The $USD is taking a dive ahead of the FOMC meeting next week. This could be a deliberate plot to give the Fed some room to move if they do raise. It could also be a lack of confidence that they will pull up short of raising and cause a severe lack of faith in the $USD value. The idea that money available at the present time is worth more than the same amount in the future due to its potential earning capacity. Also referred to as "present discounted value". This core principle of finance holds that, provided money can earn interest, any amount of money is worth more the sooner it is received. We can survive without money but it solves an important problem known as the 'double coincidence of wants'.
Double coincidence of wants. What does it mean?. The difficulty in barter is to find two persons whose disposable possessions mutually suit each other's wants. There may be many people wanting, and many possessing those things wanted; but to have a an exchange in the act of barter there must be a double coincidence, which will rarely happen. The double coincidence is the situation where the supplier of good A wants good B and the supplier of good B wants good A.
I have a bale of wool and I want to exchange it for some meat. You have some meat and you want to exchange it for a bale of wool. You have to find the other person to create the double coincidence of wants.
The point is that the institution of money gives us a more flexible approach to trade than barter. With money we can simply take the money to the store and exchange it for goods rather than having to find someone to accept our goods in exchange.
No comments:
Post a Comment