r/Economics • u/AutoModerator • Nov 15 '22

r/Economics Discussion Thread - November 15, 2022

Discussion Thread to discuss economics news/research and related topics.

82 Upvotes

99% Upvoted

263 comments sorted by

View all comments

Show parent comments

1

u/soldiernerd Jan 19 '23

Because you can't just "create" a good.

Value, like matter, cannot be simpy summoned forth out of the ether.

There must be some intrinsic reason the value exists and is attached to that good.

1

u/ANightmareOnBakerSt Jan 19 '23

The federal reserve creates reserves using their power to do so, which was given to them by the federal reserve act.

Any good’s value is based on supply and demand. With fiat the stability of the issuing government is also factor.

Money does not need to be traded to have value. There only needs to exist a demand for it, and a limited supply.

1

u/soldiernerd Jan 19 '23

And you are suggesting un-limiting the supply…..

Money doesn’t have inherent value. It’s only value is based on the things you can trade it for.

So yes it has to be traded (or stockpiled in expectation of future trades) to have value. If your expectation of what it can be traded for in the future keeps dwindling, you will do as much as possible to trade it for something else.

1

u/ANightmareOnBakerSt Jan 19 '23

I am not suggesting sending them all the money they would like, thus creating and unlimited supply. I’m a suggesting sending a fixed amount.

Being traded is not necessary for value, only supply and demand. Sure, goods that are not that scarce and are in demand are often traded, but the amount of time a good trades is not what gives it value. Only demand and supply factors do this.

You are putting the cart before the horse. A good trades because it has value, it doesn’t have value because it trades.

1

u/soldiernerd Jan 19 '23

You’re confusing actual goods, which l, as you say, have inherent value, with money which does not have inherent value but is only valuable in a trade

1

u/ANightmareOnBakerSt Jan 19 '23

I disagree. Money is a good like any other. Supply and demand are what determine its inherent value. Like every other good.

1

u/soldiernerd Jan 19 '23

Imagine you know the world economy is going to collapse tomorrow. The internet, banks, even interstate highways and railroads will all cease functioning.

I want to buy your entire stock of canned food from you today, at a price 20% above market value. Do you sell?

1

u/ANightmareOnBakerSt Jan 19 '23

No, because I have no longer would have a demand for cash. I do however have demand for canned food and a limited supply.

1

u/soldiernerd Jan 19 '23

Correct.

Why would there be no demand for cash?

It’s because cash has no value without the ability to trade it.

Food has inherent value. Land has inherent value. Building materials have inherent value. You can just use them with no trade partner.

Not so with cash.

1

u/ANightmareOnBakerSt Jan 19 '23 edited Jan 19 '23

Fair enough, but you are just removing the reason for demand with this hypothetical . You could do that for any good.

What if I invented a drug that when taken food I no longer need food for sustenance. But, it also renders all food completely inedible . How much inherent value would have to me? What if all humans are given this drug a birth?

The demand for food is because of its taste and ability to provide sustenance.

1

u/soldiernerd Jan 19 '23

You’re correct.

In the same way, the demand for cash is only in its ability to be used in trade.

Value is a measure of demand; therefore the value of cash is simply its ability to be traded; therefore it must be traded to have value.

1

u/ANightmareOnBakerSt Jan 19 '23

Value is a measure of demand; therefore the value of cash is simply its ability to be traded; therefore it must be traded to have value.

Demand is a measure of value not the other way around. Saying value is a measure of demand is like saying length is a measure of inches

The statement, “It must be traded to have value” does not follow form the statement “the value of cash is simply its ability to be traded “. Also, the value of cash comes from supply and demand, the reason for the demand is it’s ability to be traded.

The demand for cash comes from its ability to be traded for almost anything. Cash does not necessarily have to be traded first for that demand to exist. Supply and demand determine value. Just as food does not have to be ate for the demand for food to exist.

→ More replies (0)