prices are formed for the goods. The number of barter prices that may exist when n = # of barter goods is n(n-1) /2. Wow! There are too many different prices to remember. Money appears in the POW camp when individual POWs recognize that other POWs are trading to obtain the same commodity that they for in the effort to make their trading easier to do. The POW prisoners usually choose cigarettes as their money. Deflation in a POW camp is caused by POWs rapidly using up the supply of cigarettes. Deflation results in decreases in the cigarette prices of goods. Inflation is caused by a new shipment of cigarettes by the Red Cross. Inflation results in an increase in the cigarette prices of goods. “Clipping” in the POW camp consists of reducing the tobacco content of a cigarette.
Today the American dollar is money and gold varies in price everyday. If gold were money, the American dollar would vary every day. When I was in Japan, the American dollar was worth .92 cents one day, .93 cents another, and .97 cents just a few days later.
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