Non-monetary Trade

Dec 2011
1,297
#41
On the other hands, we could wonder if the dynamics of price is different from the dynamics of value.


Wait ... I was thinking to the mechanism which gives a value to the money. The mechanisms which determines a price or a value are substantially the same. But you don't negotiate the value of the money, you negotiate how much money you have to give to the seller to obtain the goods or the services you want [you don't say to the seller "my 10 dollars value more than 10 dollars!", you can try and pay only 9 dollars, if the seller agrees.
You are talking about the numbers written on currency, not about the representational value of money per se. Actually, I do tell the seller that "my 10 dollars are worth more than [your] 10 dollars" if I reject his offer of goods he valued at 10 Dollars. I tell him: "I want more goods for my 10 Dollars than you offered me", this is the same as saying, "my 10 Dollars are worth more than your's". Only if we reach an agreement can we say that our valuation coincides.

Think to inflation [or the contrary]: it is an economic phenomenon which doesn't affect the stated value of the money. Inflation [or the contrary] is a market dynamics depending on demand and offer. And it exists also in barter: "from now on 4 cows are no more enough for a wooden boat ... 5 cows is the value of a wooden boat here" [excess of demand or shortage of offer ... the seller can ask more].
Inflation doesn't affect the numbers written on currency, "the stated value of money", if you will, but it does affect the actual value it represents. If I have 10 Dollars and can buy 10 pencils for 1 Dollars each at t=1, but the seller at t = 2 tells me "no, your 10 Dollars are not worth 10 Dollars anymore, they're only worth 5 Dollars", then I will only be able to buy 5 pencils for 2 Dollars each. That is effectively a 50% reduction in the value per "unit of money" or 100% inflation. What you are basically saying is that inflation does no affect the unit of measurement, which is mostly true (there have been cases were rampant inflation led to a re-adjustment of the numbers written on currency).
 
Dec 2011
1,297
#42
But here probably we can underline one "oddity" of barter:

while a monetary economy means that the value of the money is absolute, because its usefulness is universal, a barter economy means that the value of a commodity is relative to how much it's useful, necessary, desired.

I can carry an entire enormous herd of cows to a place where they produce wooden boats, but if they don't care about cows [may be it's a village of fishers who have no intention to have cows around] and they cannot think to a way to barter them ... my 500 cows will value ... 0, zero, nothing. I will not be able to obtain wooden boats from that village.

In a monetary economy they will accept my money ...
Well, that's true, but only if you bring the necessary amount of units of money with you. If you bring less, you won't get a boat, but you might be able to purchase two oars. You can bring 3,000,000 Dollars to buy a house, but if the seller won't sell it to you because he wants 3,000,000.02 Dollars, your money is effectively worthless at that moment, it will represent an actual value of 0.

Now, if your argument is that the value of money is more universal than that of any commodity, in modern economies, yes, I would entirely agree.
 

sparky

Ad Honorem
Jan 2017
3,804
Sydney
#44
" the value of the money is absolute "
the value of money in a fiduciary system rest on the trust given to the printer ....IE the government
the face value is only a number written on a piece of paper ( now plastic in out part of the world )

increasingly "money" doesn't even have a material support but is a set of digital code floating in some alternative universe
one could be a millionaire and not be able to buy bread because of a glitch in some network

consider the fate of the Argentinians when during one of their financial crisis , the banks puled the plug on the ATM and closed their doors
the country had to survive on barter , shops and companies issued IOU to their employees
.quickly a market developed to rate the "value" of an IOU issued by MacDonald or the local grocer

Breaking News, Analysis, Politics, Blogs, News Photos, Video, Tech Reviews - TIME.com

As inflation soars, Facebook drives trading in Argentina's barter clubs | Reuters

" A 1 kg (2 lb) pack of flour serves as a reference, with a hypothetical value of 30 pesos, or one point. Two packs of flour are worth one bottle of sunflower oil. Four packs of flour is the suggested price for one cake, while three packs can be used to get adult jeans. "

once again , basic food stuff is taken as the most stable unit of "value" for staying alive
much better than a speech by the chairman of the national treasury
 

specul8

Ad Honorem
Oct 2016
2,814
Australia
#45
Well, they say money can't buy happiness. Maybe so, but it sure makes unhappiness a lot easier to bear.
The trick is to get the happiness first, then get the money . Find happiness when you poor, and learn how to live simply and then get the money.

I have a couple of friends that USED to be wealthy .... now ?

Oh , the pain .... the pain !




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Likes: Linschoten

AlpinLuke

Ad Honoris
Oct 2011
25,209
Lago Maggiore, Italy
#46
" the value of the money is absolute "
the value of money in a fiduciary system rest on the trust given to the printer ....IE the government
the face value is only a number written on a piece of paper ( now plastic in out part of the world )

increasingly "money" doesn't even have a material support but is a set of digital code floating in some alternative universe
one could be a millionaire and not be able to buy bread because of a glitch in some network

consider the fate of the Argentinians when during one of their financial crisis , the banks puled the plug on the ATM and closed their doors
the country had to survive on barter , shops and companies issued IOU to their employees
.quickly a market developed to rate the "value" of an IOU issued by MacDonald or the local grocer

Breaking News, Analysis, Politics, Blogs, News Photos, Video, Tech Reviews - TIME.com

As inflation soars, Facebook drives trading in Argentina's barter clubs | Reuters

" A 1 kg (2 lb) pack of flour serves as a reference, with a hypothetical value of 30 pesos, or one point. Two packs of flour are worth one bottle of sunflower oil. Four packs of flour is the suggested price for one cake, while three packs can be used to get adult jeans. "

once again , basic food stuff is taken as the most stable unit of "value" for staying alive
much better than a speech by the chairman of the national treasury
Sparky ... my education is economic, when I say that the value of money is "absolute" I mean that in the context of a transaction you cannot look at a 10$ banknote sustaining that it values 5$ ... there is a 10 on it and a law states that you have to accept that that piece of paper values 10$.

The common misunderstanding about money is to make confusion between the value of money and the price of goods and services. Inflation doesn't change the value of money ... it's the price of goods and services to arise. The other way round in the contrary case.
 

sparky

Ad Honorem
Jan 2017
3,804
Sydney
#47
I would think it's a distinction without a difference ,
since the purpose is an exchange on mutually acceptable term
on one side there is a quantity of beans on the other a quantity of zeroes
when the quantities match there is a deal
 
Dec 2011
1,297
#48
Sparky ... my education is economic, when I say that the value of money is "absolute" I mean that in the context of a transaction you cannot look at a 10$ banknote sustaining that it values 5$ ... there is a 10 on it and a law states that you have to accept that that piece of paper values 10$.
First of all, you absolutely can. If there is 100% inflation from one point in time to the next, you can sustain that a 10 Dollar banknote you had before, now only represents a value of 5 Dollars.
Second, there is no law that forces you to accept that a piece of paper values 10 Dollars, in fact, if, in my eyes, it doesn't do so, I will reject it.

Again, you are talking about the measurement scale, not about value. Value is the subjective satisfaction someone receives from consuming a good. We can measure that value on a continuous scale we represent on our currency, usually by taking past prices as our baseline and than compare how these prices match up to prices of other goods and the subjective satisfaction they grant us. If this subjective benefit we receive from a good does not match the measurement on the monetary scale, we will make a new measurement and hence, the value money represents changes even if the measurement scale remains the same.

What you are saying is the same as claiming that the length of piece of wood doesn't change depending on humidity because its measurement before and after the change still lies on the SI scale. You are the one confused here because you mix up the two different usages of "value".

The common misunderstanding about money is to make confusion between the value of money and the price of goods and services. Inflation doesn't change the value of money ... it's the price of goods and services to arise. The other way round in the contrary case.
Yeah, and you are the one who is having the misunderstanding here. The value of money is not the number printed on it. In fact, the subjective satisfaction one receives from consuming money is (often) negligible - in the end, its just a piece of paper, or even just an idea "existing" as a bunch of zeros and ones on a computer. Money represents a value, a value that only comes to pass if you actually exchange it for a good you can consume. What you call price is nothing but a measurement of this value and under certain circumstances, the numbers written on a piece of paper called currency do match this measurement.
 
Oct 2018
1,209
Adelaide south Australia
#49
Well, they say money can't buy happiness. Maybe so, but it sure makes unhappiness a lot easier to bear.

Yeah, my mum said that to me when I was 14. My reply was something like " No ,but it can buy a lot of affection" How little did I know. Plus, I've been poor and miserable and 'well off' and miserable . I prefer 'well off".

Today? Happily retired and comfortable.
 

Bart Dale

Ad Honorem
Dec 2009
7,095
#50
Money just makes trading a bit simpler, is all. When bartering , it becomes more complicated to get the things you need, but it is possible. For example, the farmer wants to buy a horse, but all he has is wheat or ride to trade, and the amount of wheat or ride the horse is worth is more than the amount of rice or what the horse dealer needs,.and so is useless to the horse dealer, unless the horse dealer exhanges this excess wheat or rice for other things he needs with a 3rd party, like for horseshoes from the smith for his other horses, or harnesses from the leather worker. Barter could work, but it requires a lot of separate negotiations and work on the merchants and everybodies part. Food can be perishable, and not always easy to store, so there can be time limits on these exhanges.

Money makes it easier. It doesn't have to be coins or paper bills, as long as you have a universally agreed upon medium of exhange, it will work. Precious metals often work well, since you can accumulate them and store them up for big purchases without having to worry about it rotting away like food, and becoming worthless, and a little bit goes a long way, so it is easier to transport, unlike bushels of wheat and rice. Plus you don't have worry about having extra wheat to trade, but finding the blacksmith has all the wheat he needs and then having to find a 4th party to trade the wheat to get what the smith needs, so you can get what you want from the smith. Everybody can use money.

Of course, unlike the actual goods you use, the medium.kf exhange might have any intrinsic value, or nowhere near the value of the actual goods traded for the money, so if people stop accepting the money, you have lost out. Metals coins habe an intrinsic value of the metal, which you could always melt down and use, but paper money pretty much has.little.value on its own, and if people stop accepting it, you don't have anything. Which is why thr use of paper .one was long resisted and its early use by the Chinese a dismal failure. When paper money did become popular and successful, it was because it was often back by precious metals that in theory you could exchange for the paper money. (In reality, if you tried to exhange your paper.money for gold or silver, it wouldn't work. )