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Yes, we've just eliminated a step. It used to be: $1 is worth 1/16 oz. of gold (made-up figures for this example.) 1 dozen eggs are worth 1/16 oz. of gold. Therefore, $1 will buy 1 dozen eggs."

Now, it's just "$1 has the capacity to buy 1 dozen eggs."

EDIT: Nevermind.

Lighthawk wrote:The dollar is worth something because enough people believe that it is worth something...

So it's like 40K Ork technology.

"Da green onez are wurf more."

Scarily enough, yes. If tomorrow everyone decided that the dollar was worthless and wouldn't accept it as currency, than it would indeed become worthless. Economics isn't like math or science, with all the rules set by the nature of the universe itself. Chunks are based on what people are willing to accept.

I would imagine that as oil is traded in US$ thats what lends the weight behind the dollar. You want to buy oil you need dollars therefor there'll always be a demand for dollars so they have value.

I'm no economics student & frankly don't undetstand some of what goes on but thats my take on things.

But then there's no great law saying that oil has to be traded in dollars. It's just a convention people follow, and there's no real reason an oil producer couldn't begin to sell in euros or yen tomorrow.

Oil is traded in dollars only as much as the term "lingua franca" is defined by the formerly widespread usage of... well, lingua Franca. When you look at the commodoties reports in the Mail, does it list crude in dollars/bbl. or pounds/bbl.?

Mikey wrote:Oil is traded in dollars only as much as the term "lingua franca" is defined by the formerly widespread usage of... well, lingua Franca. When you look at the commodoties reports in the Mail, does it list crude in dollars/bbl. or pounds/bbl.?

Don't know don't have a copy of the mail handy

Like I said I'm no economics student. I see global finance as a murky world full of tangles, twists & turns to keep people confused so no one notices its a house of cards built on a table with a dodgey leg.

Bingo! It's just not as complex as it looks. They only do that to keep people from looking too closely.

The dollar was once worth a certain amount of gold and silver, but now it's only worth a dollar because the powers that be say it is. So, it's essentially a government credit card, am I correct? So, if I bought something from a store and then proceeded to draw a dollar bill on a sheet of paper as payment for goods or services, I would either be run out of the store, or arrested. But the guv'mint is the guv'mint, and when they do it, it's legal. So, who wants to take the MAN out behind the woodshed and ?

No economist here, but "the powers that be" isn't some guy sitting in a room, or Obama, or whoever. It's the currency trading market, the shops and businesses, etc. The government can affect the value of it, but only in how they do things like change interest rates, print money or take it out of circulation, stuff like that.

Indeed. The reason that your hand-drawn "one dollar" on a cocktail napkin doesn't work isn't because "the man" makes it so - it's because the shopkeeper can't turn around and trade or deposit it, unlike a real dollar bill, in turn because the banker or wholesaler can't do so, etc.

*Sorry for the double*

I heard you the first time.

It's still stupid as hell that our money is valued on the power of "because". IMO, of course.

Tsukiyumi wrote:I heard you the first time.

Fixed.

Tsukiyumi wrote:It's still stupid as hell that our money is valued on the power of "because". IMO, of course.

Not to me - it' a lot more useful to me, in 2011, that a dollar is worth how much milk a shopkeeper agrees that I can buy with a dollar (for example) than a fraction of a gold bullion that I will never see and can't eat or wear or house my family with.