What is the real value of money?
The value of money is relative in the sense it relates to different values of the goods and services we exchange among us. If we are able to buy a loaf of bread with a dollar, then the value of the dollar equates to the value of that particular loaf of bread upon purchase. However, the real value of money is more extensive with regard to empowering us with more ability to choose what to purchase, as for living our own lives instead of others living it for us.
Money has value in itself, as apart from goods and services, in that it provides a simpler and more convenient means to exchange goods and services. In a psychological sense, it empowers us with the freedom to choose goods and services to purchase. Although it is possible to exchange an apple for a loaf of bread, a dollar is a more convenient means of exchange, as to empower us with more ability to live our lives according to our preferences. The more money we have to spend, the more freedom we have to choose what to spend it for.
What guarantee does money have as an acceptable means of exchange for goods and services?
Originally, money was a note of promise for a redeemable asset, such as gold. The notes then became traded as money with the gold as collateral, which has been presumed to have a value according to the amount of labor required to discover and produce it, as being relatively equal to the cost of labor of whatever the gold is exchanged for.
Money today is fiat. Instead of being backed by gold, it is issued and regulated according to governmental authority, the Federal Reserve. Some of us thus consider the modern dollar as worthless. However, money itself is similarly worthless if there is no worthwhile product for which to redeem it. Although the gold standard has by many of us been considered more of a guarantee, its value is still only relative. To someone in the desert in need of water to survive, for instance, a canteen of water is more essential than is a ton of gold. Similarly, the air we breathe is more critical to sustaining our lives, but it has no economic value except for a negative one if industries are required to clean up their pollution of it.
Although money has value in itself, fiat or otherwise, it is still determined by whatever it can be exchanged for. If there is food aplenty, then a dollar is worth a lot of food. If food is scarce, then the same food is worth a lot more than the same dollar. This result constitutes the law of supply and demand: A generous supply of product with less demand is priced lower compared to a scarce product of relatively more demand. However, this value of money is only economic, as subjective to the cost of living. In contrast, the air we breathe has more real value than economic value. The real value of air is taken for granted whereas economic value only constitutes the desire to exercise our freedom to spend money on whatever empowers money to determine the state of the economy.
The value of money is also speculative, but we are gamblers by nature. The risk of losing money in a poker game excites us similar to how a more dangerous and challenging lifestyle seems to render our lives more meaningful. To risk our lives to climb the tallest mountain is a challenge for bragging rights. However, our freedom often becomes too much of a challenge. In the old Wild West free of law and order, for instance, James Butler (Wild Bill) Hickok (1837-1876) was shot in the back by a disgruntled loser at poker. The killer was tried and found innocent by the jury in the lawless town of Deadwood, but he was later retried, found guilty of murder by a jury in a more lawful town nearby. As population increased, and as more chaos followed, more law and order became preferred for a safer community.
The flip side of freedom is conformity and commitment. When the danger becomes too great to overcome by single individuals, we the people join together in agreeing on rules of conduct to partner among us a more favorable game of life. However, this commitment is often expensive for it to work. If food becomes scarce, as due to the effects of global warming, then the world will again become as exciting as the old Wild West. Inflation will overcome entitlements, such as Social Security. The world will become a fight for survival. Chaos of the social structure will follow the chaos of climate change.
About Author / Additional Info:
I retired as a cannery worker at the end of 1999. I self educated myself with the aid of the World Wide Web, wrote a book on physics, and am now developing my ideas with regard to political economics.