so, those little strips of paper cloth you carry in your wallet or the chunks of round metal in your pocket have an inherent worth?
No. But as I understand it, money, whether paper, coin or electronic represents something. What that something is debatable and fluid (as it should be?).
$20 slip of paper in my wallet equals an hour of work for some, the cost of a meal for others etc.
The way I understand currency (skip to the bottom if you have a life):
If we all started a society together on Madjacks island, we might start a simple barter economy. Trade a few apples for a block of wood, a bowl of soup for a fishing line etc.... But this is inefficient and would eventually create MadJack-bucks to simplify transactions.
Let's say I grow apples. Well when I want FatDaddy to catch me some fish. But perhaps he hates apples and doesn't want to trade with me. He would rather get pickles from Lawtchan. So we create a currency that represents value of objects and labor. Supply and demand slowly assigns specific values to each object and action in amount of MadJack bucks. A bushel of apples becomes worth 1 MadJackBuck, while perhaps a slingshot to hunt birds might cost 50 MJBs.
The way it probably starts off on MadJack island is 1 MJB represents approximately 1 hour of work, then there ought to be about as many MJBs in circulation as there are working man-hours to go around. This is good because it is a static unit of measure. At least at first, and assuming the population doesn?t grow or shrink much.
As we go along we innovate. I start finding ways to grow apples twice as fast as I used to. Now instead of 1 bushel per hour, I am now producing 2 per hour. At first I might be twice as rich because before my innovation everyone assumed 1 bushel=1 hour and therefore 1 MJB. So for a while I am making serious scratch due to my increased productivity. Eventually people see how much I?m making on apples and they try their own hand at apple producing. That?s the competition portion kicking in. Perhaps when they join in they briefly start getting rich too (Boom), and suddenly too many people switch to apples and before we all realize we have over produced apples and under produced fishing and other things (Bust). And finally apples value has adjusted, because it is more abundant. Some got rich, some went broke, but the ultimate result is more apples and more importantly the knowledge of how to harvest apples more efficiently has permeated the industry. We are better off.
The complex part of all this lies in the management of the currency. Who decides how much MJBs exist? And why? That?s the only real point of control there is. The value of each MJB will fluctuate and adjust based on how much productivity exists and how many MJBs are printed.
Now suppose we had put TheBoys in charge of making the MJBs. Now The Boys is a compassionate man, and he doesn?t like to see people suffering. He sees JediSurvivor struggling to buy enough food because he spends all his time surfing. He thinks it would be super nice if Jedi had some more MJBs, and heck everyone could use some more anyway. So he decides to double the amount of MJBs in circulationOn a small scale such as our MadJack Island, people would get pissed and probably exile TheBoys in charge of creating MJBs for monkeying around with our shared currency. We all KNEW was a MJB was worth and creating too many messed everything up. GardenWeasel who had saved his MJBs instead of spending them immediately got screwed because the introduction of twice as much MJBs basically distorted what he had saved. The money TheBoys printed for Jedi and some other people in need looks the same as the money GW saved from the fruits of his labor. There is no way to determine that GWs money is real and Jedi?s is created out of thin air. Everything is focked.
Alternatively, maybe TheBoys is not simply compassionate. What if he is greedy? Maybe he KNOWS creating too much money will harm the MadJack Island Economy, but he stands to gain from this somehow? Perhaps he and his friends excel not at hard work and innovation but only at matters related to MJBs. They lend, they loan ?invest?, they create interest, they introduce complexities that become MORE profitable the more broken the system is. They are smart enough to play the MJBs market and win, so it benefits them to introduce new MJBs beyond the amount that the harder workers saved. Because while each MJB might be worth 50% of its previous value, they have created a game they are good at, and they will make lots of lots of it. More than making up for its lessened worth. They prosper more the more chaotic the system is.
Both of these examples are inflation. Whether caused by bleeding hearts or greedy corporatists. This is what our Central bank is doing with ?quantitative easing?.
*****This is my admittedly basic understanding of Economics. Pardon the verbosity and correct me where I?m wrong. Or just skip to my original and ultimate question.
How the hell does something like Gold become the currency on MadJacks Island and why would we choose to ?use it as the standard??*****
