ArtsAutosBooksBusinessEducationEntertainmentFamilyFashionFoodGamesGenderHealthHolidaysHomeHubPagesPersonal FinancePetsPoliticsReligionSportsTechnologyTravel

The Value of Money

Updated on April 3, 2011

What is the real value of money? What is money actually worth? In these crazy economic times, I start to wonder. I made money, and accounting for money, my career for a little over 30 years. I know for certain that money doesn't have the value it once had, especially when I first started, way back in the mists of time, as a bookkeeper. It also makes me wonder if all that time was wasted, keeping such careful track of something that isn't really real, after all.

I looked into this question, and researched it quite a bit, and found a confusing wealth of data. In the end it seems money has no actual value any more : only comparative worth.

 

Let's look at the value of money in today's language first: FOREX .

FOREX stands for foreign exchange, meaning the exchange of currencies worldwide. Most currencies have value only in relation to each other, in other words, the value of an American dollar, for example, is only worth however many yen or Euros or Great British pounds someone will pay for it.

FOREX is the largest market in the world, the most traded. It trades, daily , the equivalent of 3.2 trillion United States dollars . It opens at 7:30 am Monday morning in Australia, and closes at 5:30 pm on Friday in New York, making trading available for 24 hours per day, across the world, five days per week.

Currencies are traded in pairs. The first currency listed is the base currency. It's value is 1. The second currency listed is the counter-currency. It's value is how much of it is required to buy one of the first currency.

As you can see from the table below, it takes about $1.43 US to buy a euro. It takes about 84 Japanese yen to buy a US dollar. (These quotes are current as of the time I'm writing this. The exchange rates change daily, or hourly even, so this information may not be exactly correct at the time I publish this. It is for an example, only.)

Base 
Counter-currency 
Exchange Rate 
USD (United States Dollar) 
JPY (Japanese Yen) 
84.062 
GBP(Great British Pound) 
USD (United States Dollar) 
1.611 
USD (United States Dollar) 
CD (Canadian Dollar) 
.96 
EUR (euro)
USD (United States Dollar)
1.423

Let's talk about the historical value of money, now.

Historically, money had a substantial basis: precious metal. The United States dollar was originally backed by gold. The British pound was actually, literally, a pound of sterling silver.

Well, no more. There isn't enough precious metal in the world to cover the outstanding currencies. And, once credit was invented, along with national debt, there certainly isn't enough precious metal to cover the world's debt, either.

That's when the value of money became relative. There are various and sundry ways to try to quantify the value of the American dollar today. I don't want to bore you with all the details I discovered in my research, since many of the valuators seem to produce conflicting numbers and those numbers are only significant by relative comparisons, anyway.

I do want to share with you a couple of basic concepts and a few striking facts.

Let's take, for example, the American President Obama's salary. It is now (recently doubled) $400,000 per annum. President Obama also has a $50,000 expense account.

How does that compare with George Washington's salary of $25,000 per year, starting in 1789?

Using the CPI (Consumer Price Index), the relative value of George Washington's salary in today's terms of what consumer products it would buy, President Washington earned the equivalent of a little over $585,000, which makes President Obama's salary seem more reasonable.

If I bought an item for $20 (US) in 1913, it would cost me about $447 (US) today. The rate of inflation across that period of time in the United States is 2135.4% Holy cow!

Let's take a year that's closer in time, that some of us can even remember:

1967 .

If we take 1967 as our base year, and say a dollar was worth a dollar in 1967, today's dollar is worth about 15 cents. Yikes! Do I notice a trend here? Does money itself seem to be rapidly losing its value?

I'd say the answer is yes, but then I wouldn't want to try to live without any money at all. It isn't completely worthless yet.

Comments

    0 of 8192 characters used
    Post Comment

    • Sue Adams profile image

      Juliette Kando FI Chor 

      6 years ago from Andalusia

      Money is fresh air, fictitious figures in computers. Soon there won't be any cash any-more, only credit cards.

    • Paradise7 profile imageAUTHOR

      Paradise7 

      7 years ago from Upstate New York

      Thank you for the comment. I'm glad you enjoyed it.

    • susannah42 profile image

      susannah42 

      7 years ago from Florida

      Very interesting hub. Makes you think.

    • Paradise7 profile imageAUTHOR

      Paradise7 

      7 years ago from Upstate New York

      Thanks for the comment, Sweetie Pie, and GOOD FOR YOU!

    • SweetiePie profile image

      SweetiePie 

      7 years ago from Southern California, USA

      I make money to pay for my rent and food, but beyond that I do not want to stress about it too much. In the past I thought it would be nice to be a millionaire, but now a days I really feel fortunate to live the life I do. There are people with lots of money, but it does not guarantee it will make you happy. It seems when some make there first millions the race continues to make more and more. That is just not one treadmill I want to get on.

    • Paradise7 profile imageAUTHOR

      Paradise7 

      7 years ago from Upstate New York

      Thank you, manthy, for your comment. I seriously wonder what would happen if the dollar actually did collapse completely? The weird thing about it is, if the dollar collapsed, so would the yen, the euro...money is all connected now, that was part of the point of this hub.

      That presidential election thing always seems like one great big power trip to me. I wouldn't want the job for a million a year, myself. Especially not in these times.

    • manthy profile image

      Mark 

      7 years ago from Alabama,USA

      Interesting - why would anyone spend 500 million dollars to get a job that pays $400k a year...........LOL

      I think the dollar is in decline - I hope it doesn't collapse

      as many people are predicting.

      Gr8 hub

    • Paradise7 profile imageAUTHOR

      Paradise7 

      7 years ago from Upstate New York

      You are very welcome, gitrdun.

    • gitrdun4444 profile image

      gitrdun4444 

      7 years ago from North Carolina

      Very interesting hub. Not surprised. As I lived in Okinawa, Japan years ago things are very different there.

      Love the chart too. Thanks Paradise

    • Paradise7 profile imageAUTHOR

      Paradise7 

      7 years ago from Upstate New York

      Thank you, icehubber and shazwellyn, for those interesting and intelligent comments. Money is worth what we believe it's worth--that''s right!

    • shazwellyn profile image

      shazwellyn 

      7 years ago from Great Britain

      Yes... money is debt!

      https://hubpages.com/money/What-Is-Money-Money-Is-...

      We are about to enter a new time where the people will realise how they have been conned and what rights the actually dont have!

    • icehubber profile image

      icehubber 

      7 years ago from Iceland

      Good hub, its always interesting to discuss the monetary system

      However money as such has little to no value, only peoples faith in it give value.

    • Paradise7 profile imageAUTHOR

      Paradise7 

      7 years ago from Upstate New York

      Thank you both, scarytaff and mck, for your kind and generous comments. "Money spigots running full tap"--I like that, I wish I thought of it, I would've put in here!

      Scarytaff, thank you so much for welcoming me back. I've not written many hubs since last year. I'm so glad you remember.

      Now, I've got to fix up that table a little! I should have proofread it better before publishing.

    • mckbirdbks profile image

      mckbirdbks 

      7 years ago from Emerald Wells, Just off the crossroads,Texas

      I refer to this as compound inflation. There is no relief in sight as the money spiggots are running full tap. Great Hub. The 'savers' need to rethink their store of value.

    • scarytaff profile image

      Derek James 

      7 years ago from South Wales

      Very true, No.7 Money has lost its value by people pushing up the price of commodities all the time. I notice it particularly in supermarkets now, things don't rise by a few pennies but by tens of pennies at a time. Thanks for the hub.

    working

    This website uses cookies

    As a user in the EEA, your approval is needed on a few things. To provide a better website experience, hubpages.com uses cookies (and other similar technologies) and may collect, process, and share personal data. Please choose which areas of our service you consent to our doing so.

    For more information on managing or withdrawing consents and how we handle data, visit our Privacy Policy at: https://hubpages.com/privacy-policy#gdpr

    Show Details
    Necessary
    HubPages Device IDThis is used to identify particular browsers or devices when the access the service, and is used for security reasons.
    LoginThis is necessary to sign in to the HubPages Service.
    Google RecaptchaThis is used to prevent bots and spam. (Privacy Policy)
    AkismetThis is used to detect comment spam. (Privacy Policy)
    HubPages Google AnalyticsThis is used to provide data on traffic to our website, all personally identifyable data is anonymized. (Privacy Policy)
    HubPages Traffic PixelThis is used to collect data on traffic to articles and other pages on our site. Unless you are signed in to a HubPages account, all personally identifiable information is anonymized.
    Amazon Web ServicesThis is a cloud services platform that we used to host our service. (Privacy Policy)
    CloudflareThis is a cloud CDN service that we use to efficiently deliver files required for our service to operate such as javascript, cascading style sheets, images, and videos. (Privacy Policy)
    Google Hosted LibrariesJavascript software libraries such as jQuery are loaded at endpoints on the googleapis.com or gstatic.com domains, for performance and efficiency reasons. (Privacy Policy)
    Features
    Google Custom SearchThis is feature allows you to search the site. (Privacy Policy)
    Google MapsSome articles have Google Maps embedded in them. (Privacy Policy)
    Google ChartsThis is used to display charts and graphs on articles and the author center. (Privacy Policy)
    Google AdSense Host APIThis service allows you to sign up for or associate a Google AdSense account with HubPages, so that you can earn money from ads on your articles. No data is shared unless you engage with this feature. (Privacy Policy)
    Google YouTubeSome articles have YouTube videos embedded in them. (Privacy Policy)
    VimeoSome articles have Vimeo videos embedded in them. (Privacy Policy)
    PaypalThis is used for a registered author who enrolls in the HubPages Earnings program and requests to be paid via PayPal. No data is shared with Paypal unless you engage with this feature. (Privacy Policy)
    Facebook LoginYou can use this to streamline signing up for, or signing in to your Hubpages account. No data is shared with Facebook unless you engage with this feature. (Privacy Policy)
    MavenThis supports the Maven widget and search functionality. (Privacy Policy)
    Marketing
    Google AdSenseThis is an ad network. (Privacy Policy)
    Google DoubleClickGoogle provides ad serving technology and runs an ad network. (Privacy Policy)
    Index ExchangeThis is an ad network. (Privacy Policy)
    SovrnThis is an ad network. (Privacy Policy)
    Facebook AdsThis is an ad network. (Privacy Policy)
    Amazon Unified Ad MarketplaceThis is an ad network. (Privacy Policy)
    AppNexusThis is an ad network. (Privacy Policy)
    OpenxThis is an ad network. (Privacy Policy)
    Rubicon ProjectThis is an ad network. (Privacy Policy)
    TripleLiftThis is an ad network. (Privacy Policy)
    Say MediaWe partner with Say Media to deliver ad campaigns on our sites. (Privacy Policy)
    Remarketing PixelsWe may use remarketing pixels from advertising networks such as Google AdWords, Bing Ads, and Facebook in order to advertise the HubPages Service to people that have visited our sites.
    Conversion Tracking PixelsWe may use conversion tracking pixels from advertising networks such as Google AdWords, Bing Ads, and Facebook in order to identify when an advertisement has successfully resulted in the desired action, such as signing up for the HubPages Service or publishing an article on the HubPages Service.
    Statistics
    Author Google AnalyticsThis is used to provide traffic data and reports to the authors of articles on the HubPages Service. (Privacy Policy)
    ComscoreComScore is a media measurement and analytics company providing marketing data and analytics to enterprises, media and advertising agencies, and publishers. Non-consent will result in ComScore only processing obfuscated personal data. (Privacy Policy)
    Amazon Tracking PixelSome articles display amazon products as part of the Amazon Affiliate program, this pixel provides traffic statistics for those products (Privacy Policy)