What determines our countries value of money?

Question

For example....the UK Pound is 2 USD....

So if I had a million $ in the USA it would only be worth 500k in the UK.

So what makes our money value so low?

Answer 1

Biggest factor is the confidence of investors in our government to provide the infrustructure to make investmenst work. Sadly at this time we have Bush who does inspire such confidence. When Clinton was president i got $150 Cdn gor 100 Us now its abouteven after dipping to .97 cdn same with Euro Pound etc

Answer 2

There are four kinds of money;

Intrinsic money - it has it's own value because it's made from something valuable, such as gold or silver coins. The South African Krugerrand is a good example.

Representative money - it's not valuable on it's own, but it is backed by something valuable, such as the US gold or silver certificates that had an equal value of gold or silver stored at Ft. Knox (and other places).

Confidence money - worth whatever people think it's worth - but worth a lot because people think the government that issues it is stable and will back it, such as the British Pound.

Fiat money - basically worthless but it is used because the government demands it as payment and punishes those who don't pay in the government's prescribed form, such as the Russian Ruble in the 1980s (which the international markets wouldn't even trade in).

The difference between confidence and fiat money can most easily be seen in the inflation rate. Sooner or later all confidence monies become fiat, and all fiat monies super inflate until they are worthless. Many economists are predicting exactly that for the US Dollar within four years, or so.

Basically, if you make more of something, it's value decreases. The Government has been printing too much money for too long. No system can withstand printing money from nothing for a long time. And there aren't even enough bills in circulation to cover the nation's outstanding debts. If all Americans went to the bank tommorrow and demanded cash, the Dollar would collapse in one day, because everyone would realize there isn't enough value in the US Dollar to cover what is owed.

The US Dollar is losing value so quickly because it's not backed by anything of real value (the government spent all of the gold and silver decades ago), and people worldwide are losing confidence in the US Government. If these economists are correct, the Dollar will soon be worth nothing. Right now it's best strength is all oil (something everbody needs) is bought or sold in US Dollars, but moves are underway to change all oil purchaces to Euros. If that happens the Dollar will probably lose half it's value within a week.

Real money has real value. Fake money doesn't. It's pretty much that simple.

May God bless you and your search for Truth.

Answer 3

How much our country produces compared to other countries, the amount of our commodities, how much debt we have with other countries.  

Really this matters the most only with international trade, because while your US dollar might be worth 2 Euros in the UK... things that cost a dollar here will still, generally, in turn, cost 2 Euros there.

Unfortunately, we tend to do a lot of international trade.  Own anything that was made in China?  Need i say more?

Answer 4

Simple - Supply and demand