2 questions i have wondered

Okay here's 2 questions I'm hoping some of you guys can help me with. They may sound stupid but I'd like to know the answer.

1) How does the dollar rate work?

2) How does the Global Economy increase? If you do not understand this, I'll give an example: Say if there were 3 conturies, US, Finland and China. If US has 1 trillion and China has 1 trillion and Finland has 1 trillion, the Global Economy is 3 trillion. If US gets 0.5 Trillion form Finalnd and China, US would have 2 trillion, China would have 0.5 trillion and Finland would have 0.5 trillion, BUT the Global Economy is still 3 trillion.

Now my question again> how does the Global Economy increase?

[Edited by Megatron on 05-07-2000 at 10:10 AM]

[Juan Carlos Rey]

Ask an economist how to add background color to a form in VB! How cn we innocent programing people know a single bit of economics? But I'll give a try:

The global economy is not related to the number of dollars there are, because dollar is nothing more than printed paper. It reflects the global economy, but do not determine it.

Global economy is the total amount of products and services involved. The more products you have (cattle, oil, corn, potatoes, PC's, cars) and the more services you provide (communications, transport, Software, insurance, etc. etc.) the bigger the economy.

When a country needs cash and go print paper (make money) in the short run they get their cash, but short afterwards it produces inflation. The actual value of that money decreases, because the total circulating money MUST equal the total amount of products and services. Simple math.

[Sam Finch]

as Far as I know that's not quite right, countries are very carefull not just to print money, in theory the total amount of currency a country has is equal to the value of it's gold reserves, ie if the amount of gold in the bank of England is £V then there should be exactly V Pounds Sterling in the world. You can at any time march into the bank of england with your 10p coin and demand 10 pence worth of gold.

The reason for inflation is that people are greedy, If I'm slaving away working for a supermarket and demand a pay rise then to pay for that payrise the supermarket has to raise it's prices slightly, then I decide I want a payrise again because I still need to pay for all the stuff I need. This pushes prices up again and the whole process starts again.

suddenly my 10p worth of gold which used to buy me a packet of crisps(chips) will only buy me half a packet of crisps, The crisps arn't any more valuble, the gold isn't any less valuable so we have to change what the currency is worth, so my 10p isn't worth 4g of gold any more, it's only worth 2g. To balance this out the bank prints more money.

[Juan Carlos Rey]

Most countries have abandoned the gold equivalence. They balance their money on an international equilibre.

Mine used to print paper on an industrial basis: by tons. That gave us an inflation of more than 100% a year. Believe me.

And your example does not explain inflation. If your boss gives you a rise and he is obliged to rise his prices, where does the gold part fit?

And I told I was not an economy expert...

That's just the printing of the money though. If a person owned $100 and there was was 10,000,000 bills printed, that doesn't change the economy. Sure there's 10,000,000 bills but nobody owns all that. There is only $100 of that owned, the rest of the 10,000,000 bills aren't owned by anyone.

[Sam Finch]

If you print extra money it's owned by the government, it works a bit like automatic tax on having money, your'e money is worth a bit less, the government get's the value that's deducted.

If it works this way then why can't the governemnt just print out 1,000,000 bills each with a value of $1000. that way, no country will be poor.

[Edited by Megatron on 05-08-2000 at 04:14 PM]

[Sam Finch]

I thought we explained that, obviously we didn't explain it very well, when you print more money the value of that money goes down, however due to prices and wages rising the value of money goes down anyway, so the governments print more money to keep the amount of money the same.

So the more money you print, the less the dollar is worth?

[Bob Baddeley]

The U.S. dropped the gold standard long ago. That means that one dollar is no longer redeemable at Fort Knox or the other gold reserve (I can't remember where it is but I think in Pennsylvania). Anyway, it means that the dollar is worth exactly what people will pay for it (kind of circular logic, I guess). My dad explained it like this:

I have apples, and you have rabbit skins. I want rabbit skins and you want apples. The rabbit skins have no set price, they are simply worth what you and I think they are worth. Thus, I will give you a certain amount of apples based on what you and I agree on. The same thing works between countries with the exchange rate constantly fluctuating depending on whether the countries are doing well or not. It works as well inside of a country.

Companies are going to pay exactly as little as they can to their employees and charge as much as they can get away with from their customers. It's just that way. However, they must keep their prices "reasonable" so that people will buy it. If it's overpriced, it isn't sold. With inflation (people getting more money, so things get more expensive and the dollar is thus worth less for the same product), the value of currency drops because it takes more of a certain currency to get the same thing that used to be cheaper. This is how the economy works.

bob

Even though this is impossible but for sake of conversation, If Italy decided to drop thier prices on products by a termendous amount, thier dollar will raise a lot?

[Sam Finch]

That's not impossible, it's called deflation, It's very dangerous because when prices start to drop people stop buying things because they think "Why should I buy today when It'll be cheaper tomorow, prices then drop even further as shops try to encouragge people to buy things, which in turn makes people wait longer, then companies go out of business, jobs are lost, which means people have less money and things have to get even cheaper, resulting in more job losses.

Eventually the government has to step in and Fix prices, ie make it illegal to drop prices for a limited time. It happened in Germany in the late eighties(I think) but not disasterously.

People don't realise but a small amount of inflation is good because it keeps money moving, or in banks where it gets invested, money hiding under a matress is a very bad thing.

[gfk]

This must be the dullest thread ever to appear on ANY messageboard...

[Sam Finch]

Don't read it then.

gfk
And you have the most dull, not to mention stupidest name I have ever seen in my life.

[RSINGH]

Was that the first ever vbw flame??

[InvisibleDuncan]

Ranj - what the hell were you doing to find this thread - and read it all to the end?

Work dull today, is it?

[RSINGH]

I am sooo bored. Its sunny outside and I'm not. I really resent being at my desk at the moment.

[Bonker Gudd]

[RSINGH]

Originally posted by Bonker Gudd

back at you!

[InvisibleDuncan]

I've just spent the last hour in the garden, relaxing in the sun and eating my lunch. It's lovely out there.

[RSINGH]

Originally posted by InvisibleDuncan
I've just spent the last hour in the garden, relaxing in the sun and eating my lunch. It's lovely out there.

*Bashes head against monitor

[InvisibleDuncan]

This is the view I had while lying on my back on the blanket...



Lovely.

[Ianpbaker]

Duncan ever thought about becomming an artist ?

[InvisibleDuncan]

[RSINGH]

If your programming is anything like your artistry...

[InvisibleDuncan]

Straightforward and functional - and damned pretty to look at.

[Ianpbaker]

and that's an artist With a capital F